DIT v Credit Suisse First Boston (Cyprus) Ltd. [IT APPEAL NO. 1026 OF 2011] (Bombay HC) Issue 1: Whether Interest accrued but not due on the balance sheet date is taxable Background: The assessee is a company incorporated in and is a tax resident of Cyprus. It carries on business of banking and was, at the relevant time, registered in India with the Securities & Exchange Board of India (SEBI) as an approved sub-account of Credit Suisse First Boston, a Foreign Institutional Investor (FII). SEBI had permitted the assessee to invest in India exclusively in debt-securities, including Government securities. The assessee follows the mercantile system of accounting. The assessee filed its return of income for the assessment year 2001-2002 on 31st October, 2001, declaring a total income of Rs.5,94,28,493 comprising of interest income from securities and claimed exemption in respect of income on sale of securities. The AO held that Rs.1,21,57,517/- is required to be taxed as interest accrued though not due on securities held by the assessee as on 31st March, 2007, being the last date of the financial year. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted both the additions. The ITAT upheld the order.
Monthly Archives: July 2012
Jeans Knit (P.) Ltd v DCIT [ITA No: 19 & 23 (BANG.) OF 2010] (Bangalore ITAT) Background: The assessee is a 100% export oriented undertaking and is engaged in the business of manufacturing and export of garments. During the relevant financial year, the assessee made remittances to M/s Sharp Eagle International Ltd. (SEL), a non-resident company incorporated in Hongkong. The AO observed that the assessee made these remittances without deduction of tax at source as per provision of sec. 195(1) read with sec. 9(i)(vii) of the Act. The assessee submitted that SEL was acting on directions of the assessee for inspection of fabrics, timely dispatch of material etc. and for these services, the assessee paid 12.5% of imported value as charges to the non- resident company. The AO held that the charges paid to the non-resident company are fees for technical services (FTS) as defined in explanation 2 to sec. 9(1)(vii) and therefore, held the assessee to be defaulter u/s 201(1A) for non deduction of tax. The assessee filed an appeal before the CIT(A) and the CIT(A) also upheld the order of the AO.
Payment to overseas agent is not FTS – Bangalore ITAT
CIT v HSBC Securities & Capital Markets India (P.) Ltd. [ITA No: 657 OF 2007] (Bombay HC) Background: The assessee filed its return of income showing loss of Rs. 1,65,29,711 comprising of loss of Rs 1,72,31,711 arising out of the purchase and loss of shares and income from other sources of Rs 7,02,000. The AO passed assessment order under section 143(3) holding the aforesaid loss as speculation loss by virtue of explanation to section 73. Before the CIT(A), the assessee argued that “the explanation refers to the words “income which is chargeable under the heads” and since in the Appellant’s case, the only income which is included in gross total income is dividend income, the gross total income mainly consists of “Income from other sources” and therefore, explanation does not apply to Appellants case.“ The CIT(A) partly allowed the assessee’s appeal. However, the ITAT reversed the claim of assessee and invoked explanation to section 73 to treat the aforesaid loss as speculation in nature.
Bombay HC clarifies position on applicability of Explanation to S. 73
Abbey Business Services (India) (P.) Ltd v DCIT [2012] 23 taxmann.com 346 (Bangalore – Trib.) Facts of the case: The assessee-Indian company(Abbey India) incorporated on 22-1-2004 under the Companies Act, 1956 entered into an agreement for secondment of staff with its overseas parent company (Abbey National Plc., UK) on 4-2-2004. The secondment agreement contained inter alia the following clauses 3.2 to 3.6 3.2 Particular Secondments Abbey India and Abbey UK shall complete, sign and date a Secondment Term Sheet in respect of each employee agreed between them to be seconded to Abbey India in accordance with the terms of this Agreement.
Secondment is not “rendering of services”, if the other entity is their ‘real and economic ...
