ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE DATED 18-1-2010 Volume 1 : Part 3
F Waiver of term loan availed of by assessee not assessable as income : Accelerated Freez and Drying Co. Ltd. v. Dy. CIT (Cochin) p. 226
F Sum received from NRE account of NRI, not to be added as cash credit : Amritraj S. Punamiya HUF v. ITO (Mumbai) p. 242
F No interest for delay in TDS due to technical lapses in a public institution : ITO v. Registrar, Cochin University of Science and Technology (Cochin) p. 252
F Gain on cancellation of forward foreign exchange contracts is business income but 90% thereof liable to be reduced from profits for purpose of deduction : Dy. CIT v. Intergold (I) Ltd. (Mumbai) p. 257
F Amendment to section 10A(3), extending period of exemption is substantive : Dy. CIT v. Intergold (I) Ltd. (Mumbai) p. 257
F Loan advanced to shareholder : Payments made cannot be reduced from deemed dividend : Amount credited in loan account by way of remuneration cannot be set off against loan : Rajesh P. Ved v. Asst. CIT (Mumbai) p. 275
F Where no material establishing consideration paid higher than declared in sale deed, deletion of amount added as unexplained investment : ITO v. Fitwell Logic System P.Ltd. (Delhi) p. 286
F Sub-contractor, meaning of : Assessee taking vehicles on hire for executing contract : Liability of hirers not established : Tax need not be deducted : Mythri Transport Corporation v. Asst. CIT (Visakhapatnam) p. 290
F Carry out, meaning of : Mythri Transport Corporation v. Asst. CIT (Visakhapatnam) p. 290
F Licence under Factories Act obtained subsequent to commencement of production irrelevant for purpose of section 80-IB : Priya Printek v. ITO (Ahd.) p.302
F Deduction under s. 80-IB only after deducting unabsorbed depreciation as well as current year depreciation : Priya Printek v. ITO (Ahd.) p.302
F Where assessee joint-owner of property along with his brother on date of transfer and utlising long-term capital gains for constructing additional floor, not entitled to exemption under s. 54F : Asst. CIT v. T.N. Gopal (Chennai) p.309
F Bankers warn risks on exposure to infra funding
Bankers have demanded special facilities to meet the demands of huge funds for the infrastructure projects. Indian Banks' Association (IBA) in its meeting asked the Government and the Reserve Bank of India to do the needful to help them fund infra projects.
To overcome asset liability mismatch constraints, the bankers have demanded the exemption of the infrastructure bonds from capital gains under section 54EA and investments under section 88 of the Income-tax Act. To enhance the ability of banks to provide medium-term financing to infrastructure projects, banks could be permitted to issue senior bonds with maturity lower than five years. The RBI should consider providing cash reserve ratio (CRR) and statutory liquidity ratio (SLR) exemption to infrastructure bonds floated by banks.
Primary constraints for banks in financing infrastructure arises from their funding structure and applicable liquidity ratios. Bank resources are mainly in the form of deposits, which are typically of maturities up to three years. On the other hand, infrastructure sector requires long-term financing for a period extending beyond 15 years. Apart from asset-liability mismatch (ALM), interest rate risk and pricing are also key issues.
The Deputy CEO, IBA also feels the need of large amount of funds, long gestation period and ALM are some of the basic problems being faced by the banks.
RBI has permitted the banks to go for infra bonds to the extent of infra lending with a maturity period beyond five years. Also, the RBI has asked them to raise bonds and go for debt. Still, no bank is raising capital in this way since they will have to give an interest rate of 9 per cent. to their investors. Then things like CRR & SLR come in the way, which compel them to charge an interest rate of 11-12 per cent. while lending to infra projects. The bankers had raised this issue during their meeting with the Finance Minister in June.
IBA earlier had formed a special committee to examine the set of problems faced by various banks in funding core sector. The report of the internal working group of IBA was submitted during its managing committee meeting held in Mumbai.
The report has outlined that banks should be permitted to go for takeout financing in a big way and fiscal incentive should be provided to the banks. The resource mobilisation for the infra funding must be exempted from relevant Income-tax Act, so as to make money cheaper for infra financing.
On fiscal side, capital gains should be made attractive to investors through fiscal measures, the report said.
Currently, two kinds of prudential limits are in force-group and single exposure. In single exposure, the banks are permitted to fund up to 25 per cent. while for groups, banks can take leverage of up to 50 per cent. But bankers feel that it is not enough keeping in view the ever increasing demands of credit from the sector which is also required by the Government's increasing focus on infra spending. As per an estimate, total exposure of the banks to the sector is valued at Rs. 1,30,000 crore. [Source : www.financialexpress.com dated December 31, 2009]
F A troubled tax code go to Law ministry for redrafting
With the consultation process for the direct taxes code over, the proposals on taxation for salaried employees and income from house property may undergo some changes.
There could also be a relook at the proposals on the minimum alternate tax, capital gains tax, double-taxation avoidance agreement, general anti-avoidance rule, taxation of charitable organisations and foreign companies, and taxing investment at the withdrawal stage.
According to the code, income from a house, which is not occupied for the purpose of any business by its owner, will be taxed under the "income from house property" head. [Source : www.businessstandard.com dated January 7, 2010]
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