Jurisprudentiol-Monday's cases

By Vijay Kumar

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

Notfn. 4/2006-ST - Applicant is engaged in activity of giving loan for earning interest through leasing vehicles - as interest on loan is exempted from service tax in terms of s.67 of FA, 1994 & rule 6(2)(iv) of ST Valuation Rules, 2006, applicant has a prima facie case: CESTAT

THE appellant is Non-banking Finance Company and engaged in the activity of providing services of hire purchase and financial leasing of commercial vehicles. The service provided by the applicant is having three components namely, Principal, Interest amount & Processing/Management fees.

The applicant is paying service tax on processing/management fees of the service provided by them. They are not paying service tax on principal and interest.

Revenue is of the view that as the applicant is engaged in financial leasing service, therefore, as per notification No. 4/2006-ST dt. 1.3.2006, the applicant is entitled for 90% exemption of the interest charged by them and remaining 10% collected by them is includible in the taxable service.

Income Tax

Whether where money is paid by flat buyer & same remains as outstanding with assessee, excess payment over and above sum paid by original buyer due due to incapability to purchase flat is to be treated as interest as per Sec 2(28A) - YES: ITAT

THE assessee entered into a contract with M/s Kone Elevators for erection and commissioning of lift. The returns filed by assessee were taken for survey u/s 133A where it was found that an amount of Rs.62.87 lacs had been paid to Kone Elevators without deducting tax at source. Accordingly, the AO observed that the tax deductibles u/s 194C at 2% which worked out at Rs.1,25,740/-, was not made by the assessee. The assessee contended that since the payment were not made under works contract and it was only a contract of sale, the provisions of section 194C would not be applicable. The AO observed that the contract was purely for carrying out work of supply, erection and commissioning of lift and the payment had been made as per the invoice at Rs.18,00,000/-. There was no bifurcation of each items and the price schedule signed by both the parties and the invoice showed that the process of erection of lift would fall under the clause (iii) of the explanation to section 194C.

The issue before the Bench is - Whether where money has been paid by the flat buyer and the same remains as outstanding with the assessee, the payment of excess amount over and above the amount paid by the original buyer necessitated due to incapability of the original buyer to purchase the flat is to be treated as interest as per Sec 2(28A) and the same is liable to TDS u/s 194A. And the verdict favours the Revenue.

CUSTOMS

Cus - Notf. 16/2000-Cus - Exemption notification is to be construed strictly - Catalyst is required for initiating a chemical reaction&is not required for manufacture of machinery, instruments, equipment or appliances - Benefit not available: CESTAT

THERE are two appeals, one filed by the Revenue against an O-in-A & another by the importer against another O-in-A. Both involve common issues.

The assessee imported 16,400 Ltrs of Catalyst HTZ-5 from M/s. HaldorTopsoe A/S Denmark claiming the benefit of exemption under notification No. 16/2000-Cus (Serial No. 182). The adjudicating authority denied the exemption on the ground that the catalyst imported by the assessee is a chemical used in the process of manufacture of fertilizers and cannot be considered as machinery, instrument, apparatus and appliances or parts or raw materials for the manufacture of the aforesaid items. The assessee importer filed an appeal before the lower authority, who held that since the said catalyst is for the first/initial charge and is required for renovation or modernization of a fertilizer plant and machinery and the same was certified by the officer not below the rank of a Deputy Secretary to the Government of India in the Department of Fertilizers., the appellant is eligible for the benefit of aforesaid exemption.

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