Jurispruden tiol - Tomorrow's cases

By Vijay Kumar

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

Sec 110 of Finance Act, 2000 would not apply to those SCNs where it is held that invoking larger period of limitation is unjustified on ground that there is no fraud, collusion or suppression of facts for invoking larger period : Bombay HC

THE questions of Law raised in this Revenue appeal are :-

1) Whether the CESTAT is justified in holding that the extended period of limitation is not applicable in the present case without even discussing the elements of expenses incurred by the assessee which were suppressed with intent to evade central excise duty ?

2) Whether the department is entitled to invoke extended period of limitation when the wilful suppression of certain expenses incurred by the assessee while declaring the assessable value with intent to evade central excise duty ?

3) Whether CESTAT has erred in setting aside the demand as time barred, by not justifying the amendment made in section 11A vide section 110 of Finance Act, 2000 ?

In the famous Cotspun case, the Supreme Court held that larger period of limitation was not available when the classification list was approved by the Department. To undo this order, the Government brought in Section 110 of the Finance Act, 2000, to proclaim that any demand issued between 1980 and 2000 would not be hit by time bar notwithstanding any approval, acceptance or assessment relating to the rate of duty on or value of, the excisable goods by any Central Excise Officer under any other provision of the Central Excise Act or the rules made thereunder.

Income tax

I-T - if two views are possible and AO has taken one of them, such view cannot be revised u/s 263 - Before invoking Sec 263, it is necessary for Revenue to make out a case that assessment order is not only erroneous but also prejudicial to the interest of Revenue : ITAT

ON scrutiny, the CIT has noticed that the AO has allowed the claim of the assessee in respect of claim of exemption of capital gains u/s. 10(23G) of Rs.53,70,49,727/-arising out of conversion of 1 crore equity share of Gujarat Pipavav Port Ltd. (in short GPP) as stock in trade in assessment year 2000-01 and subsequent sale of these shares in the A.Y. 2002-03 and claim of interest of Rs.1,87,06,108/- on borrowed funds from Gujarat Maritime Board used for purchase of shares as a business expenditure without verifying the fact that the conditions laid down in Section 10(23G) has not been satisfied and the interest paid on funds utilised for purchase of shares held as an investment is a Capital expenditure not allowable u/s. 36(1)(iii). Even otherwise the interest payable to Gujarat Maritime Board is covered by the provisions of Section 43B of the I.T. Act. By allowing the claims the AO in the computation of income for A.Y. 2002-03 has rendered the assessment order u/s. 143(3) dated 24.3.2005 erroneous and prejudicial to the interest of Revenue and the CIT proposed the assessment to revise u/s. 263(1) of the I.T. Act, 1961.

When transactions between two companies are at arms' length and no controlling interest is established, lifting corporate veil will not serve purpose to establish avoidance of tax : ITAT

SINCE the issues in all these appeals and cross appeals by revenue and assessees are inter-related all these appeals were heard together and disposed of by a common order.

The primary issue to be decided is whether

++ The appellants Fine Instalments (P) Limited and Handsome Investments (P) Ltd. should be treated as merely paper or dummy entities and are conduits of Xerox Modicorp Limited.

++ Validity of reopening of assessment in the case of Indian Xerox systems Ltd, under section 147 of the Act,when the assessments were reopened beyond a period of four years from the end of relevant assessment years as barred by law, and whether such reassessment is justified to show that any income chargeable to tax has escaped assessment for the reason of failures on the part of the assessee to disclose fully and truly of material facts necessary for his assessment for that assessment year.

See our columns Tomorrow for the judgements