INSTRUCTION NO. 01/2012 [F.NO.225/34/2011-ITA.II], DATED 2-2-2012 The issue of processing of returns for the Asst. Year 2011-12 and giving credit for TDS has been considered by the Board. In order to clear backlog of returns, the following decisions have been taken:
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Sheetal Drape (India) Ltd. v. Additional Commissioner of Income-tax-4(3)IT Appeal NO.1323 (MUM.) of 2012 (Mum ITAT) Proviso to section 36(1)(iii) provides that no interest paid shall be allowed as deduction in respect of capital borrowed for acquisition of an asset for extension of existing business for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which the asset was first put to use.In this provision the reference is first to the existing business and then to its extension. It does not refer to setting up an altogether different or new business. In the absence of any specific statutory meaning to the expression ‘extension of existing business’, one has to go by its meaning as understood in common parlance. Assessee shifting its business from rented office to its own Office premises acquired with borrowed funds is extension of existing business within the meaning of proviso to section 36(1)(iii) The instant case is of ‘extension of existing business’ and not that of setting up of a new business, inasmuch as by having its own premises and doing the same business, the assessee will now be in position to carry on its operation at a much wider scale in a hassle free manner. This would obviously result in extension of its existing business.
Shifting from rented to own premises is extension of business – Therefore, interest not allowable ...
ACIT v ETC Industries Ltd. [2012] 21 taxmann.com 457 (Indore – Trib.) The deeming fiction created in section 50 modifies the provisions of section 48 only to the extent of modifying the term ‘cost of acquisition’.
Section 50C – Stamp duty valuation applies to both – depreciable and non-depreciable assets
ACIT vs. SIL Investment Ltd (ITAT Delhi) Delhi ITAT has provided detailed findings and observations on applicability of section 14A where Rule 8D has been applied arbitrarily without application of mind. Facts: For AY 2006-07, the assessee earned dividend of Rs. 17 lakhs and LTCG of Rs. 12 crores. The assessee claimed that it had incurred no expense to earn the tax-free income and so no s. 14A disallowance was permissible. However, the AO disallowed Rs. 2 crores under Rule 8D towards interest and admin expenditure. The CIT (A) accepted that no interest was incurred and deleted that disallowance. He also reduced the admin expenditure disallowance. On appeal to the Tribunal, HELD:
S. 14A: Onus is on AO to show expenditure is incurred to earn tax-free income
Press Release dated 15.5.2012 issued by the Ministry of Finance: Following government amendments have been proposed in the provisions relating to General Anti-Avoidance Rules (GAAR) contained in the Finance Bill 2012.
Amended GAAR Provisions In Finance Bill 2012: Press Release
Mahesh Nemichandra Ganeshwade vs. ITO (ITAT Pune) The assessee entered into a development agreement on 12.7.2005 in which the consideration was fixed at Rs 2.50 crores. A correction deed was entered into on 2.7.2007 in which the sale consideration was increased to Rs. 4.90 crores. The assessee invested Rs. 50 lakhs in s. 54EC bonds on 3.8.2007 and 27.10.2007. The AO held that the date of transfer was 12.7.2005 and as the s. 54EC investments had been made beyond a period of 6 months from the date of transfer, the exemption was not available. The assessee claimed that as it was impossible for him to invest within 6 months from the date of transfer, the period of 6 months had to be reckoned from the date of receipt of consideration. HELD by the Tribunal:
S. 54EC: Relief available if investment made within 6 months of receipt of consideration
CIT vs. Nalwa Sons Investment Ltd (Supreme Court) Explanation 4 to section 271(1)(c) of the Income-tax Act, 1961 provides for levy of penalty even in a situation which has the effect of reducing the loss declared in the return or converting that loss into income. The Apex Court in the ruling of Gold Coin Health Food (P.) Ltd. [2008] 304 ITR 308 (SC) had laid laid down the rationale that ‘the tax sought to be evaded’ will mean the tax chargeable not as if it was the total income.
Despite concealment, no s. 271(1)(c) penalty if s. 115JB book profits assessed
CIT vs. The Instalment Supply Ltd (Delhi High Court) The assessee bought 1614 items of computer systems for Rs.40 lacs from HCL Hewlett Packard Ltd and leased back to the same company. The assessee claimed 100% depreciation on the ground that the cost of each itemswas less than Rs.5,000. The AO & CIT (A) held that the lease was not a bona fide transaction and that the transaction was a finance transaction. It was held that the assessee had advanced Rs.40 lacs to HCL Hewlett Packard Ltd and agreed to receive back this amount along with the interest over six years. However, the Tribunal upheld the claim on the ground that the conditions of a valid lease were satisfied. On appeal by the department to the High Court,
Difference between Finance Lease and Operating Lease
M/s. Alpha Projects Society P. Ltd vs. DCIT (ITAT Ahmedabad) In AY 2005-06, the assessee made payments to contractors & for professionals & technical services. Though TDS was deducted, it was paid after the end of the FY but before filing the ROI. The assessee pleaded that s. 40(a)(ia), as amended by the FA 2010 w.e.f. 1.4.2010 to provide that no disallowance should be made if the TDS was paid before the due date of filing the ROI should be held to be retrospective. However, the AO & CIT (A), rejected the claim by relying on Bharati Shipyard Ltd 132 ITD 53 (Mum) (SB). On appeal to the Tribunal, HELD allowing the appeal: