Recent caselaws in Service Tax

Latest Case Laws:
 Adopt same yardstick for establishing nexus between input and output service for deciding availability of cenvat credit or refund of credit. Pipavav Shipyard Ltd v/s Commissioner of Central Excise, Bhavnagar 2016 (41) STR 151 (Tri-Ahmedabad).
 No service tax to be levied where an activity has been undertaken in India but the ultimate purpose is for rendering service outside India. International Overseas Services v/s Commissioner of Service Tax, Mumbai 2016(41) STR 230 (Tri- Mumbai).
 No Input Tax Credit available where nexus between input and output is not proved, even if the input services is received by the service provider himself. Kilburn Chemicals Ltd. v/s Commissioner of Central Excise, Tirunelveli 2016 (41) STR 131 (Tri- Chennai)
 Even if input service is received at premises other than from where output service is executed, taxpayer can claim refund of the same. Exfo Electro-Optical Engineering (P) Ltd v/s Comissioner of Central Excise, Pune 2016 (41) STR 65

BUSINESS EXPENDITURE - ALLOWABILITY OF

Section 37(1) of Income Tax Act, 1961

Compounding fees : Compounding fee paid to Municipal Corporation for legalising construction of building is not allowable as business expenditure - (2014) 52 taxmann.com 484 (Punjab & Haryana)

 

 

Software expenses : Expenditure incurred by assessee on replacement of latest version of software had to be allowed as revenue expenditure - (2015) 53 taxmann.com 112 (Ahmedabad - Trib.)

 

 

REPAIRS : Expenditure incurred by assessee on replacement of old tiles, wooden partition, pest control, etc. in respect of business premises taken on lease, was to be allowed as revenue expenditure - (2015) 53 taxmann.com 112 (Ahmedabad - Trib.)

 

 

Gist of recent important tax caselaws

Below are the recent important tax caselaws related to Income tax, Service tax, Excise in brief. The citation is made available for your benefit :

INCOME TAX

SECTION 2(15)

CHARITABLE PURPOSE

Medical relief : Where assessee, a non-profit making company entered into agreement with State Government in terms of which assessee had to provide Emergency Medical Transport Services to patients free of cost, it was to be concluded that assessee was incorporated for charitable purpose of providing medical relief and, thus, its application seeking registration under section 12AA was to be allowed - GVK EMRI (UP) v. Director of Income-tax (Exemption), Hyderabad (2014) 45 taxmann.com 90 (Hyderabad - Trib.)     SECTION 37(1) BUSINESS EXPENDITURE - ALLOWABILITY OF Education expenses : Where expenditure on higher education of employee had an intimate and direct connection with assessee's business, it would be appropriately deductible, even though such an employee was son of a director - Kostub Investment Ltd. v. Commissioner of Income-tax (2014) 45 taxmann.com 123 (Delhi)       SECTION 40A(2) BUSINESS DISALLOWANCE - EXCESSIVE OR UNREASONABLE PAYMENTS Commission : Where revenue authorities disallowed payment of sales commission made by assessee to its agents by invoking provisions of section 40A (2), in view of fact that those agents were house wives were not in a position to offer any professional advice on matters relating to production, market survey or procurement of orders, impugned disallowance was to be confirmed - Luxco Electronics v. Commissioner of Income-tax (2014) 45 taxmann.com 122 (Allahabad)       SECTION 92 Comparables and adjustments/CUP Method/TNMM : Where assessee had to incur additional cost in relation to services rendered by it to unrelated parties as compared to similar services rendered to related parties, assessee should have been allowed relief on account of functions performed, risk assumed and asset employed in services rendered by it to related and unrelated parties - J.P. Morgan India (P.) Ltd. v. Assistant Commissioner of Income-tax (2014) 44 taxmann.com 466 (Mumbai - Trib.)       Comparables and adjustments : Where comparable was a big company in all respects including range of turnover, same should be excluded from list of comparables to small companies which were captive service providers having considerably low turnover - United Online Software Development (India) (P.) Ltd. v. Income-tax Officer (2014) 44 taxmann.com 424 (Hyderabad - Trib.)     CENTRAL EXCISE ACT SECTION 11B REFUND – GENERAL Refund has to claim only as per section 11B of Central Excise Act, 1944 and no civil suit cannot be instituted for refund of claim based on discovery of mistake of law - Union of India v. Rajasthan Spinning & Weaving Mills Ltd. (2014) 45 taxmann.com 2 (Rajasthan) SECTION 14 SUMMONS - RETRACTION OF STATEMENT Onus lies on Department to prove that there was clandestine removal by assessee; and for that purpose, department must put forth evidence and conduct examination of witnesses and buyers to prove the charge - Commissioner of Central Excise, Ahmedabad v. Gopi Synthetics (P.) Ltd. (2014) 45 taxmann.com 57 (Gujarat)

