Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Seizure of Foreign Currency - Tribunal fell in error by converting absolute confiscation into confiscation with option to redeem - Also allowing 25,000 USD as permissible amount is not correct - Question of law answered in favour of Revenue: HC

THIS is an appeal by revenue against the order of Tribunal reported in 2005-TIOL-515-CESTAT-MAD. Please also see Confiscation of foreign currency: Can redemption be allowed? USD 55,500 was seized from an individual who died on 3.10.2001. Since there was no RBI clearance for the above foreign exchange it was absolutely confiscated and penalty of Rs five lakhs was imposed.

On appeal by the successor, the Tribunal held that though the currency was required for remittance for technology purposes, it was a fact that the same was not remitted through legal channels nor procured through legal routes and held that USD 25,000 was permissible to be carried by any passenger going abroad during the material time and the absolute confiscation was converted into confiscation with an option to redeem on payment of fine of Rs two lakhs.

Income Tax

Whether interest paid to sister concern is to be disallowed merely on ground that such interest was not paid by assessee to any other parties from whom it had taken advances - NO: ITAT

THE assessee is a reality developer. The assessee has paid interest of Rs.63,45,627 to its sister concern being specified person u/s. 40A(2)(b). Interest was paid @ 12% per annum. The assessee has not paid interest on similar advances. The assessee was having unsecured loans of Rs.7,66,79,452/- on which also the assessee has not paid any interest. The assessee has made interest free advances to various parties amounting to Rs.17,55,87,523/-.The AO who was of the opinion that the assessee has not paid interest to any parties from whom he has taken advances and further the said interest was not reflected in the Tax Audit report u/s. 44AB. The AO accordingly disallowed interest of Rs.63,45,627/- paid to sister concern being specified person u/s. 40A(2)(b).

The issue before the Bench is - Whether interest paid to sister concern can be disallowed on the ground that the assessee has not paid interest to any other parties from whom it had taken advances and further the said interest was not reflected in the Tax Audit report u/s. 44AB. NO is the answer.

Service Tax

Activities undertaken by appellant involves writing of scripts, recording voices of artists, producing program, providing musical background & recording of sound - prima facie activity does not fall within statutory definition of 'sound recording' - bona fide case for grant of stay: CESTAT

THE activities undertaken by the appellant include writing of scripts by engaging freelance writers, getting suitable voices approved for the purpose of recording, recording voices with artists and writers, providing background music, if necessary, and recording the programme in their studio. These programmes are mainly for the purpose of advertising such as advertisement jingles.

The above was music to the ears of the department who issued a SCN demanding Service Tax purportedly under the category of ‘sound recording studio or agency service'.

See our Columns Tomorrow for the judgements