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By Vijay Kumar

Income Tax

Advance payment towards purchase of capital asset - deal cancelled but sum not refunded by seller - it's capital loss and cannot be allowed as business loss : Delhi HC

HERE is an interesting situation. The assessee decides to buy a building for expansion of office premises, make some advance and then decides to cancel the deal. But the seller declines to refund the advance. After a few years, the assessee has no choice but to write off the advance as bad debt. Now the question is : Is it a business loss or a capital loss? Answering this question the Delhi High Court held that since the advance payment was made for purchase of a capital asset, the loss partakes the character of capital in nature, and deduction cannot be allowed as business loss.

Supreme Court

Can States legislate on industrial alcohol? - To be decided by Larger Bench : SC

THIS is a State Excise case but several constitutional questions are raised. The Court must accept the position that the States have the power to regulate the use of alcohol and that power must include the power to make provisions to prevent and/or check industrial alcohol being used as intoxicating liquor. In para 64 of the judgment the Bench stated that it recognises the power of the State to regulate though perhaps not as emanation of police power, but as an expression of the sovereign power of the State.

Central Excise

Goods cleared for export without payment of duty under bond - no proof submitted, hence duty confirmed - Appeal against such order does not lie before Tribunal : CESTAT

THIS is a classic case of how an assessee suffers for no fault of his. The assessee exported goods without payment of duty under a bond. However, since he did not produce the necessary proof of export, a demand of duty was issued to and the same was confirmed. He failed to satisfy the first appellate authority and hence went in appeal before the Tribunal.

Excisability of waste and scrap of paper board - CEGAT has abruptly come to an abrupt conclusion - matter remanded : Supreme Court

DURING investigation of the accounts of M/s Wimco Ltd. Bareilli, the respondent in this Revenue appeal, departmental sleuths realised that the respondent was using paper and paper board for the manufacture of printed paper board boxes. During the course of manufacture of such boxes, waste/scrap/parings are generated, it was alleged that this waste was classifiable under Chapter sub-heading 4702.90 of Central Excise Tariff Act,1985 (in short the 'Tariff Act'). Scrutiny of records revealed that the respondent was selling this waste/scrap/parings. It was also noticed that they did not declare transactions of waste/scrap/parings, and did not file classification list under Rule 173-B of the Central Excise Rules, 1944 (in short the 'Rules') and did not issue any invoice prescribed under Rule 52-A. Accordingly, a show cause notice (in short 'SCN') was issued to the respondent asking it to explain as to why duty amounting to Rs. 23,20,000/- should not be demanded and why penalty should not be imposed and why interest should not be charged.

See our columns on tomorrow for the judgments