Gist of important latest tax caselaws

SECTION 2(15)
CHARITABLE PURPOSE

Education : Where assessee-trust was conducting a study centre for Karnataka Open University, it could not be considered to be an educational institution within meaning of section 2(15) - New Elim Charitable & Educational Trust v. Commissioner of Income-tax (2013) 40 taxmann.com 373 (Cochin - Trib.)

 

 

SECTION 2(22)

Loans or advances to shareholder : Deemed dividend provisions cannot be invoked merely because shareholders are common in both companies - Commissioner of Income-tax v. AR Magnetics (P.) Ltd. (2013) 40 taxmann.com 392 (Delhi) 

 

 

SECTION 9

Permanent Establishment/Business profits/Royalty or fees for technical services : Where marketing and management services were rendered outside India, mere existence of service PE in India would not make it taxable - ADIT (IT) v. WNS Global Services (UK) Ltd. (2013) 40 taxmann.com 315 (Mumbai - Trib.) 

 

 

SECTION 32

User of asset/Additional depreciation : Where equipment purchased for starting FM radio broadcasting services could not put to use till end of relevant financial year as licence could not be obtained from Ministry, depreciation thereon could not be allowed - Malayala Manorama Co. Ltd. v. Assistant Commissioner of Income-tax (2013) 40 taxmann.com 380 (Cochin - Trib.) 

 

 

SECTION 37(1)

Film production : Where assessee could not generate any income during year from films in respect of which it acquired television rights, deduction for cost of their acquisition could not be allowed - Malayala Manorama Co. Ltd. v. Assistant Commissioner of Income-tax (2013) 40 taxmann.com 380 (Cochin - Trib.)

 

 

SECTION 43B

ESI and PF contribution : Statutory payments in respect of ESI contribution and Provident Fund of employees which were paid by assessee company after expiry of financial year but before filing of return, are allowable under section 43B - Nuchem Ltd. v. Income Tax Appellate Tribunal (2013) 40 taxmann.com 371 (Punjab & Haryana)

 

 

SECTION 69B

Statement recorded during survey : Where Assessing Officer made addition on account of unexplained investment on basis of document impounded during survey and statement recorded by partner of assessee-firm, in view of fact that said documents did not suggest that noting were of loans and advances and, moreover, statement recorded during survey could not be relied upon, impugned addition was to be set aside - Commissioner of Income-tax v. Golden Finance (2013) 40 taxmann.com 329 (Gujarat)

 

 

SECTION 271(1)(c)

Surrender of income, effect of : Where after completion of assessment, consequent upon inquiry assessee surrendered amount of certain loan as bogus loan and interest on said loan, concealment of income was established making a case for levy of penalty under section 271(1)(c) - Bharatkumar G. Rajani v. Deputy Commissioner of Income-tax (2013) 40 taxmann.com 344 (Gujarat)

 

 

 

 

 

 

 

 

 

 

 

Gist of latest caselaws

Lease expenses : Where assessee purchased a running hotel business and vendor had to secure lease rights of premises from owner, expenditure incurred towards such tenancy right should be allowable as revenue expenditure - S.M. Dayanand v .Deputy Commissioner of Income-tax (2013) 40 taxmann.com 420 (Karnataka)

 

 

 

