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Topics - murali Krishnamurthy

Discussion / 80G
May 28, 2014, 01:15:15 PM
My client (temple) is a  trust having both charitable and religious objects.(mixed objects). The trust was granted registration u/s 12AA of the Act and also 80G. However, the certificate for 80G states that if the income is expended more than the 5% on religious objects, it will loose the benefit of 80G.
The temple is renovating its premises and requires heavy amounts for the same and there are philantropic donors for the same.
My questions are :
1. can 80G certificate be given to them?
2. in which year will the AO cancel the 80G benefit granted to the trust? is it prospective or retrospective?
3. will the cancellation of 80G be also render the trust disentitlement of registration u/s 12AA.
4. How is this income or the statutory per centage calculated/

An early reply will be greatly appreciated.

My client had received ICD from another company where there is only common shareholder. my client (assessee company) is not a shareholder of the other company. The AO under directions of Addl CIT had included the ICD as deemed dividends. On appeal, the CIT(A) allowed the claim. The department is in appeal before the ITAT.

Please advise whether the action of the AO is correct? Any case law to support the claim of the assessee company.

An early reply will be greatly appreciated as the appeal is listed for hearing on Monday.
Discussion / 40(a)(i)(a)
January 28, 2013, 06:06:43 PM
There is a special bench of the Vishakapatnam Bench on the issue that this section is applicable only to the payments outstanding as at the year end and not for the payments which have been concluded. Further the Hon'ble AP High Court has issued " interim stay" on this order. Please indicate the meaning of this order and whether there are any other case law on this subject.

An early response will be greatly appreciated 
My client has purchased land in 1978 for Rs.10000/- and thereafter in 1979 constructed building  investing a sum of Rs.100000/-He was using this property for self occupation. Around 1985 he made certain improvements amounting to Rs.100000/-. He entered into a development agreement and in lieu of the land and building he got 5 flats towards his share and the developer got 7 flats. The five flats were in different floors. Two on one floor and the remaining one on each floor. Owing to financial stringency, he sold three flats in a semi finished condition on as is where is basis.

Can the assessee claim deduction under 54 and 54F for the long term capital gains for the value of the seven flats?
Will there be any short term capital gains as the flats were sold on as is where is basis?

Kindly render your considered opinion with case law on the subject at the earliest.
Discussion / Applicablity of section 50C
April 12, 2011, 11:45:02 AM
My client was allotted a plot of land by a co-operative society in 1993, which was not registered in his name. This plot was sold in 1995, based on the said allotment, and no return of income was filed reflecting this transaction.

The present "owner" was not accorded municipal sanction as he was informed that there was "defective title" passed onto him, as the plot was not registered in the original owner's name by the society. This defect was rectified and the plot was registered in the "original owner's" name after payment of the required charges in 2010.

The following issues arise which require clarification -

1. Which is the year to be taken for ownership purposes?
2. What is effect of payment of the betterment charges, etc in 2010?
3. Can the rectification of the defect be traced to the original sale transaction?
4. Will the provision of section 50C apply in the instant case since the property has to re-registered?
5. Can there be two registrations for the same transaction concerning the same property.?

An early reply will be greatly appreciated.

Discussion / Deduction u/s 54
January 10, 2011, 05:18:49 PM

My client entered into a development agreement at Chennai for construction of a residential complex. As consideration thereof she received three flats, each on a different floor one over the above. Her family being large, she occupied the ground floor portion and the remaining members of the family were staying on the other floors. There was a common kitchen.

In the computation of capital gains, she claimed exemption u/s 54 of the Act the value of these flats.

The AO has disallowed the claim on the ground that it comprises of more than one "residence". However, the CIT(A) had allowed the appeal of the assessee. The department is on second appeal before the Hon'ble ITAT.

Is the decision of the AO correct? Are there any case law on the subject of "residence" and its meaning thereof. A Chennai bench of ITAT order or Madras High Court would be preferable.

A early reply will be GREATLY appreciated as the appeal is posted for hearing next week.
Discussion / Penalty u/s 271(1)(c)
October 06, 2010, 09:20:16 AM
 The assessee filed original return of income, in time, and claimed deduction u/s 80-IA of the Act on the presumption that the project will be completed as per schedule. However, owing to recession, the project could not be completed and therefore, the assessee filed a revised return of income within  year withdrawing the claim.

The assessment was completed after verifying the books of account. The AO initiated penalty proceedings and levied penalty for "furnishing inaccurate particulars" of income. Aggrieved against the penalty, the assessee has preferred an appeal.

