Jurisprudentiol– Tomorrow's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Income Tax

Incentive subsidy received by Sugar Mills was Capital Receipt and not Revenue Receipt – Supreme Court

THE test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant.

Service Tax

Tour operators using vehicles as stage carriages – still liable to pay Service tax as tour operator – since Government has issued Section 11C notification, no suppression can be alleged and no extended period can be invoked - CESTAT

SINCE the Government itself in this notification has acknowledged the practice of non-levy of service tax during period from 1.4.2000 to 4.2.2004 on the service provided by tour operators operating under Contract Carriage permits, in relation to transport of passengers from one place to another (other than package tour services) there will be no justification for holding the Appellant guilty of wilful suppression of relevant information with intent to evade the service tax. So, longer limitation period cannot be invoked and the entire demand is time barred.

Central Excise

Valuation of Sec 4A notified goods - paints manufactured on job work - 200 litre bulk drums correctly assessed u/s 4 on basis of formula laid down in Ujagar Prints case - Tribunal allows appeal.

THE product manufactured and packed in 200 Ltr drums are not covered under the provisions of Section 4A and if that be so, the appellant is free to apply the provisions of Section 4 for the purpose of arriving at the correct assessable value of the said goods.

See our columns Tomorrow for the judgements