Jurisprudentiol– Tomorrow's cases

By Vijay Kumar

Income Tax

Legal Corner Icon — the image was hosted by the publisher and was not captured.I-T - Software duplication - royalty payment to non-resident parent company at 30% of IPP - AO invokes old Sec 92 - Onus to find a comparable case for ordinary profit is on Revenue - Oracle India's appeal allowed: ITAT

THE assessee in this case is a noted software developer Oracle India Pvt Ltd. And the bone of contention is royalty payment. The assessee pays royalty to its non-resident holding company M/s Oracle Corporation, USA for duplicating and sub-licensing of software to its customers. The assessee declares to the AO that it has been paying royalty at the maximum rate of 30% of the Indian Published Price (IPP). The AO raises objection to such a high rate of royalty payment and asks the assessee to justify as to why provisions of section 92 should not be invoked. The AO further notes that the transaction between the assessee and its non-resident parent company has been arranged in such a manner that the assessee company is earning lesser revenue because more royalty is paid to the holding company.

Service

Disciplinary Action - Enquiry Officer himself has acted as the Investigator, Prosecutor and Judge. Such a procedure is opposed to principles of natural justice and has been frowned upon – Supreme Court

Here is a case of a forest guard who was dismissed from service in 1986, was ordered to be reinstated by the High Court in 2005 and the aggrieved State taking the matter to the Supreme Court, which has now confirmed the High Court order. A 22 year ordeal for a lowly guard – against the might of the State! How much money the guard must have spent to reach the Supreme Court!

Service Tax

Prima-facie, transaction charges paid to National Stock Exchange cannot be held to be reimbursable amounts from clients - Not excludible from service charges - Pre-deposit ordered: CESTAT

APPELLANT is a registered stock broking member of National Stock Exchange. In addition to their brokerage they are also collecting transaction charges from their clients. As per Circular dated 11th December, 2000 issued by the National Stock Exchange of India, the transaction charges are payable by the Trading Members of the stock exchanges. The amount is determined on the basis of turnover of the Trading Members and various slabs are fixed, (i) for turnover less than Rs.200 Crores, (ii) for turnover between Rs.200 Crores to Rs.600 Crores, and (iii) for turnover above Rs.600 Crores. The appellant was issued a show cause notice by the Jurisdictional Service Tax Commissioner proposing to include the said transaction charges in the value of taxable service and levied service tax (inclusive of Cess) amounting to Rs. 52.6 lakhs and imposed penalty. Interest was also demanded. In addition to this an amount of Rs. 8.95 lakhs was alleged as inadmissible CENVAT credit on the ground that there is no evidence of service tax registration of the service providers. Confirmation of the demands and imposition of penalty followed as usual.

See our columns Tomorrow for the judgements