Is the action of the AO correct and legally tenable?

Kindly give your considered opinion with case law to support the action of the assessee.
Discussion / requirement of tax audit
July 14, 2010, 09:18:11 PM
 My client has been declaring commission income from non-life insurance under the head "income from other sources" in the past. In the current year, received commission receipts more than the threshold limit u/s 44AB. What is the position under law? Should tax audit be carried out or not? Is it business income in the first instance?

Kindly clarify at the earliest so that the return may be filed before the due date, as applicable?
Discussion / claim for refund
June 26, 2010, 11:56:43 AM
My client is a partnership firm. It filed its return of income, electronically for the assessment year 2008-09, claiming loss to be carried forward and accompanied with a claim of refund being the TDS on rent. The firm earns property income and also carries money lending business and by virtue of computation arrived at a net loss.

However, the acknowledgement was not sent to Bangalore through an oversight. This error/mistake was realised only recently when the matter was being processed for refund in the group.

Can a revised return or any return of income be filed at thus juncture,even if the firm is prepared to loose the benefit of carry forward of loss. The TDS is very substantial and cannot be ignored.

Kindly suggest the course of action with relevant case law to support the issue.

A quick response from the fraternity will be greatly appreciated and the firm will be obliged.
Discussion / carry forward of loss
June 19, 2010, 03:26:59 PM

My client has filed return of income in time. However, during the assessment proceedings certain mistakes were noticed and the revised computation of total income was filed with a covering letter to the AO and claimed loss to be setoff against future income. The latter did not take any action on this letter and completed the income on an estimate basis.

Is the claim correct? Is there any case law to substantiate the claim without filing the revise return of income?
Discussion / section 12
January 26, 2010, 06:46:49 PM
 can the AO deny exemption u/s 12 if the return of income for a particular year has not been filed? Can sums received for tsunami victims be treated as voluntary contributions from the public and brought to tax?
Discussion / 50C
January 26, 2010, 06:43:35 PM
 I believe there is a judgement of Tribunal reported in 298 ITR 42 (ITAT) Jodgpur bench which has stated that if the document is not registered, then section 50C has not applicability? are there any subsequent case law on the subject? is this good law.
Discussion / 50C
December 24, 2009, 05:08:39 PM
1. My client has sold a piece of land for rs.2.31 crores in the heart of the city. The property has several negative aspects like no proper pathway for ingress and egress, defectice vaasthu, irregular in size, no ready made buyer, impractical for commercial exploitation,etc. Hence, the sale was effected based on the practical location of the property and not with reference to the market value. The purchaser has filed an appeal in the High Court against the order of the authorities with respect to valuation.The AO has adopted the SRO valuation at Rs.4.51 crores, notwithstanding the pendency of the appeal in the Court. My questions are - a) is the action of the AO correct in law in adopting the SRO value, b) does the section allow him to do so?,c) are there any case law to overcome this situation? an early reply will be greatly appreciated.

2. My client's father bought a property (agricultural) beyond the municipal limits in 1967. Later the names of the three children (sons) were included in the passbook. Subsequently, the government allowed permission to convert into plots to facilitate housing programme and also requested for transfer of lands to create parks and greenery. This was acceded to by the owners. In 1991, few of the parcelled lands were sold and offered as capital gains in the hands of the father. The remaining land was shown as vacant in his wealth tax returns. In 2003-04 accounting year, few more plots were sold and the gains were shown as capital gains and the assessee also availed capital gains exemption u/s 54F of the Act. The AO treated the transaction as adventure in nature of trade and also denied exemption u/s 54F. Is the action of the AO justified? Please advice with necessary case law.

CA Murali

My client is both an investor and a trader in shares / mutual funds for the past several years and is continuing as such even till date. He maintains a "stock register" where all the transactions are recorded and whichever are treated as relating to "trade" are marked as "T" and balance are treated as investments. The gains on the sale of shares/ mutual funds relating to trade are shown as "Business Income" and the gains on sale of shares/mutual funds relating to investments are shown as "Capital Gains",whether LTCG or STCG. This has been the practice since inception and the department has not contested this practice and accepted the method of accounting.

For the assessment year 2006-07, the AO treated the STCG on sale of shares / mutual funds as business income, despite showing the stock register, the ledger, explaining the intention, etc. The AO relied only on the Board Circular and also followed the directions of the Addl.CIT u/s 144A, to whom the assessee approached in this context.

