Jurisprudentiol-Thursday's cases

By Vijay Kumar

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

Maintainability of Writ - Error apparent on face of record - Order passed by authority orders relying on previous orders which were stayed / reversed - Order passed on account of sheer non-application of mind and based on irrelevant consideration - Order quashed and matter remanded back to authority: HC

THE impugned order has been passed by relying on two earlier decisions passed against the same assessee on the same issue - One of the orders has been stayed by the CESTAT and the other order has been reversed by the Commissioner (Appeals) - Impugned order has been passed on account of sheer non application of mind and based on irrelevant consideration, without reference to the orders passed by the superior authorities viz. the order passed by the Commissioner (Appeals) as well as the CESTAT - Impugned order is quashed and matter remanded.

Income Tax

Whether sums agreed to be paid to retiring partners on account of their capital as outstanding in firms' books of account can be considered as goodwill and therefore, there is no question of denying depreciation on it - YES: ITAT

THE assessee, a partnership firm, is engaged in the business of supply of equipments for shooting and editing telefilms with computerized digital graphics on hire. Two of its partners, holding 20% share each in the profits (or losses) of the firm, retired there-from during the financial year and were paid their share of 'goodwill'. Assessee claimed depreciation on goodwill, as an intangible asset of the firm. AO disallowed the claimed stating that 'Goodwill', it was the constant refrain, was not an intangible asset within the meaning of Explanation 3(b) to section 32(1)(ii).

THE issue before the Bench is - Whether the sums agreed to be paid to the retiring partners on account of their capital as outstanding in the firms' books of account can be considered as goodwill and therefore, there is no question of denying depreciation on it. And the answer is YES.

Service Tax

Very nomenclature of service 'management consultancy' indicates that it has nothing to do with provisions of facilities such as water, effluent treatment, etc. expenditure of which is reimbursed to appellant - appellant is not rendering any advice or consultancy - Demand set aside and appeal allowed: CESTAT

M/s. Century Enka Ltd. entered into an Agreement with M/s. Centak Chemicals Ltd. for the period April 1999 to March 2004 for providing General support services, Operational services, Personnel services and Secretarial services to the latter. From 1st April, 2004, on the expiry of the first agreement, they entered into two separate agreements for operational facilities and personnel facilities to be provided to M/s. Centak Chemical Ltd.

The case of Revenue is that all these services fall within the scope of Management Consultancy service and, therefore, the appellant is liable to pay service tax on the amounts received from M/s. Centak Chemicals Ltd.

See our Columns Tomorrow for the judgements