Search Results For: 37(1)


Honda Siel Cars India Ltd vs. CIT (Supreme Court)

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DATE: June 9, 2017 (Date of pronouncement)
DATE: June 10, 2017 (Date of publication)
AY: 1999-00
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Technical know-how: Entire law explained on whether expenditure incurred under a Technical Collaboration Agreement for setting up of new plant for the first time to manufacture cars constitutes capital or revenue expenditure

When we apply the aforesaid parameters to the facts of the present case, the conclusion drawn by the High Court that expenditure incurred was of capital nature, appears to be unblemished. Admittedly, there was no existing business and, thus, question of improvising the existing technical know-how by borrowing the technical know-how of the HMCL, Japan did not arise. The assessee was not in existence at all and it was the result of joint venture of HMCL, Japan and M/s. HSCIL, India. The very purpose of Agreement between the two companies was to set up a joint venture company with aim and objective to establish a unit for manufacture of automobiles and part thereof. As a result of this agreement, assessee company was incorporated which entered into TCA in question for technical collaboration. This technical collaboration included not only transfer of technical information, but, complete assistance, actual, factual and on the spot, for establishment of plant, machinery etc. so as to bring in existence manufacturing unit for the products. Thus, a new business was set up with the technical know-how provided by HMCL, Japan and lumpsum royalty, though in five instalments, was paid therefor

Posted in All Judgements, Supreme Court

CIT vs. Raghuvir Synthetics Ltd (Supreme Court)

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DATE: March 28, 2017 (Date of pronouncement)
DATE: April 28, 2017 (Date of publication)
AY: 1994-95
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S. 143(1)(a): Even though there was a raging controversy amongst the High Courts on whether expenditure for raising capital is capital or revenue in nature, the judgement of the jurisdictional High Court is binding on the assessee and any view contrary thereto is a "prima facie" mistake that requires adjustment

Even though it is a debatable issue but as Gujarat High Court in the case of Ahmedabad Mfg. & Calico (P) Ltd. (supra) had taken a view that it is capital expenditure which was subsequently followed by Alembic Glass Industries Ltd. V. CIT (supra) and the registered office of the respondent assessee being in the State of Gujarat, the law laid down by the Gujarat High Court was binding. (See Taylor Instrument Com.(India) Ltd. v. Commissioner of Income Tax (1998) 232 ITR 771, Commissioner of Gift Tax v. J.K. Jain (1998) 230 ITR 839, Commissioner of Income Tax v. Sunil Kumar (1995) 212 ITR 238, Commissioner of Income Tax v. Thana Electricity Supply Ltd. – (1994) 206 ITR 727, Indian Tube Company Ltd. v. Commissioner of Income Tax & Ors. (1993) 203 ITR 54, Commissioner of Income Tax v. P.C. Joshi & B.C. Joshi (1993) 202 ITR 1017 and Commissioner of Income Tax, West Bengal, Calcutta v. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466). Therefore, so far as the present case is concerned, it cannot be said that the issue was a debatable one

Posted in All Judgements, Supreme Court

CIT vs. Axis Pvt. Equity Ltd (Bombay High Court)

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DATE: January 30, 2017 (Date of pronouncement)
DATE: February 3, 2017 (Date of publication)
AY: 2007-08
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S. 28/29: There is a distiction between "setting up of business" and "commencement of business". All expenditure after "setting up" is deductible business expenditure even if the business has not commenced. A business is "set up" when steps are taken to recruit employees and take premises etc

A similar issue viz. distinction between setting up of business and commencement of business had come up for consideration before this Court in Western India Vegetable Products Ltd. vs. Commissioner of Income Tax 1954 Vol. 26 ITR Page 151. This Court had held that business is said to have been set up when it is established and ready to be commence. However, there may be an interval between a business which is set up and a business which is commenced. However, all expenses incurred during the interregnum between setting up of business and commencement of business would be permissible deductions

Posted in All Judgements, High Court

Religare Commodities Ltd vs. ACIT (ITAT Delhi)

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DATE: January 4, 2017 (Date of pronouncement)
DATE: January 18, 2017 (Date of publication)
AY: 2008-09
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S. 37(1): Stock Options (appreciation rights) are intended to motive employees and so the expenditure thereon is a deductible revenue expenditure. The discount (difference between market price and vesting price) is allowable upon vesting subject to reversal if the options lapse

The discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act

Posted in All Judgements, Tribunal

Apollo Tyres Ltd vs. ACIT (ITAT Cochin)

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DATE: January 10, 2017 (Date of pronouncement)
DATE: January 11, 2017 (Date of publication)
AY: 2010-11
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S. 37(1): The loss on sale of shares of a wholly-owned subsidiary is allowable as a business loss if the investment in the subsidiary was made for commercial purposes

The objective of ATAG was undertaking sales and marketing related activities for the brand of the appellant in Singapore. The said factual assertion has not been rebutted by the AO in the impugned assessment order. There is nothing on record to show that the said subsidiary company was doing any activity completely independent and unrelated to the activities carried out by the appellant company. Thus, the claim of the appellant that the investment was made for commercial purposes and not for purpose of accretion of investment cannot be rejected

Posted in All Judgements, Tribunal

Reliance Infrastructure Ltd vs. CIT (Bombay High Court)

