Taxability of Cargo Handling services in relation to Export Cargo after the introduction of negative List

Union budget 2012-13 has made a drastic changes in the history of service tax, previously the rules says that if any services is coming under the definition of any taxable services then the service tax is applicable on that services, but now the rule says that any services which are coming under negative list then they are exempt, in other words it means any services which are not mentioned in the negative list are taxable.

Previously, The definition of Cargo Handling services excludes the services in relation to Export Cargo, hence they are not taxable.
but in current scenario the negative list does not include export cargo handling therefore by virtue of which the same has been taxable from 01.07.2012 onward.

But there is some exemption in relation to stuffing, de-stuffing, cargo handling of agriculture produce. agriculture produce means the produce which arises due to harvesting and cultivation, but it does not include the produce which are arises from the harvesting or cultivation but the same has been processed further by any means.

Example - Sugarcane is a agriculture produce as the same has been arises by cultivation, but the sugar is not a agriculture produce because the same has been processed further.

Is depreciation under section 32 allowable in respect of emergency spares of plant and machinery, which though acquired during the previous year, have not been put to use in that year?

CIT v. Insilco Ltd. (2009) 179 Taxman 55 (Del.)

On this issue, the Delhi High Court observed that the expression used for the purposes of business appearing in section 32 also takes into account emergency spares, which, even though ready for use, yet are not  consumed or used during the relevant period. This is because these spares are specific to a fixed asset, namely  plant and machinery, and form an integral part of the fixed asset. These spares will, in all probability, be useless once the asset is discarded and will also have to be disposed of. In this sense, the concept of passive  use which applies to standby machinery will also apply to emergency spares. Therefore, once the spares are  considered as emergency spares required for plant and machinery, the assessee would be entitled to capitalize the entire cost of  such spares and claim depreciation thereon.

Note: One of the conditions for claim of depreciation is that the asset must be used for the purpose of  business or profession . In the past, courts have held that, in certain circumstances, an asset can be said to be  in use even when it is kept ready for use . For example, depreciation can be claimed by a transport company  on spare engines kept in store in case of need, though they have not actually been used by the company.  Hence, in such cases, the term use embraces both active use and passive use. However, such passive use  should also be for business purposes.


The Contributor is CA. Priya Subramanian

Can exemption under section 54 available on sale of a residential house be extended to the extent of investment in two flats, if such flats were combined to make one residential unit?

CIT v. D. Ananda Basappa (2009) 309 ITR 0329 (Kar.)

The assessee-HUF sold its residential house in Mumbai and purchased two residential flats adjacent to each other (from two different persons) on the same day vide two separate registered sale deeds. The builder had certified that he had effected necessary modification to make it one residential apartment. The assessee sought exemption under section 54 in respect of the investment made in purchase of the two residential flats. The Assessing Officer, however, gave exemption under section 54 to the extent of purchase of one residential flat only contending that

(i) Sub-section (1) of section 54 clearly restricts the benefit of exemption to purchase of one residential house only; and

(ii) It was found by the Inspector that, before the sale, the residential flats were in occupation of two different tenants.

The order of the Assessing Officer, though confirmed by the Commissioner (Appeals), was set aside by the Tribunal holding that the assessee was entitled to exemption in respect of the amount invested in both theflats,  since they were to be treated as one single residential apartment.

The Karnataka High Court observed that the assessee had shown that the flats were situated side by side and  the builder had also certified that he had effected modification of the flats to make them one unit by opening the door between the apartments. Therefore, it was immaterial that the flats were occupied by two different tenants prior to sale or that it was purchased through different sale deeds. The Court observed that these were not the grounds to hold that the assessee did not have the intention to purchase the two flats as one unit. The Court held that the assessee was entitled to exemption under section 54 in respect of purchase of both the  flats to form one unit.


The Contributor is CA. Priya Subramanian