Jurisprudentiol - Friday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Service Tax

In SCN, demand in respect of Break Bulk Fees is made under ‘transportation of goods by air service' - Appellant is not an ‘aircraft operator' so demand not sustainable - also order confirming demand under ‘Cargo Handling Service' is beyond scope of SCN: CESTAT

IN the SCN the demand of Service Tax is made in respect of BBF under ‘transportation of goods by air service'. As per the provisions of the Act, taxable service means any service provided or to be provided to any person, by an aircraft operator, in relation to transport of goods by aircraft. Admittedly, the appellants are not aircraft operators.

The adjudicating authority in the impugned order confirmed this demand under ‘cargo handling service'. The appellants were not put to notice regarding confirming the demand under the category of cargo handling service whereas in the show cause notice the demand was on the ground that the appellants were providing transportation of goods by air service.

Income Tax

Whether it amounts to concealment of income warranting penalty when legal expenses incurred to defend himself in criminal case were claimed as business expenditure but same were disallowed by Tribunal - NO: ITAT

THE assessee is a leading film actor who derives income from profession of acting and advertisement assignments. Assessee had claimed legal expenses of Rs. 12,90,000/- and Rs. 33,75,000/- in AYs 2003-04 and 2004-05 respectively which were incurred by the assessee for defending himself in various criminal proceedings pending in the court. According to the A.O., the said expenses incurred by the assessee to defend himself in criminal proceedings were personal expenses and the same therefore could not be allowed as business expenditure. On appeal, the CIT(A) deleted the disallowance made by the A.O. on account of legal expenses for both the years under consideration observing that the said expenses were incurred by the assessee for the preservation and protection of his profession from any legal process or proceedings which might have resulted in reduction of his income. On further appeal, the Tribunal, however, reversed the decision of the CIT(A) on this issue and confirmed the disallowance made by the A.O.

The issue before the Bench is - Whether it amounts to concealment of income warranting penalty u/s 271(1)(C) when legal expenses incurred by the assessee-actor for defending himself in a criminal case were claimed as business expenditure but the same were disallowed by the Tribunal. And the answer is NO.

Customs

Import of Poppy Seeds - Allegation of undervaluation - DRI has not recorded any statement of any individual who had been conduit through whom Hawala transaction took place - although prima facie there is a strong case for appellant no other option as a third Member, but either to agree with one of differing views - Pre-deposit ordered of Rs.15 lakhs: Tribunal by Majority.

BASED on intelligence that there was a huge undervaluation in imports of White and Yellow Poppy Seeds from Turkey, the DRI conducted search of the office premises of the appellant along with residential premises and incriminating documents were recovered and statements were recorded.

The investigation revealed that the appellant is a proprietary firm of Madhu Kapoor and day-to-day operations of the said firm were undertaken by Arun Kapoor, husband of Madhu Kapoor. It was further revealed by Arun Kapoor that the appellant firm had submitted forged/fabricated documents to the Customs resulting in evasion of customs duty; that the undervaluation done by them at the time of import was to the extent of 30 to 40% of the actual price; that the differential amount i.e. difference in the contract price and the value declared to the Indian Customs was paid to the overseas suppliers through unofficial channels i.e., Hawala and the modus operandi was to give the money to the person appointed by the overseas suppliers for collection from their shop.

See our Columns Tomorrow for the judgements