Smt Sriram Indubal v ITO (ITA No: 1950 MDS of 2012 dtd 31.01.2013) – Chennai ITAT Background: The assessee had sold a property comprising of land and building for a consideration of Rs. 3,46,50,000. Sale proceeds were invested by the assessee in 54EC bonds in two instalments i.e. first Rs. 50 lakhs in REC Bond on 27.2.2008 and second Rs. 50 lakhs in NHAI Bond on 27.06.2008. The AO held that investments under section 54EC had to be made within six months from the date of transfer of capital asset. Since the statute pegged the investment for which exemption was allowable in an assessment year to Rs. 50 lakhs, the second sum of Rs. 50 lakhs invested on 30.6.2008 was not eligible for deduction under Section 54EC of the Act.
Monthly Archives: April 2013
CIT v M.D. Jakir Hossain Mondal (ITA No 31 of 2013 dtd 04.04.2013) (Calcutta High Court) Background: The assessee incurred expenditure of Rs. 31 lakhs on freight but did not deduct TDS thereon u/s 194C. The AO held that as there was a failure to deduct TDS, the expenditure could not be allowed as a deduction u/s 40(a)(ia). However, the CIT(A) allowed the claim on the ground that the freight charge was a part of the price of the goods and there was no contract between the assessee and the transporter.
Merilyn Shipping case on 40(a)(ia) distinguished by Calcutta High Court
DCIT vs. Vikas Oberoi (ITAT Mumbai) Background: The assessee was a beneficial shareholder of two companies named Kingston Properties P Ltd. (KPPL), New Dimensions Consultants P Ltd (NDCPL) & R. S. Estate Developers P Ltd (RSEDPL). NDCPL & RESEDPL advanced various sums of money to KPPL towards “share application money”. However, some of the advances were returned by KPPL while some were adjusted towards allotment of shares. The AO held that the transaction was a “colourable device” and a “loan and advance” which fell within the ambit of s. 2(22)(e). The said “loan and advance” was assessed as “deemed dividend” in the hands of the assessee – beneficial shareholder – following Universal Medicare 324 ITR 264 (Bom). The CIT(A) reversed the AO. On appeal by the department to the Tribunal HELD dismissing the appeal:
Share application money not subject to deemed dividend u/s 2(22)(e) – Mum ITAT
Cotton Naturals (I) Pvt. Ltd. v DCIT (I.T.A. No. 5855/Del/2012 dtd 8/2/2013) Delhi ITAT Background: The assessee is a company engaged in the business of manufacturing & export of Ready made Garments. The assessee had entered into international transactions with with its associated enterprise (‘AE’) during the year 2007-08. It had provided loan amounting to USD 10,50,000 to its AE at the rate of 4%. As per Form 3CEB, CUP method was chosen to bench mark the interest received on loan. The assessee has contended that since it has received interest at a rate of 4% which is comparable with the export packing credit rate obtained from independent Banks in India, the interest is at arm’s length price. The TPO by making comparison with uncomparables like government bonds and the amount advanced by the Indian banks in foreign currency to entities in India and by making arbitrary additions of transaction cost, security and risk etc. to such rate determined the arm’s length rate of interest at 17.26% per annum and proposed an addition of RS.68,02,619. The assessee carried the matter to DRP. The DRP ignored all the contentions and held that loan is in Indian currency hence LIBOR is not the relevant rate and ordered that PLR (Prime Lending Rate of RBI for FY 2007-08 be applied. AO accordingly applied the PLR of 13.25%..