Jurisprudentiol - Tuesday's cases

By Vijay Kumar

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

Appellant providing "Advertising services" by placing advertisements on behalf of clients in various print & electronic media - On volume discounts, rate difference and amounts written back, demands under BAS cannot be sustained in law: CESTAT

THE appellants were engaged in providing advertisement services to clients. Investigation by service tax authorities revealed that they did not pay service tax on amounts which were written back as rate difference in media costs and the discounts received from the media for volume of work, which resulted in demand of service tax on the same. Service tax was also demanded on coordination cost paid to overseas entities.

Income Tax

Whether provisions of Sec 43A will apply even if FCNR loan is taken not for acquisition of capital assets but to repay debentures - NO: High Court

THE assessee Climate Systems Pvt Ltd had issued 15% Unsecured Redeemable Non-convertible Debentures carrying interest @15% per annum. In order to repay the debentures, the assessee borrowed money. The loan was taken against Foreign Currency Non Resident Loan Account [FCNR(B) Loan]. The advantage was that the loan was availed at a lower rate of interest as compared to interest payable on the normal loan account. In order to hedge against foreign exchange fluctuations, the assessee had entered into forward contracts with banks in India. The assessee incurred loss of Rs. 49,98,072/- on account of foreign exchange fluctuation on account of FCNR(B) Loan. The said amount was paid during the previous year relevant to the assessment year.

In the Assessment Order under Section 143(3), income of the assessee was assessed at Rs.2,76,29,016/- as against return income of Rs.2,46,94,573/-.No enquiry or questions were raised regarding expenditure of Rs.49,98,072/- during the original assessment proceedings.

The issue before the Bench is - Whether provisions of Sec 43A will apply even if FCNR loan is taken not for acquisition of capital assets but to repay debentures. And NO is the answer of the High Court.

Central Excise

Clearance of Sugar under "Levy Sale" which later was treated as "Free Sale" by the Directorate of Sugar - Government paying differential amount of price but appellant not intimating department - extended period of limitation rightly invoked: CESTAT

THE appellant is a manufacturer of sugar, molasses and ethyl alcohol.

The Directorate of Sugar, New Delhi issued release orders dated 30/09/1997 & 27/10/1997 in favour of the appellant for clearance of 15,681 quintals of sugar under the levy sale sugar quota.

Accordingly, the appellant cleared the said quantity of sugar during November 1997 to December 1997 paying the concessional rate of duty applicable to levy sale sugar @ Rs.52/- per quintal. Subsequently, the sale was treated as sale from "Free Sale Sugar" vide Directorate of Sugar, New Delhi letter F. NO.1-5/97 SC-II dated 20/10/1997. Thereafter, the said Directorate vide letter No.8-45/98CC/34/3573 to 3579 dated 11/12/1998 paid the differential amount of price between levy sale sugar and free sale sugar amounting to Rs.46.17 lakhs which was received by the appellant in January 1999.

However, the assessee did not pay the differential duty of Rs.5,17,473/- on the clearances of 15,681 quintals of sugar.

See our Columns Tomorrow for the judgements