Jurisprudentiol-Wednesday's cases

By Vijay Kumar

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

Applicant is not banking company and service tax is payable only on issuance of bank guarantee by bank - Commission received upon issuing guarantees to various corporate entities is prima facie not liable to ST: CESTAT

THE applicant is issuing guarantees to various corporate entities and for which they are charging commission.

The Revenue wants the applicant to pay Service tax on this commission received under the category ‘ Banking and other Financial Services ' .

The appellant makes the primary submission that they are a Non-Banking Financial Institution issuing corporate guarantees to various corporate entities to secure their advance and for issuing such guarantees they are getting certain commissions from the corporate entities. It is the contention of the applicant that they are not providing any service under banking and other financial service as defined under Section 65 (12) of the Finance Act, 1994 as only guarantees issued by a bank is liable to service tax.

Income Tax

Whether provisions of Section 14A are attracted when investment is made by assessee in foreign subsidiary and dividend received on such investment is not tax free as per Section 10 - YES: ITAT

THE assessee had claimed certain amount as exempt income under section 10 but no disallowance was made under section 14A in the computation of income. During the assessment proceedings the Assessing Officer asked the assessee to give the working of disallowance under section 14A read with rule 8D. The assessee submitted written submissions and contended that in respect of tax exempt dividend income no borrowed fund was utilized for investing and further no expenditure was incurred in relation to the exempt income. However, without prejudice to the contentions the assessee, gave the working of disallowance under section 14A read with rule 8D. The Assessing Officer did not accept the contention of the assessee as no expenditure was incurred for earning the tax free income and made disallowance under section 14A by applying rule 8D.

The issue before the Bench is - Whether provisions of Section 14A are attracted when investment is made by assessee in foreign subsidiary and dividend received on such investment is not tax free as per Section 10. And the answer goes against the assessee.

Central Excise

Inputs written off as obsolete - Rule 3(5B) of the CCR, 2004 does not have retrospective effect - Reversal of credit not called for - Revenue appeal dismissed: CESTAT

ON scrutiny of the respondent's trial balance sheet for the year 2003-04, it was found that as on 31.3.2004, there were certain obsolete inputs, WIP worth Rs.1,22,20,110/- against which provision of Rs.73,33,865/- was made in the accounts by reducing the value.

The jurisdictional R/S, in November, 2007 enquired with the assessee the status of the said goods. Pursuant thereto, the assessee reversed CENVAT credit of Rs.23.90 lakhs. Not convinced with this reversal on the ground that the assessee had not submitted one-to-one co-relation of the inputs, a SCN was issued demanding duty of Rs.19.94 lakhs by invoking the extended period of limitation.

Whereas the adjudicating authority confirmed the demand, the Commissioner (A) set aside the same on the ground of limitation.

See our Columns Tomorrow for the judgements