An appeal is being filed against the impugned assessment.

Is the action of the AO justified? Kindly clarify the correct legal position with case law.
Discussion / Carry forward of business loss
January 23, 2009, 09:34:05 AM

My client, builder, has filed the return of income for the asst.year 2003-04 u/s 139(1). At the time of filing the ROI, the interest on loans was capitalised and treated as work in progress. During the assessment proceedings, the client revised the computation of income by treating the interest as revenue and filed the revised financial statements. The AO has not contested this but also did not take into account this revised computation of total income(loss) while determining the taxable income. The said assessment is under appeal before the CIT(A).

For the subsequent years, based on this revised computation of income(loss), the profits of the business were adjusted and the return of income(s) were filed for the assessment year 2004-05 and 2005-06. However, these returns are belated returns and also have been revised due to the above said reason.

For the assessment year 2006-07, the AO has disallowed the brought forward loss for the years 2004-05 and 2005-06 and did not check the record for 2003-04.

Is the action of the AO justified? Kindly clarify the correct legal position with the help of case law, if any.   

The Hon'ble Bench ITAT did not consider the decision of a co-ordinate bench and passed an order. Can such an 
order be recalled as there was a mistake apparent from record? Kindly give considered opinion with relevant case
as soon as possible, since the case is posted for hearing on the coming Friday.

CA Murali 
Discussion / Cash credits vis-a-vis sales
May 20, 2008, 01:21:19 PM

My client is in trading business and has operations in several parts of the state of AP. His accounts are maintained at place   other than Hyderabad. The accountant makes the necessary entries and the same are recorded accordingly.

For the assessment year 2002-03 and 2003-04 the accountant had written the advances received from customers as "loans", for want of accurate information. During the assessment proceedings, the AO had made additions under section 68 as unexplained cash credit. Adequate time was not accorded for filing relevant information and clarification, as the assessment was getting time barred.

Before the CIT(A), an alternate ground was taken to treat the cash credit as "sales" and adopt the GP ratio of the firm and bring to tax the amount proportionately.Unfortunately, the CIT(A) ignored the submissions made and confirmed the addition.

The second appeal before the ITAT is now coming up for hearing next week.

Are there are any case law on the subject? I would be greatly appreciate a quick response from this august body.

CA Murali Krishna Murthy   

Discussion / Capital or Revenue expenditure
March 04, 2008, 01:04:17 PM

The assessee is carrying the business of dealing in second hand cars and for this purpose requires considerable space to display the vehicles. The assess had taken for this purpose, an existing shed, on a short lease for 5 years and carried out certain improvements which include laying of fresh flooring, replacement of roof,painting etc. Most of the expenditure is not recoverable at the end of the lease period. The assessee claimed this amount as revenue expenditure whereas the AO treated the same as Capital expenditure. Aggrieved against the impugned assessment, the assesse filed an appeal before the CIT(A).

During the appellate proceedings, the CIT(A) has pointed out that there has been an amendment to the section and that the expenditure is Capital in nature only. Also he suggested if there are anu case law on the subject after the amendment, he will consider the same.

Is the action of the CIT(A) correct in law? Are there any case on the subject? Kindly clarify and also furnish the case law, if any on the subject. The case listed for hearing on Friday 07.03.2008.

CA Murali Krishnamurthy
Discussion / section 254(2) of the Act
January 29, 2008, 08:44:44 AM
A miscellaneous application (MA) was filed in 1999. Due to various reasons attributable to the Tribunal and the appellant the MA could not be heard and disposed off. One of the major reasons id the creation of  a new bench and the time taken for transfer of appeals from one location to another and also that the members could not be arranged to constitute  a regular Bench.
Ultimately, at the time of hearing,in December 2007, the present Bench has pointed out that as four years have lapsed, the Bench would not be able to adjudicate on the issue.However, it was magnanimous to state that in the interest of justice, it would hear the MA if there is any case law on the subject that the Tribunal has inherent power to hear even after the lapse of four years.

Please help with relevant case law in this regard

CA Murali Krishna Murthy
Discussion / Section 50C
December 05, 2007, 08:29:47 AM

I am looking for a scenario to avoid the CG u/s 50C, where the land was agricultural and sold as non-agricultural land. That the land is agricultural is borne by certificate from the concerned authority and other accompanying evidence.

Kindly give your valued opinion as the case has been picked up for scrutiny and is time barring.

CA Murali Krishnamurthy