The assessee’s argument (relying on New Shailaja Co-op Hsg Soc) that there is no “cost of acquisition” is also not acceptable because while in that case the assessee had become entitled to additional FSI owing to the DC Regulations for which there was no cost, the present was one of “transfer of existing land and building” which was demolished by the builder for fresh construction and the documents were registered (Jethalal D Mehta 2 SOT 422 (Mum), Lotia Court Coop Hsg Soc 118 TTJ 199 (Mum), New Shailaja Coop Hsg Soc, Om Shanti Coop Soc etc not followed)

The argument of the revenue that the consideration paid was for the “use of equipment” is also not correct because in order to constitute user of equipment, the customer should actually have domain or control over the equipment, or in other words, the equipment should be at its disposal. The customer should be in a position to use the equipment in its business activities. If a customer is given the mere access to some infrastructural facilities of the service provider and where the service provider has all the control, disposition and possession of such infrastructure and also the service provider operates such infrastructure on its own, then the customer cannot be said to have been assigned a right to use the equipment in the form of the infrastructure. In that case, the transaction partakes of the character of provision of services or facilities by the owner of the infrastructure in favour of the customer, as against giving the infrastructure to the customer itself for being used in the manner desired by the customer

Transactions carried out via Portfolio Management Scheme are clearly in the nature of transactions meant for maximization of wealth rather encashing the profits on appreciation in value of shares. The very nature of Portfolio Management Scheme is such that the investments made by the assessee are protected and enhanced and in such a circumstance, it cannot be said that Portfolio Management is scheme of trading in shares and stock. Whether, the assessee is engaged in the business of dealing in shares or investment in shares is essentially a question of fact and it has to be determined with regard to the entirety of the circumstances. Where the assessee is engaged in systematic activities of holding portfolio through a PMS Manager, it cannot, by any stretch of imagination, be said that the main object of holding the portfolio is to make profit by sale of shares during the course of maintaining the portfolio investment over the period. The high number of transactions shown in the statement is misleading because these are computer-split transactions and not independent transactions.

S. 50C is a deeming provision which extends only to a capital asset which is “land or building or both”. A deeming provision cannot be extended beyond the purpose for which it is enacted. If a capital asset cannot be described as `land or building or both’, s. 50C cannot apply. A lease right in a plot of land is neither `land or building or both’. The distinction between a capital asset being `land or building or both’ and any `right in land or building or both’ is well recognized. “Land or building’ is distinct from “any right in land or building”. Consequently, s. 50C does not apply to leasehold rights

In Liberty India vs. CIT 317 ITR 218 (SC), the Court was concerned with DEPB & Duty Drawback which was an incentive and not with the refund of excise duty paid. The scheme was different. Further, in CIT vs. Dharampal Premchand 317 ITR 353, the Delhi High Court held that excise duty refund was eligible u/s 80-IB on the ground that (a) there was a direct nexus between the refund of excise duty and the undertaking and (b) if the proper accounting methodology was followed for the payment and refund of excise duty, the net effect on the P&L A/c was nil. The department’s appeal against CIT vs. Dharampal Premchand was dismissed (after consideration) by the Supreme Court. This cannot be ignored. Also, the refund of excise duty is the assessee’s own money coming back and is not income at all

For determining the ALV u/s 23(1)(a), the AO has to determine the fair/ reasonable rent expected to be fetched by the property. If the property is governed by the Rent Control Act, the standard rent is one of the various factors to be taken into account by the AO. However, the municipal value or standard rent is not binding on the AO but is a guiding factor for determining the reasonable rent expected to be fetched by the property. If the AO finds that the Municipal Value is not based on relevant material for determining fair rent in the market and there is a sufficient material on record for taking different valuation, the AO can determine the fair rent by inflating or deflecting the Municipal Value or Standard Rent. If the AO finds that the actual rent received is less than the fair market rent because of the abnormally high interest-free security deposit, he can undertake necessary exercise in that behalf. However, the notional interest on interest free security cannot be taken as determinative factor to arrive at fair rent

When loss making companies have been taken out from the list of comparables by the TPO, Zenith Infotech Ltd. which showed super profits should also be excluded. The fact that assessee has himself included in the list of comparables, initially cannot act of estoppel particularly in light of the fact that the AO had only chosen the companies which are showing profits and had rejected the other companies which showed loss (Quark System vs. DCIT 38 SOT 307 (SB) followed)

Under Article 11(4) of the DTAA, interest from indebtedness “effectively connected” with a PE of the recipient is taxable under Article 7 and not under Article 7. Though the interest was connected with the PE in the sense that it has arisen on account of TDS from the receipts of the PE, it was not “effectively connected” with the PE either on the basis of asset-test or activity-test. The payment of tax was the responsibility of the foreign company and the fact that it was discharged by way of TDS did not establish effective connection of the indebtedness with the PE. In order to be “effectively connected”, it is not necessary that the interest income has to be necessarily business income in nature. Even interest assessable under “other sources” can qualify

S. 194C defines “work” to include “carriage of goods and passengers by any mode of transport other than railways” while s. 194-I defines “rent” to mean payment for use of “plant” (which is defined in s. 43 to include vehicles). As the cars were owned and maintained by the contractor and all expenditure was borne by the contractor, the contract was for “carriage of passengers” for which the assessee paid a fixed amount. Therefore, the payment of vehicle hire charges fell within the scope of s. 194C and was not “rent” for s. 194-I

Transferable Development Rights (TDR) granted by the Development Control Regulations for Greater Mumbai, 1991, qualifying for equivalent Floor Space Index (FSI) have no cost of acquisition and so sale thereof does not give rise to taxable capital gains (Jethalal D. Mehta vs. DCIT 2 SOT 422 (Mum) followed)