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By Vijay Kumar

Customs

Kar Vivad Samadhan Scheme - even irregular or incomplete filing of appeal would come within purview and ambit of ‘pending’ litigation : Madras High Court

WRIT Appeals Nos.2619 and 2824 of 2004 have been filed against the common order passed by a single Judge in writ petitions Nos.2890 and 2891 of 2004 by which the the appellant was non suited for the prayer to call for the records relating to the order of the respondent - the Commissioner of Customs, (Port) Chennai dated 28.05.1999 to have it disposed of under the Kar Vivad Samadhan scheme and for a further direction to the respondent to issue final certificate to the appellant under the said scheme.

The single Judge, after referring to section 95 of Finance (No.2) Act, 1998 has ultimately held that it is true that the word 'pending' would mean 'undecided issues' and a legal proceedings deemed to have been pending as soon as it is commenced and until it is concluded, but nevertheless the commencement of the legal proceedings would not mean the mere presenting of papers to the Registry. Even though the papers were presented on 28.12.1998, the papers were returned from the Registry for certain compliance on 13.01.1999. Again the papers were represented after compliance only on 25.01.1999. In those circumstances of the case, it could not be construed that the writ petition was pending as on 28.12.1998 inasmuch as the presentation of the same by the appellant itself was not proper and therefore, the relief claimed by the appellant under the Kar Vivad Samadhan Scheme is barred by limitation.

The correctness of the said order is canvassed in these two appeals.

Income Tax

Provision made to meet anticipated cost of change over form Central DA to Industrial DA scale – allowable expenditure; Airport terminal building is plant; modernisation of airport – revenue expenditure : ITAT

Provision made to meet the anticipated cost of change over form Central DA to Industrial DA scale

despite the fact that such an amount represented mere provision and not any ascertained liability. "The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in presenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain." If the business liability has definitely arisen in the accounting year, deduction will be allowed although liability may have to be quantified and discharged on a future date.

Prior period depreciation disallowance of Rs. 71.28 lacs representing prior period depreciation despite the fact that it is only the current years depreciation which can be claimed as per the provision of sec. 32 of the IT Act 1961 and despite the fact that the assessee had not made any provision for such depreciation in earlier years. The depreciation of earlier years has not been clubbed, rather it has been shown separately. Each year's depreciation is allowable separately as per rules. The assessee has added the earlier year's depreciation as per its books of account. In the computation of income, the claim has been made as per I.T. Rules.

Airport Terminal - Plant and machinery:

It is argued that the building is specially designed to accommodate these assets so that the traffic is smoothly managed and functioning of the flights is not disturbed. The counsel has gone to the extent of submitting that these buildings are part of the air-craft for ingress and egress of the passengers and therefore the whole of the building should be treated as plant for the purpose of deduction of depreciation. On careful consideration of the entire material on record and after seeing the requirement of the building in the context of special services rendered by the assessee for the purposes of its business, the terminal buildings are to be treated as 'plant'.

Modernisation of airport – revenue or capital?

There is no dispute about the fact that the commitment fee paid to US Exim Bank, guarantee fee paid to Government of India; Export credit agency fee and management fee were all related to foreign loan obtained by the assessee, the purpose for obtaining such loan was stated to be modernization of Delhi and Bombay Airport . The department has not been able to point out that the loan was taken for any other purpose or that the expenses referred to above were not in connection with the obtaining of foreign loan. The modernization of the Airports for the rendering of various services as claimed by the assessee were directly and closely connected with the business activity of the assessee and thus the expenditure had direct nexus with the business activity of the assessee as the loan was obtained for carrying out the business.

Central Excise

Reversal, on own, of ineligible Cenvat credit of Rs 8.85 lakhs without utilization does not attract interest u/s 11AB of CEA’44 : Tribunal

THE assessee availed Cenvat credit of more than Rs.8.85 lakhs rupees but realized almost a year later that they were not eligible to avail the same. Without waiting for the jurisdictional authorities to flex their muscle, they reversed the credit down to the last penny!

And maybe their conscience told them to inform the jurisdictional authorities about the misdemeanor, an act for which they may never pardon themselves!

The assessee was served with a notice asking them to pay interest of Rs.93,345/- and proposing to impose penalty.

The adjudicating authority was obviously a practical person. He checked up whether by utilizing this inadmissible credit, the assessee had gained any financial advantage – he noticed that the cenvat credit balance statement for the entire period of dispute always showed a credit balance of Rs.30 lakhs plus. Satisfied that there was no “utilization” of the inadmissible credit, he found that there was no question of recovering any interest u/s 11AB. But, since the assessee had contravened the law & taken the credit which by their own admission is inadmissible, he imposed a penalty of Rs.10,000/-.

See our columns tomorrow for the judgements