Proceedings in pursuance to notice issued under section 158BD giving less than 15 clear days time to assessee to file return for block period would be void ab initio only in a case where prejudice is shown to have been caused to assessee or where notice has not been served at all to assessee.Notice giving less than 15 days time to file block return: Proceedings in pursuance to notice issued under section 158BD giving less than 15 clear days time to assessee to file return for block period would be void ab initio only in a case where prejudice is shown to have been caused to assessee or where notice has not been served at all to assessee - Commissioner of Income-tax v. Joginder Singh (2013) 40 taxmann.com 429 (Punjab & Haryana)

 

 

 

Fees for Technical services : Irrespective of insertion of Explanations 5 & 6, with retro effect from 1-6-1976, where entire services of providing technical design and drawings were rendered by foreign company to Indian assessee outside India, same would not be chargeable to tax in India - New Bombay Park Hotel (P.) Ltd.v.ncome-tax Officer (International Taxation) TDS-4 (2014) 41 taxmann.com 36 (Mumbai - Trib.)

 

 

 

Liaison Office of a foreign company is taxable when such foreign company is registered with ROC - Brown & Sharpe Inc. v. Assistant/Deputy Commissioner of Income-tax (2014) 41 taxmann.com 345 (Delhi - Trib.)

 

 

TDS on ECB : Interest on external commercial borrowings (ECB) loan being exempted by CBDT under section 10(15)(iv)(c), no TDS liability would arise - Deputy Commissioner of Income-taxv.Essar Steel Ltd. (2013) 40 taxmann.com 537 (Mumbai - Trib.)

 

 

Pre-commencement production cost that was shown as capital work-in-progress, could not be denied as revenue expenditure after production started - Deputy Commissioner of Income-tax v.Essar Steel Ltd. (2013) 40 taxmann.com 537 (Mumbai - Trib.)

 

 

DEDUCTION - PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS

Housing project : Where assessee engaged in business of construction, adopted project completion method which was one of recognized method of accounting, its claim for deduction under section 80-IB (10) could not be rejected merely on ground that it should have adopted percentage completion method of accounting - Commissioner of Income-tax v. Satadhar Enterprises (2013) 40 taxmann.com 327 (Gujarat) 

 

 

SEARCH AND SEIZURE

Validity of search : Where satisfaction with respect to search and seizure in assessee's case was entirely based on a document which neither bore assessee's name nor was it related to him, issue of warrant and subsequent search and seizure proceedings were liable to be quashed - Rajesh Rajora v. Union of India (2013) 40 taxmann.com 330 (Madhya Pradesh)

 

 

APPELLATE TRIBUNAL - APPEALABLE ORDERS

Condonation of delay : Where competent authority rejected assessee's application for grant of registration under section 12AA in absence of books of account and other details furnished by assessee and against impugned order assessee filed appeal before Tribunal late by 1804 days and sought condonation of delay, since assessee was not only negligent in filing appeal before Tribunal but also in pursuing its application before competent authority, there was no reasonable cause for delay - Hyderabad Urban Development Authority v. Assistant Commissioner of Income-tax (2013) 40 taxmann.com 354 (Hyderabad - Trib.) 

 

 

SERVICE TAX

CARGO HANDLING AGENCY SERVICES

Movement of goods in mining area cannot, prima facie, be regarded as Cargo Handling Services - Aravali Equip (P.) Ltd. v. Commissioner of Central Excise (2013) 40 taxmann.com 4 (New Delhi - CESTAT) 

 

 

PENALTY - NOT TO BE IMPOSED IN CERTAIN CASES

Though errors of omission/commission are clerical errors and they may not be deliberate, but, when they are huge, they must be picked up at time when tax return is signed and submitted; failure in that behalf would attract penalty, as such errors do not constitute 'reasonable excuse' - Powerscreen Equipment Ltd. v. Commissioners of Customs & Excise (2014) 41 taxmann.com 62 (UKV - DUTIES TRIBUNALS) 

 

 Source: Taxmann

 

 

  

 

 

 

 

 

 

 

Caselaws already asked and pending CA FINAL NOV 2013 ATTEMPT DT & IDT

Friends, below are the all caselaws as given in Institute's Important caselaws book. The tick-marked (having page number at the side) are the ones which have already been asked in previous attempts.

THE REMAINING ARE MORE IMPORTANT AS THEY HAVE HIGHER CHANCES TO BE ASKED IN COMING EXAMS!!

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