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DATE: June 5, 2015 (Date of pronouncement)
DATE: February 8, 2016 (Date of publication)
AY: 2010-11
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S. 23(1)(b): Brokerage paid to give out premises on rent and to earn lease rent is not deductible in computing the Income from house property

The word ‘rent’ connotes a return given by the tenant or occupant of the land or corporeal hereditaments to the owner for the possession and use thereof. It is a sum agreed between the tenant and the owner to be paid at fixed intervals for the usage of such property. The phrase rent received and receivable contemplates the amount received for the enjoyment of the property and certain rights in the said property by the tenant. If there is charge directly related to the rental income or for the property without which the rights in the property cannot be enjoyed by the tenant then it can be construed as part and parcel of enjoyment of the property from where rent is received then such charges can be held to be allowable from the rent received or receivable. However, the brokerage paid to the third party has nothing to do with the rental income paid by the tenant for enjoying the property to the owner. Brokerage cannot be said to be a charge that has been created in the property for enjoying the rights and at best it is only an application of income received/receivable from rent

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DATE: October 28, 2015 (Date of pronouncement)
DATE: November 5, 2015 (Date of publication)
AY: 2009-10
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S. 80-IA: Interest on TDS refund, interest from lessees, interest on FDRs and Tender fees are all “derived” from the undertaking and are eligible for deduction. If items of income are not eligible, it should be netted off against expenditure and only balance can be disallowed

The TDS deduction from lease rental income was beyond the control of the assessee and also due to the delay in getting no-deduction certificate from the AO. In view of the same, the assessee was deprived of funds to the extent of TDS amount, which would have otherwise used for the purpose of business purposes including repayment of loan taken for construction of IT parks and SEZ. The Income tax department was required to pay interest only due to the delay in granting refund of TDS. In the case of Liberty India Ltd, relied upon by the AO, the assessee therein received DEPB credits as per the scheme framed by the Government of India. Hence the Hon’ble Supreme Court held that the primary source of the DEPB receipt is the scheme framed by the Government. However, in the instant case, TDS deduction is integral part connected with the receipt of lease income and the same cannot be separted from the activity carried on by the assessee

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DATE: September 11, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2002-03 to 2008-09
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Extrapolation: Fact that assessee admitted undisclosed income for one year does not mean that AO can assume that similar undisclosed income is earned in earlier years as well

The assessing officer did not bring any material on record to support his case of estimation of professional receipts of earlier years. We also notice that the assessing offer has assessed the net profit on the alleged suppressed professional receipts, meaning thereby, the assessing officer has presumed that the assessee would have suppressed corresponding expenses also. Again it is only a guess work only, unsupported by any material. Similarly, the average daily collection estimated by the AO was also mere guess work. In effect, there is no material available with the AO to show that the assessee has suppressed professional receipts as well as expenses in order to substantiate the estimation made by him

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DATE: September 2, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2007-08, 2008-09
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S. 271(1)(c): If the notice does not clearly specify whether the penalty is initiated for "concealment" or for "filing inaccurate particulars", it is invalid. Mere fact that assessee has surrendered income does not justify penalty if his explanation is not found to be false/ not bona fide

The notice issued by the AO u/s 274 read with section 271 of the Act at the time of initiation of penalty proceedings states that it is issued for “concealment of particulars of income or furnishing of inaccurate particulars of income”. The assessing officer has not specified that as to which limb the notice was issued, i.e., whether it is issued for concealment of particulars of income or furnishing of inaccurate particulars of income. The assessing officer should be clear about the charge at the time of issuing the notice and the assessee should be made aware of the charge. The penalty order is liable to be quashed as the AO has not correctly specified the charge

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DATE: September 4, 2015 (Date of pronouncement)
DATE: September 9, 2015 (Date of publication)
AY: 1994-95, 1996-97
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CITATION:
Strictures passed against ICAI By ITAT for alleged “deteriorating standards” and “losing its grip over the Income tax matters” toned down on the basis that they were made in the context of a "hypothetical situation" and were not "intended to criticize the functioning of the ICAI"

