Jurisprudentiol– Tomorrow's cases

By Vijay Kumar

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

Incentive deduction under section 80HHE in respect of profits of business of software exports – not eligible for foreign companies – no discrimination - ITAT

A careful analysis of the scheme of Section 80HHE does show that the differentiation is on the basis of residential status of a taxpayer and not on the basis of place of incorporation of the company. Section is quite specific that so far as persons other than companies, i.e. non corporate taxpayers, are concerned only residents are eligible for deduction under section 80HHE , and that, by implication, non residents are not eligible for deduction under section 80HHE . Coming to the question of eligibility of the companies or corporate taxpayers, it is to be noted that the expression 'Indian company is also neatly defined under the Act, under Section 2 (26) of the Act, as a company formed and registered under the Companies Act' and includes certain other categories of other entities formed or incorporated in India. So far as the companies, i.e. corporate taxpayers, are concerned, this Section provides , that only Indian companies are eligible for deduction. By implication, it would appear that, while Indian companies are eligible for this deduction irrespective of their residential status, the foreign companies are not eligible for this deduction.

No liability can be incurred only by making advance payment; Deduction not allowable on pre-paid rent relating to next financial year: ITAT Special Bench

IN an interesting decision the Special Bench of the Tribunal has held that a claim for deduction for pre-paid lease rent relating to next financial year cannot be allowed in the current AY. And the rationale is that a deduction can be allowed only when a liability is incurred. And under the mercantile system of accounting, a liability can be said to have arisen only when an enforceable debt is created against the assessee. And, since in the present case, a payment has been made in advance even before a liability is incurred by the assessee, it cannot be allowed as deduction in the current AY.

Central Excise

Very fact that applicants indicate 'Manufacturing date' on 1kg pack, branded ' Sika Noleek ' shows that they themselves recognize process undertaken by them as manufacture – No strong prima facie case – Tribunal orders pre-deposit

THE issue involved in the instant case is whether the repacking of the Talc powder obtained in bulk into small packs of 1Kg and putting the brand name of “ Sika Noleek ” of the applicants amounts to manufacture or not.

The applicant was of the firm belief that this activity does not take him any where near the Central Excise Tariff and the Excise officers but the Revenue wanted to plug the Revenue leak – hence they demanded Central Excise duty on “Noleek” saying that it is the outcome of a manufacturing process.

Service Tax

Computer training institute – Eligible for exemption prior to 16.6.2005 – notification not to have retrospective effect: CESTAT

"COMMERCIAL OR COACHING" services were brought into the service tax net w.e.f. 1st July 2003. Notification No. 9/2003-ST effective from 01/1/2003 exempted the taxable services provided in relation to commercial training or coaching, by a vocational training institute, a computer training institute or a recreational training institute. The said exemption benefit was extended time to time. Thereafter, Notification No. 24/2004-ST dated 10/9/2004 exempted the taxable services in relation to commercial training or coaching, by "a vocational training institute", or "a recreational training institute".

See our columns Tomorrow for the judgements