Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Service provided by appellant is essentially supply of drilling rig along with its personnel to operate same on charter hire basis and payment for services rendered is made on per-day basis - activity comes within scope of ‘Supply of Tangible goods for use': CESTAT

THE appellant had entered into two contracts with M/s. Oil and Natural Gas Corporation Ltd. (ONGC) for supply of Cantilever type jack-up rigs named Greatdrill Chetna and Greatdrill Chitra. These were required to provide offshore drilling services to ONGC in terms of the contracts dated 27/02/2009 and 08/05/2009. These drilling rigs were hired by the appellant from M/s. Greatship Global Energy Services Pte. Ltd., Singapore, on bareboat charter basis.

The adjudicating authority confirmed a service tax demand of Rs.27,24,52,804/- against the appellant M/s. Greatship (India) Ltd., Mumbai. While passing the impugned order, the Commissioner has classified the services rendered by the appellant as falling under ‘Supply of Tangible Goods for Use service' (SOTG in short) and the period of demand is from 07/07/2009 to 31/03/2010.

Income Tax

Whether if contract for sale or purchase is ultimately settled and no actual delivery of goods is affected under settlement, it is to be treated as speculative transaction - YES: ITAT

THE assessee company, engaged in the business of trading of cut and polished diamonds, filed its return of income declaring loss at Rs.2,19,91,359/-. AO finalised the assessment u/s 143(3) determining the total income of Rs.78,57,190/. Effective ground of appeal was about disallowance of loss of Rs.2,98,48,551/- on account of cancellation of foreign currency forward contract. During assessment, AO found that the assessee had debited loss on account of exchange rate fluctuation amounting to Rs. 2.98 Crores and directed the assessee to furnish details on account of exchange rate difference and of forward contracts. After considering the explanation filed by assessee, AO observed that any loss incurred by an assessee on entering into currency derivatives, due to forward contract of foreign exchange (FE) rate, had to be taken as forex derivative loss, that such loss had to be on account of dealing in forex derivatives which had actually been incurred by way of settling the difference at the end of the expiry of period of derivative contract or its termination, that assessee had to prove that currency derivative losses incurred was on account of hedging (reducing) risk and had not been undertaken as a speculative transaction to earn more profit.

The issue before the Bench is - Whether if a contract for sale or purchase is ultimately settled and no actual delivery of goods is affected under the settlement, it is to be treated as a speculative transaction. YES is the answer.

Customs

Conversion of Shipping Bill for duty free goods into Shipping Bill for drawback - Single Member Bench cannot hear such case - Matter to be placed before Division Bench: CESTAT

THE issue involved is conversion of Shipping Bills for Duty Free Goods into Shipping Bill for drawback. Against the order passed by the Commissioner of Customs, Pune, the appellant is before the CESTAT with an appeal.

The case was heard by a Single Member Bench and the order was reserved. An order has been passed in the matter recently holding that the matter cannot be decided by the Single Member Bench and must be heard by the Division Bench.

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