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Dear All,

After the introduction of exemption or lower rate of tax on capital gains where STT is paid, the AO's are tempted to treat the investment activity as business activity and tax it at the full rate (business income) on one or other pretext.

What is the legal situation in the case where a HNI places his money with investment advisor under POA or PMS.

Can AO treat the same as business income on the ground that the transactions of sale and purchase are numerous?

Is there any decided case, circular or clarification on this issue (i.e.investments made under POA or PMS)?

Thanks and Best regards,
???

What to do if an Assessee has Business Loss computed under section 67A, as the ITR 6 does not provide for the same... ???

Dear All,

Can MAT credit be claimed against tax before surcharge and education cess?

Best Regards,

The provisions of section 56(2) will not apply to intrest free loan as it is very rightly said that it comes with the obligation to repay it. In case the AO is suspicious about the genuineness of the loan he has been given enough powers under section 68 of the Act. Therefore he should not have any reasons to apply section 56(2) in such matter as the deeming provisions has to be consrued strictly. In case it is assumed that the contention of the AO is correct then it should be applicable to all the loans whether they are secured/unsecured/interest bearing/interest free.

Thanks alot,

can this decision be uploaded at our ITAT online. It will be of great help for every one.

Best Regards,

INCOME TAX
Tribunal ruling to help cos save tax on share sale

Maharashtra : Corporates, brokerages and banks can take advantage of a recent ruling on taxation of gains from sale of shares. The income-tax tribunal has said that if a company sells stocks after moving the securities held as `stock-in-trade' (or trading portfolio basket) to capital assets (equivalent to an investment portfolio), then the gain from such transaction will be considered as `capital gain'. The case pertains to a small Mumbai-based investment company, Bright Star Investment. The firm had bought shares of a particular company and reported them as `stock-in-trade' in its books.

Source : The Economic Times-18/8/2008.

A copy of deciosn or citation will be of great help........

Thanks and Regards,

[Prior period expenses]

Prior period expenses

In a recent ruling, the Delhi high court had an occasion to deal with the tax treatment of prior period expenditure. The court held that the question as to the year in which a deduction is allowable may be material when the rate of tax chargeable is different in different years. The court opined that where tax is levied at a uniform rate, it is immaterial whether the deduction is allowed in one assessment year or another. The tax department is not at loss in any event. The high court also observed that the tax department should restrain itself from raising points which do not affect the taxability of the assessee or the tax that the Department is likely to collect from the assessee in one year or other.

The judgement is here:

http://itatonline.org/archives/?p=81

Regards,

 :D.Thanks a lot....

Dear Friends,

Can any one give me the reference or citation of the following Delhi High Court decison :

Publication:Economic Times Delhi;
Date:Aug 12, 2008;
Section:Policy; Page Number:13      


Prior period expenses

IN A recent ruling, the Delhi high court had an occasion to deal with the tax treatment of prior period expenditure. The court held that the question as to the year in which a deduction is allowable may be material when the rate of tax chargeable is different in different years. The court opined that where tax is levied at a uniform rate, it is immaterial whether the deduction is allowed in one assessment year or another. The tax department is not at loss in any event. The high court also observed that the tax department should restrain itself from raising points which do not affect the taxability of the assessee or the tax that the Department is likely to collect from the assessee in one year or other.

Thanks and Best Regards,

I would beg to differ on this point.

Lets take an example where a Company purchases non cancellable air tickets in the month of MArch for the flight scheduled in April. Can the Co. claim the deduction in respect of amounts paid for purchase of tickets in year1?

If this is the case then there cannot be any concept of prepaid expenses.

One distinction whcih should be noted here is the expenditure is not in the nature of deferred revenue expenditure but is Prepaid Expenses. Accordingly the deduction should be allowed in the year in whcih the benifit is derived by the Assessee.

Please let me know your views on this.

The Co. claimed the full deduction in year 2 as the software was operationalised in this year. The AO allowed the deduction in year two only to the extent the expenditure was incured in the said year i.e.he disallowed the payments made to the vendor in year 1 on the ground that the expenditure has not been incurred during the relevant previous year. I hope this clarifies the case........

Dear Friends,

A Co.(following accrual system of accounting) has incurred expenditure on software devlopment, which was held to be revenue in nature by the AO. However the expenditure was spread in two years and was claimed as deduction in the year in which the software was operationalised i.e year 2. The AO disallowed the portion of expenditure incurred in year 1 on the ground that the expenditure was not incurred during the relevant previous year.

Can the principle of put to use/available for use be applied in the case of revenue expenditure? ???

The ratio laid down by the SC in the case of SA Builders (158 Taxman 74) should apply in this case. The SC has observed that the Intrest paid on amounts advanced to the subsidiary is allowable deduction as it is no longer required to prove the nexus between the borrowed funds and interest free advances as long as the amounts are advanced to the sister concerns and subsidiaries for purposes of their business and has not been utilized for the personal benefit of Directors. 

IMHO the above decison of SC should apply in your case.

Best Regards, :)

Dear Mr.Bhaskar Rao,

In my view this option is available to an assessee but practically the money will have a better opportunity cost than keeping it in the Capital Gain Scheme, which needs to be examined before this decison is taken. As far as indexation is concerned no further benifit will be available as the amount claimed as exempt will be taxed after expiry of the relevant period. The benifit U/s 54EC will not be available as the investment is required to be made with in six months from the date of transfer of Asset.

Best Regards,
:)

Finance Bill 2008 has resolved this issue forever........ :'(