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.
Yearly Archives: 2012
Prakash Leasing Ltd v DCIT [IT APPEAL NO.2557 OF 2005] (Karnataka HC) Background: The assessee company is engaged in the business of finance and leasing. During the year under consideration, the assessee company had purchased vehicles and had leased out the same. Assessing Authority was of the view that if the vehicles were purchased by this alleged lessees, the ownership of the vehicles lies only with them and not with the assessee company. Relying on the statements of 35 persons, the truck drivers, it was held that they have purchased the vehicles under the financial assistance from the assessee and therefore, the assessee is not the owner of the 36 motor vehicles owned and therefore, he is not entitled to depreciation. Similarly, 26 persons to whom summons had been issued did not turn up. Therefore, the Assessing Authority disallowed the depreciation claimed on these vehicles allegedly leased to the 26 persons.
Lessor is entitled to depreciation even if lessees use the assets in their business – ...
ACIT v Result Services (P) Ltd [IT Appeal NO. 2846 (DELHI) OF 2011] (Delhi ITAT) Background: The assessee company is a 100% subsidiary of the holding company M/s McCann-Erickson (India) Pvt. Ltd. M/s McCann Erickson has taken on rent office premises in Delhi and Mumbai vide separate lease deeds with the landlords. M/s McCann has permitted common use of the above premises by the assessee company. The full rent for the premises have been paid directly by the holding company to the landlords after deducting tax at source u/s 194-I of the Act. During the year under consideration, the assessee paid Rs. 56,23,456/- to M/s McCann towards its portion of rent on account of the above use of office premises. The AO has disallowed the above payment u/s 40(a)(ia) by holding that TDS should also have been deducted by the appellant company on the above amount u/s 194-I of the Act.
Reimbursement of rent not subject to TDS u/s 194-I – Delhi ITAT
CIT v Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 23 taxmann.com 23 (Bombay HC) Facts of the case: Assessee had claimed in his return for A.Y. 2004-05 a deduction under section 43B in respect of payment of SEBI fees of Rs. 10,00,000 each paid on 16th July, 2004 and 29th April, 2004 i.e. during the financial year 2004-05. Thus, admittedly, for the relevant assessment year viz. 2004-05, the assessee was not entitled to a deduction in respect of the said payments. In the course of assessment proceedings before the AO, the assessee stated that the claim was made inadvertently. The respondent, however, made a claim of Rs. 40,00,000 under section 43B in respect of payment of the SEBI fees on 9th May, 2003 i.e. in the assessment year 2004-05. The AO rejected the claim on the ground that he had no authority to allow any relief or deduction which had not been claimed in the return. CIT(A) and ITAT ruled in assessee’s favour and allowed the deduction. Hence, the instant Departmental appeal.
Assessee entitled to claim additional deductions/reliefs before appellate authorities – Bombay HC
Jafferali K. Rattonsey v DCIT [IT APPEAL NO. 5068 (MUM.) OF 2009 dated 25.1.2012] (Mumbai ITAT) Background: The assessee had claimed exemption for Long Term Capital Gain of Rs. 4,94,51,910/- on account of sale of shares u/s.10(38) of the I.T. Act. During the course of assessment, the assessee furnished demat account, brokers’ note and bank account statements to substantiate his claim u/s 10(38). AO noted that shares are dematerialized immediately before the date of sale i.e. either on the same date of sale or 2 to 3 days before the sale of shares. The AO contended that the date of purchase can be considered only as date of dematerialization in the Demat Account with Techno Shares and Stocks Ltd. Price of the shares on the date of dematerialization would then become the purchase price of the assessee. The sale was held to be short term capital gains. CIT(A) upheld the decision of AO in this context
Period of holding to be determined from the date of purchase and not from the ...
Prakash Leasing Ltd v DCIT [ITA Nos 301,302 & 491 OF 2007] (Karnataka High Court) Background: The assessee was a non-banking financial company. The assessee received a sum of Rs. 11.84 crores as the lease rentals. The assessee had deducted a sum of Rs. 4.35 crores representing the lease equalization account from lease rentals of Rs. 11.84 crores. It contended that the lease equalization charges should not be added as income. The assessing authority disallowed the said claim on the ground that the same was neither a liability, nor an allowance and nor an expenditure. He held that same was just a matching entry for the purpose of tallying the accounts with regard to the assets leased out. He was also of the opinion that the said claim was made for the first time during the year and also that the depreciation was provided in the books and the lease income was recognized.
Lease Equalisation Charges – Accounting standards of ICAI to be followed – Karnataka HC
M/s Spencer & Co Ltd v ACIT [2012-TIOL-370-ITAT-MAD-TM] (Chennai ITAT) Background: The asseessee M/s Spencer and Company Ltd, had filed its return of income u/s 139(1) for assessment year 2002-03, on 30.10.2002. M/s. Spencer Industrial Fund Ltd. (SIFL) was amalgamated with the assessee company with effect from 1st April, 2001. Consequently, the assessee company revised its return u/s 139(5) by filing a return on 23.11.2003 disclosing information regarding amalgamation of SIFL with it. The AO observed that there was a direct nexus between loans obtained and investments made, expenditure incurred in relation to exempt income was not deductible u/s 14A. The assessee’s income was subject to income escapement proceedings and, a notice u/s 148 was issued. Pursuant to the amalgamation, the assets and liabilities of SIFL got vested with the assessee company and were recorded at their fair values. The excess of fair value of net assets over the paid up value of allotted equity shares worked out to Rs. 2,899.68 lakhs. This surplus amount was transferred by the assessee to its General Reserve Account. The CIT observed that this surplus amount of Rs. 2,899.68 lakhs was not subjected to tax as business income under section 28(iv) and thereafter, initiated revision proceedings u/s 263.
Surplus on amalgamation not taxable u/s 28(iv) – Chennai ITAT
The Director General of Income-tax has issued draft guidelines in respect of the General Anti-Avoidance Rules (GAAR) vide letter dated 28.06.2012. GAAR is scheduled to become applicable with effect from 1 April 2013. The guidelines contain procedures for implementation of GAAR and illustrations to clarify the application of GAAR provisions. Click here to download the draft guidelines
Draft GAAR guidelines providing procedures and clarifications/ illustrations dtd 28.06.2012
CIT v Epsilon Advisers (P.) Ltd. [IT APPEAL NO. 23 OF 2006 dtd. 13.06.2012] Karnataka High Court Background: The assessee is a private limited company providing consultancy services in electronic and telecommunications. In the return filed for AY 2001-02, the assessee had claimed deduction for write-off of Rs 75.00 lakh as inter-corporate deposit (deposited with M/s BPL Wireless Telecommunication Services Ltd (BWTL) and the Rs 5.34 crore as interest free advance. As M/s BWTL has closed down its business, the assessee-company had claimed bad-debts u/s 36(1)(vii) for the aforesaid amounts. The assessee held substantial interest by way of investment in sharesin BTWL. The AO allowed the amount of inter-corporate deposit of Rs 75 lakhs as an amount irrecoverable and but did not agree for allowing the balance of Rs 5.34 crore also as bad debt for the reason that amount cannot be considered as part of an advance made in the course of money lending activity. The AO also reasoned that there was no semblance of a lending activity for this advance is concerned. The advance was not evidenced by way of any supporting documents and no security or surety had been obtained. Even the shares held by the assessee-company in M/s BWTL were not treated as part of stock-in-trade, but as long term investment in that company and therefore lending of a sum of Rs 5.34 crore by the assessee company cannot be considered as part of any business activity.