The Income tax Appellate Tribunal, being a part of Government of India, should not shut its eyes when it is noticed that certain developments occurring in the Country may affect the Country as a whole, more particularly when the reputation of particular profession, from whom the Tribunal is getting assistance in the dispensation of justice, is at stake. Accordingly, we sincerely believe that it is the bounden duty of not only the Tribunal, but also the duty of one and all to point out and discuss about such kind of developments, when it is noticed that the same may affect the public at large. There cannot be any controversy that the interest of our Country is Supreme and no citizen can or should compromise on the same

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DATE: August 19, 2015 (Date of pronouncement)
DATE: August 22, 2015 (Date of publication)
AY: 2009-10
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S. 115JB: (i) Even if an amount is credited to the P&L A/c, the assessee can seek exclusion of that amount for purposes of “book profits” if a note to that effect is inserted in the A/cs (ii) The exemption conferred by S. 115JB to sums exempt u/s 10 should be extended to all sums which are not chargeable to tax

The profit arising on transfer of capital asset to its wholly owned Indian subsidiary company is liable to be excluded from the Net profit., i.e., the Net profit disclosed in the Profit and Loss account should be reduced by the amount of profit arising on transfer of capital asset and the amount so arrived at shall be taken as “Net profit as shown in the profit and loss account” for the purpose of computation of book profit under Explanation 1 to sec. 115JB of the Act. Alternatively, since the said profit does not fall under the definition of “income” at all and since it does not enter into the computation provisions at all, there is no question of including the same in the Book Profit as per the scheme of the provisions of sec. 115JB of the Act

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DATE: July 3, 2015 (Date of pronouncement)
DATE: July 15, 2015 (Date of publication)
AY: 2008-09
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S. 54: Booking a flat which is going to be constructed by the builder is a case of “construction” of the flat. If the flat is booked prior to the date of transfer of the old flat, deduction u/s 54 is not available. The date of receiving possession of the new flat cannot be regarded as the date of “purchase” of the new flat

The booking of a flat which is going to be constructed by a builder has to be considered as a case of “Construction of flat”. Deduction u/s 54 is available only if the assessee constructs a new house within three years after the date of transfer. In the instant case, the assessee has constructed a house prior to the date of transfer of original house, in which case, the assessee is not entitled to claim deduction u/s 54 of the Act in respect of the cost of new flat

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DATE: June 10, 2015 (Date of pronouncement)
DATE: June 22, 2015 (Date of publication)
AY: 2009-10
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S. 115JB: In computing the "book profits" the entire capital gains have to be included without computing the benefits of indexation

The book profits as contemplated in section 115JB means the net profit, which has been shown/credited in the profit & loss account as prepared under the relevant provisions of the Companies Act. The concept of indexation while computing the Long term capital gain cannot be imported to the computation of book profit u/s. 115JB as per the expressed provisions of the said section itself which is a complete code in itself

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DATE: June 10, 2015 (Date of pronouncement)
DATE: June 19, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 10(38), 70(3): Though the LTCG on sale of equity shares (subject to STT) is exempt from tax u/s 10(38), the long-term capital loss on sale of such shares can be set-off against the taxable LTCG on sale of another asset

Section 10(38) excludes in expressed terms only the income arising from transfer of Long term capital asset being equity share or equity fund which is chargeable to STT and not entire source of income from capital gains arising from transfer of shares. It does not lead to exclusion of computation of capital gain of Long term capital asset or Short term capital asset being shares. Accordingly, Long term capital loss on sale of shares would be allowed to be set off against Long term capital gain on sale of land in accordance with section 70(3)

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DATE: May 29, 2015 (Date of pronouncement)
DATE: June 1, 2015 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: The transaction of allowing credit period to the AE on realisation of sale proceeds is not an independent transaction and has to be considered along with the main international transaction of sale of goods

The transaction of allowing the credit period to AE on realization of sale proceeds is not an independent international transaction but it is a closely linked or continuous transaction along with sale transaction to the AE. The credit period allowed to the party depends upon various factors which also includes the price charged by the assessee from purchaser. Therefore, the credit period extended by the assessee to the AE cannot be examined independently but has to be considered along with the main international transaction being sale to the AE

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