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DATE: December 20, 2016 (Date of pronouncement)
DATE: December 21, 2016 (Date of publication)
AY: 1983-84
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S. 40(a)(ii): Foreign taxes are not hit by the bar in s. 40(a)(ii) and are deductible on the real income theory. After the insertion of the Explanation to s. 40(a)(ii) by the FA 2006, foreign taxes are not deductible only to the extent they are eligible for relief u/s 90 & 91. Amounts not eligible for DIT relief are deductible. The Explanation is declaratory and has retrospective effect

It is not disputed before us that some part of the income on which the tax has been paid abroad is on the income accrued or arisen in India. Therefore, to the extent, the tax is paid abroad on income which has accrued and/or arisen in India, the benefit of Section 91 of the Act is not available. In such a case, an Assessee such as the applicant assessee is entitled to a deduction under Section 40(a)(ii) of the Act. This is so as it is a tax which has been paid abroad for the purpose of arriving global income on which the tax payable in India. Therefore, to the extent the payment of tax in Saudi Arabia on income which has arisen / accrued in India has to be considered in the nature of expenditure incurred or arisen to earn income and not hit by the provisions of Section 40(a)(ii) of the Act. (q) The Explanation to Section 40(a)(ii) of the Act was inserted into the Act by Finance Act, 2006. However, the use of the words “for removal of dobuts” it is hereby declared “…….” in the Explanation inserted in Section 40(a)(ii) of the Act, makes it clear that it is declaratory in nature and would have retrospective effect. This is not even disputed by the Revenue before us as the issue of the nature of such declaratory statutes stands considered by the decision of the Supreme Court in CIT Vs. Vatika Township (P) Ltd. 367 ITR 466 and CIT Vs. Gold Coin Health Foods (P) Ltd. 304 ITR 308

Posted in All Judgements, High Court

CIT vs. M/s. D. Chetan & Co (Bombay High Court)

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DATE: October 1, 2016 (Date of pronouncement)
DATE: October 10, 2016 (Date of publication)
AY: 2009-10
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37(1)/43(5): Loss suffered in foreign exchange transactions entered into for hedging business transactions cannot be disallowed as being “notional” or “speculative” in nature. S. Vinodkumar Diamonds is not good law as it lost sight of Badridas Gauridas 261 ITR 256 (Bom)

It appears that in S. Vinodkumar, the Tribunal held the forward contract on facts before it to be speculative in nature in view of Section 43(5) of the Act. However, it appears that the decision of this court in CIT vs. Badridas Gauridas (P) Ltd. (134) Taxman Pg. 376 was not brought to the notice of the Tribunal when it rendered its decision in S. Vinodkumar (supra). In the above case, this court has held that forward contract in foreign exchange when incidental to carrying on business of cotton exporter and done to cover up losses on account of differences in foreign exchange valuations, would not be speculative activity but a business activity

Posted in All Judgements, High Court

Haryana State Road & Bridges Development Corporation Ltd vs. CIT (P&H High Court)

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DATE: September 29, 2016 (Date of pronouncement)
DATE: October 8, 2016 (Date of publication)
AY: 2010-11
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S. 37(1): While expenditure for purchase of a capital asset is capital expenditure, guarantee commission to acquire the asset on installment terms is revenue expenditure

Expenditure incurred for the purchase of the machinery was undoutedly capital expenditure; for it brought in an asset of enduring advantage. But the guarantee commission stands on a different footing. By itself, it does not bring into existence any asset of an enduring nature; nor did it bring in any other advantage of an enduring benefit. The acquisition of the machinery on installment terms was only a business exigency

Posted in All Judgements, High Court

Nimesh N. Kampani vs. ACIT (ITAT Mumbai)

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DATE: June 16, 2016 (Date of pronouncement)
DATE: September 8, 2016 (Date of publication)
AY: 2009-10
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S. 37(1): Expenditure incurred by a director in engaging lawyers to defend himself against cases filed for violation of the law by the Company of which he is a director is not personal expenditure but is allowable as business expenditure

Mr. Nimesh Kampani has been mentioned as one of the accused among several others, for non-payment of these fixed deposits by Nagarjuna Finance Limited. The Andhra Pradesh Government had since filed suit against directors of Nagarjuna Finance Limited including Mr. Kampani. To defend himself, Mr. Kampani has appointed various advocates to represent his case before various courts viz, District Court, High Court of Andhra Pradesh, Supreme Court of India. As the expenditure is incurred to protect his business interest the same is required to be allowed u/s. 37(1) of the Act. Accordingly we direct the A.O. to allow legal expenses of Rs.40,72,750/-

Posted in All Judgements, Tribunal

Silicon Graphics Systems (India) Pvt. Ltd vs. DCIT (ITAT Delhi)

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DATE: August 24, 2016 (Date of pronouncement)
DATE: September 2, 2016 (Date of publication)
AY: 2009-10
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S. 37(1): Foreign exchange fluctuation loss arising consequent to restatement of current liabilities as per the year end rates in accordance with Accounting Standard-11 (AS-11) is allowable as a deduction

The accounting standard-11 provides that at each balance sheet date the outstanding foreign currency monetary items should be reported using the closing rates. It clarifies that that when the transaction is not settled in the same accounting period in which it had occurred then in all the intervening period till the transaction is settled, the exchange differences have to be duly accounted for

Posted in All Judgements, Tribunal