Year: 2012

Archive for 2012


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DATE: (Date of pronouncement)
DATE: April 5, 2012 (Date of publication)
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In the present case, as in several cases which have come up before this Court and particularly in the month of March, it is evident that the AO & DIT have both had scant regard to the parameters which have been laid down by this Court for disposal of stay applications in KEC International Ltd 251 ITR 158 & UTI Mutual Fund. No reasons are indicated. The orders do not contain a prima facie evaluation of the issues which would arise in appeal. In UTI Mutual Fund, this Court was constrained to issue a cautionary observation to the effect that AOs and Appellate Authorities, when they dispose of applications for stay, act as quasi judicial authorities and not merely as tax gatherers of the Revenue. While they have a duty of protecting the interests of the Revenue, they need to mitigate the hardship to the assessee and applications for stay must be considered objectively. The assessee does have serious issues to be urged before the CIT (A) and the AO & DIT ought to have granted a complete stay of demand u/s 220(6)

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DATE: (Date of pronouncement)
DATE: April 4, 2012 (Date of publication)
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The Proviso to s. 54EC provides that the investment made in a long term specified asset by an assessee “during any financial year” should not exceed Rs. 50 lakhs. It is clear that if the assessee transfers his capital asset after 30th September of the financial year he gets an opportunity to make an investment of Rs.50 lakhs each in two different financial years and is able to claim exemption upto Rs.1 crore u/s 54EC. The language of the proviso is clear and unambiguous and so the assessee is entitled to get exemption upto Rs.1 crore in this case

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DATE: (Date of pronouncement)
DATE: April 4, 2012 (Date of publication)
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Though the Applicant was making regular profits, it did not declare any dividends after the introduction of s. 115-O and allowed its reserves to grow. This was only to avoid paying DDT. The buy-back was a “colourable device” devised to avoid tax on distributed profits u/s 115-O because while it would result in repatriation of funds to the Mauritius company, that would constitute “capital gains” in the hands of the recipient, and not be assessable to tax in India under Article 13 of the India-Mauritius DTAA. The fact that the other major shareholders did not accept the buy-back was significant. A buy-back results in a release of accumulated profits which is assessable as “dividend”. The exemption to treat the buy-back proceeds as capital gains is only in respect of a genuine buy-back of shares. As the transaction is colourable, it is not a transaction in the eye of law and has to be ignored and the arrangement has to be treated as a distribution of profits by a company to its shareholders which is assessable as dividend in the hands of the recipient

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DATE: (Date of pronouncement)
DATE: April 2, 2012 (Date of publication)
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Put up for final disposal on October 03, 2012. During the pendency of the special leave petition, the direction of the High Court in paragraph 24 of the impugned judgment shall remain stayed

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DATE: (Date of pronouncement)
DATE: April 2, 2012 (Date of publication)
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S. 32(1)(ii) allows depreciation on “intangible assets” which are defined to mean “know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature”. Applying the principle of ejusdem generis, the expression “business or commercial rights of similar nature” need not answer the description of “knowhow, patents, trademarks, licenses or franchises” but must be of similar nature as the specified assets. The specified intangible assets are not of the same kind and are clearly distinct from one another. The nature of “business or commercial rights” cannot be restricted to only the aforesaid six categories of assets but can be of the same genus in which all the aforesaid six assets fall and form part of the tool of trade of an assessee facilitating smooth carrying on of the business. The intangible assets, viz., business claims; business information; business records; contracts; employees; and knowhow, are all assets, which are invaluable and result in carrying on the transmission and distribution business by the assessee without any interruption. These intangible assets are comparable to a license to carry out the existing transmission and distribution business of the transferor. In the absence of the aforesaid intangible assets, the assessee would have had to commence business from scratch and go through the gestation period whereas by acquiring the aforesaid business rights along with the tangible assets, the assessee got an up and running business. Accordingly, the intangible assets acquired under slump sale agreement were in the nature of “business or commercial rights of similar nature” and eligible for depreciation u/s 32(1)(ii) (Techno Shares 327 ITR 323 (SC) followed) (Q whether goodwill per se is eligible for depreciation u/s 32(1)(ii) left open)

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DATE: (Date of pronouncement)
DATE: April 2, 2012 (Date of publication)
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On the question whether the interest paid by the PE to the H.O. is deductible, while such interest is not deductible under the Act because the payer & payee are the same person, Article 7(2) and 7(3) of the DTAA & its Protocol makes it clear that for the purpose of computing the profits attributable to the PE in India, the PE is to be treated as a distinct and separate entity which is dealing wholly independently with the general enterprise of which it is a part and deduction has to be allowed for, inter alia, interest on moneys lent by the PE of a bank to its H.O.

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DATE: (Date of pronouncement)
DATE: March 29, 2012 (Date of publication)
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S. 80IB (10)(b) specifies the size of the plot of land but not the size of the housing project. While the plot must have a minimum area of one acre, it need not be a vacant plot. The object of s. 80IB (10) is to boost the stock of houses. There can be multiple housing projects on a plot of land having minimum area of one acre

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DATE: (Date of pronouncement)
DATE: March 29, 2012 (Date of publication)
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U/s 14A read with Rule 8D, disallowance can be made for the expenditure incurred for earning of exempt income. From the assessee’s P&L A/c, it is evident that the total expenditure incurred was Rs. 49 lakhs only which was claimed as a deduction. The disallowance u/s 14A & Rule 8D cannot exceed the expenditure actually claimed by the assessee. Accordingly, the action of the AO & CIT (A) in making disallowance in excess of total expenditure debited to P&L A/c is unjustified

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DATE: (Date of pronouncement)
DATE: March 26, 2012 (Date of publication)
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The AO should examine & compute the disallowance on the basis of what is laid down in Maxopp Investment Ltd 203 TM 364 (Del). However, the quantum of disallowance, if any, to be made by the AO will not exceed the disallowance which was made in the original assessment order as reduced by the CIT(Appeals)

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DATE: (Date of pronouncement)
DATE: March 26, 2012 (Date of publication)
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Under the normal provisions of the Act, Rule 8D cannot apply till AY 2008-09 though the AO is at liberty to identify actual expenditure incurred to earn tax-free income & make disallowance. However, while computing book profit u/s 115JB, no actual expenditure was debited in the profit & loss account relating to the earning of exempt income. S. 14A cannot be imported into while computing the book profit u/s 115JB because clause (f) of Explanation to s. 115JB refers to the amount debited to the profit & loss account which can be added back to the book profit while computing book profit u/s 115JB of the Act. In Goetze (India) Ltd. vs. CIT 32 SOT 101 (Del) it was held that sub-sec. (2) & (3) of s. 14A cannot be imported into clause (f) of the Explanation to s. 115JA. Accordingly, it is held that no addition to book profit can be made on account of alleged expenditure incurred to earn exempt income while computing income u/s 115JB