Krishak Bharati Cooperative Ltd v DCIT [IT APPEAL NO. 205 OF 2010 dtd 12.07.0212] Delhi High Court Facts of the case: The assessee had entered into a lease agreement with NOIDA on 06.01.1989 by which the land in question was demised for a period of 90 years. The assessee was entitled to construct an office complex on the land. The assessee was required to pay premium of Rs. 2,53,96,993/- to NOIDA at the time of the allotment, or demise. In addition, under the lease deed, the assessee had to pay annual lease rent @ 2.5 per cent of the premium. The lease rent could be enhanced after 12 years. The assessee amortized the expenditure by way of premium over the period of lease, and claimed deduction of Rs. 2,75,045/- in the assessment year. The AO held that lease of land for 90 years conferred a benefit of enduring nature to the assessee, particularly in the light of the definition of the expression “immovable property” furnished in section 269UA(d)(i) and, consequently, it was in the nature of capital expenditure. This amount was, as a result not allowed as deduction.
Lease premium paid in respect of 90 years’ lease is not a revenue expenditure – ...
Tamil Nadu Cements Corporation Ltd. v JCIT [TC(A). No. 1123 of 2005] (Madras High Court) Background: The assessee during the relevant assessment year deducted prior period expenses of Rs 96,94,693 from book profits while computing MAT under section 115JA. The Assessing Authority viewed that as per the provisions of the Companies Act, prior year adjustments could not be reduced for arriving at the net profit of that particular year. The AO held that the computation done by the assessee was not in accordance with Section 115JA of the Act.
Prior period expenses allowable as a deduction from book profits while computing MAT – Madras ...
CIT v Fortis Financial Services Ltd [ITA Nos.243/2011 & 244/2011] (Delhi HC) Background: The assessee was engaged in business of providing financial services. During the assessment proceedings, the AO observed that an amount of interest of Rs 46,63,619/- was not included in the return. Similarly, Rs.4,13,82,323/- and Rs.5,28,16,681/- towards ‘bill discounting charges’, in respect of assessment years 1996-97 and 1997-98 were not included and therefore, added these amounts in his assessment order. Simultaneously, penalty proceedings were initiated for concealment and/or furnishing of inaccurate particulars. AO levied penalty, in respect of two assessment years and after considering the reply, passed two orders under Section 13 of the Act imposing the penalty for concealment or furnishing accurate particulars of chargeable interest. The CIT (A), deleted the said penalty on the ground that the issue/question raised related to honest and bona fide difference of legal opinion on whether bill “discounting charges” should be treated as interest or not for the purpose of the said Act. The tribunal upheld the said decision.
Penalty – Where two legal views are not plausible, assessee cannot contend it to be ...
UE Trade Corporation (India) Ltd v DCIT [ITA No.2303/Del/2011] (Delhi ITAT) Background: The assessee was engaged in trading in agricultural products. During the course of assessment proceedings from the tax audit report in Form No.3CD, the Assessing Officer noted that the tax auditor had quantified the amount of 40,41,233/- disallowable under sec. 40(a)(ia) of the Act. However, in computation of income the assessee had added back only Rs.20,16,778/-. The remaining amount of Rs.20,24,455/- was therefore, disallowed by the Assessing Officer.
No disallowance u/s 40(a)(ia) for short deduction of TDS – Delhi ITAT
Smt Girija Reddy v ITO [IT Appeal No. 297 (Hyd.) of 2012] (Hyderabad ITAT) Background: During the year under consideration, the assessee, a partner in the firm M/s. Montage Manufacturers, retired and her account had been credited by the firm with Rs. 7,95,88,639 being her share of goodwill. The Assessing Officer held that the crediting of the amount of Rs. 7,95,88,639 in lieu of the assessee’s share of goodwill on her retirement also amounting to transfer, and therefore, such receipt is liable for capital gains tax, as her right in the firm is a capital asset and extinguishment thereof amounts to transfer.