Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Canvassing/promoting business of insurance company prima facie comes within the purview of BAS and the liability to pay ST is on the service provider and not on the recipient - even if the ST liability was discharged by the recipient same cannot compensate or obliterate appellant's liability: CESTAT

AGAINST the appellant a Service Tax liability of Rs.1.74 lakhs under the category of 'Business Auxiliary Service' was upheld by the Commissioner (A). Aggrieved by the same, the appellant is before the CESTAT.

It is submitted that they have been authorized to act as a corporate agent for procuring or soliciting insurance business; that the service tax liability has been discharged by Oriental Insurance Co. Ltd. on reverse charge basis and, therefore, the appellant is not liable to pay service tax and hence, stay should be granted.

Income Tax

Whether when a private limited company is converted into partnership firm and interest-free loans are advanced out of reserves of erstwhile company in the same ratio as profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47 - YES: ITAT

THE assessee firm, Aravali Polymers, LLP, came into existence with effect from August 2010, once the private limited company by the same name was converted into a limited liability partnership under the provisions of sections 56 and 58 of the Companies Act.

The entire undertaking of Aravali Polymers Pvt. Ltd. was dissolved and all its moveable and immovable property, tangible and intangible assets, besides rights and liabilities were transferred to the assessee firm. The assessee had also received the Reserves and Surplus of the dissolved company. The main assets of the dissolved company were shares of East India Hotels which were also transferred to the assessee. The assessee sold these shares, which were offered to tax as long term capital gains and claimed exemption under section 47(xiiib). The assessee had also given interest free loans to its partners, the erstwhile shareholders of the dissolved company, in the same ratio as their profit sharing.

The AO invoked section 47A(4) for computing the capital gains tax adopted the market value of the shares of East India Hotels and after reducing the cost of acquisition, arrived at a higher computation of capital gains. The AO also disallowed the assessee's claim under section 47(xiiib).

The issues before the Bench are - Whether when a private limited company is converted into a partnership firm and interest-free loans are advanced out of the reserves of the erstwhile company in the same ratio as the profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47. YES is the Tribunal's answer.

Customs

No prudent businessman, where the goods are available at lower price shall buy goods & be ready to pay duty on higher value - sale, time of delivery and place of importation are necessary ingredients to determine the AV and have to be read in conjunction - correct AV is invoice price plus demurrage charges: CESTAT

INITIALLY the goods were shipped by M/s. Intercon Holdings Ltd., Hong Kong to some importers in India declaring the price @ USD 938 PMT in the month of September 2008. Those importers did not take the delivery of the goods and no payments towards the supply of the goods were made by the importers. Thereafter, the supplier of the goods entered into the agreements with the appellants on 06.11.2008 to supply the said goods on the price prevailing in the international market. Thereafter they reached an agreement for purchase of the goods in question @ USD 442 PMT or USD 445 PMT. The appellants were required to pay demurrage charges on the goods as till the date of contract these demurrage charges were payable by the supplier of the goods being owner of goods. While filing bills of entry the appellant declared the transaction value @ USD 442 PMT or USD 445 PMT for clearance of goods.

The assessing authority objected to the price declared as the original importer had imported the goods at price of USD 938 PMT.

See our Columns Tomorrow for the judgements