Jurisprudentiol - Tuesday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Central Excise

Aluminium dross and skimmings which arise as a by-product in the process of manufacture of aluminiumproducts are "manufactured"goods and hence excisable w.e.f. 10/05/2008 in view of the Explanation added to Section 2(d) of the CEA, 1944: CESTATLB

ALUMINIUM dross and skimmings that arise during the process of manufacture of various aluminium products are cleared by the appellant without payment of duty.

The department viewed that aluminium dross and skimmings are classifiable under CETH 26204010 of the CETA, 1985 and the appellant is liable to discharge the duty liability thereon for the period after 10.05.2008 pursuant to insertion of Explanation in section 2(d) of the CEA, 1944 by the Finance Act, 2008. SCNs were issued and the demands were confirmed by the lower authorities with penalty and interest.

Income Tax

Whether when assessee makes investments to pick up controlling stake in a company after FIPB approval, entire expenditure related to such investment is to be attributed to earning of dividend, and warrants disallowance u/s 14A - NO: High Court

THE assessee company is a subsidiary of Holderind Investments Ltd., Mauritius which was formed for making downstream investments in cement manufacturing ventures in India. While filing its return, the assessee had declared cummulative losses for both the A.Ys 2007-08 and 2008-09. The assessee had also declared revenue receipts, including interest from FDRs and profit from sale of fixed assets, and claimed administrative and miscellaneous expenses expenditure written off over such receipts. For A.Y 2008-09, the assessee had declared revenue receipts in the form of foreign currency fluctuation difference gain and other expenses including personal expenses, operating expenses, depreciation and financial expenses. The AO however held that the assessee had neither commenced business activities, nor made any downstream investments. The expenditure claimed by assessee for earning dividend income was also disallowed by holding that mere approval of Foreign Investment Promotion Board (FIPB) showing permission to acquire share capital, was not sufficient to indicate or hold that the assessee had started their business. He accordingly disallowed the entire expenditure u/s 14A.

The issue before the Bench is - Whether when the assessee makes investments in shares to pick up controlling stake in an Indian company after taking approval of FIPB, the entire expenditure related to such investment is to be attributed to investments made for earning dividend, and is to be disallowed u/s 14A. And the answer is NO.

Service Tax

Construction of Mall & renting of Shops - CENVAT Credit of service tax paid on input services used in the construction of immovable property would be available if such immovable property is used for rendering other taxable services - Prima facie case in favour - Stay granted: CESTAT

THE appellants are engaged in rendering the taxable service of 'renting of immovable property' and they discharge service tax liability. They availed CENVAT credit of various input services used for construction of the said mall and utilized the credit for payment of service tax on renting of immovable property services.

The CBEC vide Circular No. 96/7/2007-ST dated 23/08/2007 as amended by Circular No 98/1/2007-S.T ., dated 04/01/2008 inter alia clarified that Input credit of service tax can be taken only if the output is a 'service' liable to service tax or are 'goods' liable to excise duty and that since immovable property is neither 'service' or 'goods' input credit cannot be taken.

See our Columns Tomorrow for the judgements