Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Appellant splitting contract into two, one with Chinese party for supply of equipment and another with authorized person in India for erection and commissioning - services provided is Works Contract service - Department cannot force appellant to go for Works Contract Composition Scheme - value has to be determined as per Rule 2A of ST Valuation Rules, 2006 - Matter remanded: CESTAT

THE appellants are engaged in the business of generation of electricity. For setting up power plant they made enquiries with China National Automotive Industry International Corporation and another company SOKEO Power Private Ltd which is a Hyderabad based company and is representative of CNAICO in India. From the correspondence it was evident that the appellant awarded turnkey project for design, engineering, manufacture, testing, supply, transportation, site storage, erection, testing and commissioning of plant and machinery for setting up of the power plant. The appellant, thereafter, made two contracts one with CNAICO and another with SOKEO, the representative of CNAICO, first contract for supply of equipment while the second contract is for erection and commissioning. In respect of first contract no service tax is paid and for the second contract SOKEO has paid service tax under erection and commissioning service.

It is the case of the Revenue that the total work is for design, engineering, manufacture, testing, supply of equipment, transportation, erection, commissioning etc. and is, therefore, a turnkey project and the appellants are liable to pay service tax under the Works Contract on reverse charge basis for the amount paid by them to CNAICO.

Income Tax

Whether disallowance u/s 40(a)(ia) is warranted merely because assessee provides wrong PAN No of transport operator who was paid transport charges without deduction of tax at source - YES: ITAT

THE assessee is an individual who is engaged in the business of Transport contractor. He had filed his return, declaring total income at Rs.13,53,520/-. During assessment, AO noted from the details furnished by the assessee revealed that the assessee had received transport charges of Rs.3,41,32,614/- besides hiring charges and unloading charges. The assessee had paid transport charges of Rs.2,65,14,217/-. Since the assessee had not deducted TDS the AO asked the assessee to explain why provisions of section 40(a)(ia) should not be invoked. The assessee explained that the owners as well as transport operators had submitted their PAN Nos. and thus, as per provisions of section 194C (6) TDS was not required to be made.

The issue before the Bench is - Whether disallowance u/s 40(a)(ia) is warranted merely because the assessee provides wrong PAN No of transport operator who was paid transport charges without deduction of tax at source. And the answer is YES.

Central Excise

Subsidy received by Fertilizer Company from Government cannot be considered as an additional consideration; not includible in assessable value: CESTAT

CBEC in Circular No.983/7/2014-CX dated 10.7.2014, has clarified that the subsidy given by the Government is not includable in the assessable value and Central Excise duty is not payable on the subsidy component provided by the Government. The grant of subsidy is given pursuant to an administrative decision taken by Government of India and payment of subsidy to the manufacturer by the Government cannot be regarded as discharge of any liability or obligation by the Government towards the purchasers of the fertilizers.

See our Columns Tomorrow for the judgements.