Jurisprudentiol - Friday's cases

By Vijay Kumar

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

Rule 7 of CCR, 2004 - Prior to 01/04/2012 there was no bar on an Input service distributor to distribute the credit which pertains to one unit to another unit - Credit rightly taken - Appeal allowed: CESTAT

THE appellants' head office paid the service tax on commission paid to overseas commission agents for procuring the purchase orders for export of goods under reverse charge mechanism. Various other common input services were also used in or in relation to the manufacture of final dutiable goods and payments for the input services were made by the appellant's Head office. The head office distributed the service tax credit of Rs.3.79 crores to the appellant's DTA unit and which was utilized for payment of CE duty on the final product manufactured and cleared by them. The EOU unit was also clearing final goods in DTA on payment of applicable excise duty.

Income Tax

Whether penalty is warranted when assessee was under bona fide impression that he was ‘person resident outside India' as defined under FEMA and has not offered interest income for tax due to wrong interpretations of law - NO: ITAT

THE assessee is an employee of Cognizant Technology Solutions as Sr. Software professional. During the course of scrutiny assessment, the AO observed that the assessee had opened a bank account in ICICI Bank. The amount in this savings account was transferred to NRE Fixed Deposit account in 2002. During that period, the assessee was sent on a particular assignment by the employer company to US. The Fixed Deposits in NRE account were made in the year 2002 that had matured in the year 2009. The interest received by the assessee was not offered to tax in the return of income filed by the assessee for the relevant period. The assessee during the course of assessment proceedings gave explanation that u/s.10(4) of the Act, interest income in the NRE A/c is exempt from tax. It was submitted that the assessee was under a bona fide impression that he was a resident outside India in terms of the definition of ‘persons resident outside India' defined in section 2(q) of the Foreign Exchange Regulation Act [FERA], 1973.

THE issue before the Bench is - Whether penalty is warranted when assessee was under bona fide impression that he was a ‘person resident outside India' as defined under FEMA and has not offered interest income for tax due to wrong interpretations of law. NO is the answer.

Service Tax

Delay in payment of tax - Merely, because CENVAT credit is available in books of accounts, it does not mean that tax has been paid - demand of interest upheld - Revenue appeal allowed: CESTAT

FOR the month of October 2006, the tax liability was required to be discharged by the respondent by 05/11/2006 and for the month of January 2007 by 05/02/2007. Both these tax liabilities were discharged by the appellant by debit in the CENVAT credit account only on 15/02/2007. Therefore, in respect of the payment of duty on 05/11/2006 there was a delay of 102 days and in respect of payment of duty on 05/02/2007 there was a delay of 10 days.

A SCN was issued demanding interest u/s 75 of the FA, 1994.

See our Columns Tomorrow for the judgements