TaxTMI 
TaxTMI 
2025 (2) TMI 182
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....the reasons discussed hereinabove; I drop the balance demand of Rs.34 79,99,652/- (Rupees Thirty Four Crore, Seventy Nine Lakh, Ninety Nine Thousand, Six Hundred and Fifty Two only) under the provisions of Section 73(2) of the Finance Act, 1994, for the reasons discussed hereinabove; 14.2 I order to recover interest at applicable rates from M/s Hindustan Aeronautics Limited, Accessories Division, Faizabad Road, Indira Nagar, Lucknow-226016 under Section 75 of the Finance Act, 1994, on the amount confirmed in Para 14.1 above, for the reasons discussed hereinabove; 14.3 I also impose penalty of Rs. 10,22,050/- (Rupees Ten Lakh, Twenty Two Thousand and Fifty only) upon M/s Hindustan Aeronautics Limited, Accessories Division, Faizabad Road, Indira Nagar, Lucknow- 226016, under Section 76 of the Finance Act, 1994, for the reasons discussed hereinabove" 2. Appellant is a Government of India undertaking interalia engaged in providing taxable services under the category of Management, Maintenance or Repair Services, Appellant is also availing the facility of Cenvat Credit under Cenvat Credit Rules. Appellant imported technologies on payment of royalty, license....
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....nbsp; (Figure in Rs.) SI. No. A/c. Head of Trial balance Item Amount in Rs. Service Tax payable @15% 1 15010101 License Fee (Other intangible assets License Fees) 886372703 132955905 2 15010201 Documentation Fee (Other intangible assets Documentation) 262306281 39345942 3 15010301 Computer software (Other intangible assets Computer software) 704152 105623 4 15010401 License Fee 29150814 4372622 5 15010601 Design & Development 30000000 4500000 6 19060002 License Fee-ALH 0 0 7 19060101 Documentation 161615 24242 8 19060154 Documentation 9136649 1370497 TOTAL 1217832214 182674831 GRAND TOTAL (2015-16 & 2016-17) 2428489576 358220149 5. After completion of the investigations, show cause notice SCN dated 17.04.2018 was issued to the Appellant asking them to show cause as to why- "(1). Service tax, amounting to Rs. 35,82,20,149/- (Rupees Thirty Five Crore Eighty Two Lacs Twenty Thousand One Hundred....
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....der the entries, on which the demand has been raised, are not amounts paid by the Appellant. Therefore, demand is liable to be set aside. ⮚ That the amounts appearing in head 1501 doesn't represent amount being paid to the foreign vendors. ⮚ The amount against which the demand has been made is in respect of purchase of documentations and manuals and is not in respect of provisions of any service to the Appellant, accordingly the same could not have been covered by the definition of services under the Finance Act, 1994. ⮚ As per the Indian Accounting Standard (Ind AS) 38, these manuals are in nature of intangible assets which are accounted as such. The said assets are defined as identifiable non-maintainable assets without physical contact. ⮚ In terms of this accounting standard every year on amortized basis of the cost of acquisition of these assets is shown as expenses in the financial accounts of the Appellant. ⮚ The expense is taken from the trial balance which is not the actual expense incurred for acquisition of these assets in that financial year. The same are not in nature of consideration for an....
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....ssioner that the entries against which the current demands are being made in the book entries as per the Indian Accounting Standard have not been considered. The impugned order itself records that these amounts would already subject to matter of show cause notice issued by the divisional office earlier to the Appellant. This fact could have been verified by the adjudicating authority and the findings recorded rather than observing non- submission of any evidence in this regard. 4.4 Indian Accounting Standard (Ind AS) 38 provides as follows:- 9. Entities frequently expend resources, or incur liabilities, on the acquisition, development, maintenance or enhancement of intangible resources such as scientific or technical knowledge, design and implementation of new processes or systems, licences, intellectual property, market knowledge and trademarks (including brand names and publishing titles). Common examples of items encompassed by these broad headings are computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, fishing licences, import quotas, franchises, customer or supplier relationships, customer loyalty, market s....
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....le assets and other intangible assets: (a) whether the useful lives are indefinite or finite and, if finite, the useful lives or the amortisation rates used; (b) the amortisation methods used for intangible assets with finite useful lives; (c) the gross carrying amount and any accumulated amortisation (aggregated with accumulated impairment losses) at the beginning and end of the period; (d) the line item(s) of the statement of profit and loss in which any amortisation of intangible assets is included; (e) a reconciliation of the carrying amount at the beginning and end of the period showing: Substituted vide Notification No. G.S.R. 365(E) dated 30th March, 2016 and, thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28th March, 2018. Prior to substitution in 2016, the paragraph read as under: 116 The amount of consideration to be included in the gain or loss arising from the derecognition of an intangible asset is determined in accordance with the requirements for determining the transaction price in paragraphs 47-72 of Ind AS 115. Subsequent changes to the estimated amount of the consideration included ....
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....L. 209 (Mad.)] Hon'ble Madras High Court has observed as follows:- "15. AS 7 thus provides for a detailed methodology for the reporting and determination of the percentage of income from the contract over the term of the project and sets out the mode of computation for arriving at the same. The basis of such recognition and reporting is the apportionment of the income earned and expenditure incurred over the tenure of the project. This is entirely different and distinct from the scope, object and application of the Point of Taxation Rules that seeks to set out a methodology for determination of when the service was rendered and consequently when the receipt of income from such rendition be taxed. 16. The emphasis and thrust of each methodology is in alignment with the different purposes that they bear reference to - AS 7, in the context of the preparation of financials, addresses the "how much‟ of the transaction over the term of contract whereas Rule 3 of the Rules addresses the "when‟ in relation to the rendition of service for computing taxability under the Finance Act, 1994. 17. The basis of the addition by the respondent is clear from the....
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.... the admitted position is that the petitioner does not raise invoices as and when a particular landmark is reached and the accrual of the consideration stage-wise is occasioned automatically upon completion of the stage of construction set out in the agreement itself. 23. It is the specific case of Mr. Prabhakar that the customers have remitted, in advance, the consideration relating to several of the initial landmarks as a lump sum and that the said amount has been offered to tax. It was then incumbent upon the respondent to have, in the light of the stand adopted by the petitioner in its Service Tax Returns, to have examined whether the receipts offered to tax correspond and cover the stages in respect of which consideration has accrued as per the agreement with the customer. 24. Rule 3(a) and (b) provides for the point of taxation to be either the point of raising of invoice [Rule 3(a)] or in a case where the service provider has received the payment even prior to the time stipulated in the invoice, upon receipt of such payment [Rule 3(b)]. In the present case, no invoice is said to have been raised. However, the petitioner confirms that it has, in fact, receiv....
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....w of the clarification given by the Board unless such technical know-how etc. are listed under the law for time being in force in the country and the services cannot be held to be a taxable service. Also we find that Tribunal Mumbai has gone into the issue of such contracts in an elaborate manner and have observed as follows : "4. Learned Chartered Accountant appearing on behalf of the appellant-assessee takes us through the entire case records. It is his submission that addendum issued by the Revenue is incorrect inasmuch as that the said addendum was issued after considering the written submissions made by the appellant-assessee. It is his submission that Revenue is trying to improve upon that case after considering the defence raised by the assessee. On merits, it is his submission that the contract entered by the appellant-assessee is on behalf of the Republic of India for the supply and transfer of licence for production of fighter aircraft, engines, air borne equipments. The said agreement was entered on 28 December, 2000 accordingly, appellant-assessee paid the amounts to the foreign-based firm. He would take us through the agreement which was produced for perusal o....