Merely because surplus from educational activity, does not mean it is NOT from Educational Activity

 Merely because surplus has arisen to assessee during its educational activity does not mean that assessee is not existing solely for education purpose

Income-tax : If main object of an assessee is imparting of education and during course of imparting education, if some surplus has arisen to assessee, it cannot be said that assessees institution is not engaged for charitable purpose as defined under section 2(15) [Section 10(23C) Income-tax Act, 1961 - Charitable/religious institutions] - [2011] 10 taxmann.com 156 (Agra - ITAT)

If two views are possible than A.O. should take the one favourable to the Assessee

CIT Vs Mahavir Irrigation Pvt Ltd

[ITA No.1266/2009, dtd. 03.08.2011]

If two views are possible than Assessing Officers should take the one favourable to the Assessee and penalty for concealment cannot be levied

Where there is no finding that any details supplied by the assessee in its Return is incorrect or erroneous or false, there would be no question of inviting the penalty under Section 271 (1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars.

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Capital gains earned by a Dutch company on transfer of shares held in an In

Capital gains earned by a Dutch company on transfer of shares held in an Indian company to a foreign company is taxable only in Netherlands

Income-tax : Capital gains earned by the applicant on transfer of shares would be covered by Article 13(5) of the Tax Treaty and shall be taxable only in the Netherlands, the State in which the transferor is a resident [Section 90 of the Income-tax Act, 1961 read with Article 13(5) of the India-Netherlands DTAA - Double Taxation Relief - Where agreement exists (Capital gains)]

l The applicant is required to file return of income under section 139 even if the capital gain is not taxable in India because instead of causing inconvenience to the applicant, the process of filing of return would facilitate the applicant in all future interactions with the Income-tax department - [2011] 10 taxmann.com 157 (AAR - New Delhi

Direct Tax Laws Sept 2011

Whether services rendered by assessee is a technical service or not, require scrutiny by Court; no final assessment order should be passed till scrutiny is over - [2011] 13 taxmann 123 (Uttarakhand)

Before order of TPO determining transfer price is passed, opportunity of hearing is to be given to assessee - [2011] 13 taxmann 122 (Bombay)

Where assessee did not disclose salary of 8 months received from former employer and showed salary of only 4 months received from new employer, provisions of section 271(1)(c) were attracted - [2011] 13 taxmann 115 (Calcutta)

Addition under section 68 could not be made where assessee had explained receipt of loan by cheques with help of bank statements and income-tax returns of creditors - [2011] 13 taxmann 114 (Delhi)

Where assessee branch office of German company received order from Indian client and negotiations and conclusion of contract were done in Germany by head office, allocation of income at 40 per cent for role played by head office was justified - [2011] 13 taxmann 124 (Delhi - Trib.)

Where difference between sale consideration in transactions with AE and ALP determined by TPO is less than 5 per cent, no addition is required - [2011] 13 taxmann 121 (Mumbai - Trib.)

Reserve created under section 80HHC can be distributed amongst partners - [2011] 13 taxmann 113 (Ahmedabad - Trib.)
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INTEREST-FREE LOANS TO LOSE TAX BURDEN

INTEREST-FREE LOANS TO LOSE TAX BURDEN

ITAT Ruling On Loans From Non-Relatives

Ram Narsinghdev Sahgal MUMBAI

IN A first-of-its- kind judgement, the Income-Tax Appellate Tribunal (ITAT) recently ruled that a recipient of an interest-free loan from a non-relative is not liable to pay tax. The judgement will come as a major relief for people who borrow money from friends and colleagues and latter grapple with notices from tax authorities.
Section 56 (2)(v) of the Income Tax Act provides for taxing any sum of money in excess of Rs 25,000 received without consideration by an individual or a Hindu Undivided Family (HUF) from any source other than a relative. Occasions where the recipient is exempted from tax are during a marriage, or in cases where the amount is received under a will, or by way of inheritance or in contemplation of death of the payer.
Applying this section, an income-tax assessing officer treated interest-free loans amounting to Rs 54.7 lakh received by one Chandrakant Shah from nonrelatives as a sum without consideration and taxed it.

New section came into force in 2004

THE assessee approached the Commissioner of I-T (Appeals), but was not granted relief. He then appealed before the Mumbai ITAT, where his legal counsel said that the lower authorities had "misinterpreted" the new section, which came into effect on September 1, 2004. Furthermore, Mr Shah's counsel said the sum of interest-free loans taken by him even before that date (September 1, 2004) did not fall within the ambit of the amended section.
Bhupendra Shah, Mr Shah's counsel, argued before a division bench comprising Madhavi Devi and VK Gupta that an interest-free loan could not be taxed under Section 56 (2)(v), as the repayment of a loan itself is treated as consideration between two parties and not a sum without consideration. The counsel said the amounts were shown in the balance sheet by the assessee as unsecured loan liabilities, and, hence, could not be treated as an addition to capital as in the case of a gift.
The counsel contended that the term "loan" meant delivery by one party to and receipt by another party of a sum of money upon agreement expressed or implied condition, to repay it with or without interest.
He maintained that it was inessential for an interest component to make a transaction of lending of money a loan transaction, by referring to a decision of the Court of Appeal of State of California. The US court had observed that a loan of money was a contract by which one delivered a sum of money to another, and the latter agreed to return at a future time without interest that sum which he borrowed.
The bench upheld the counsel's argument, saying: "We hold that a transaction of loan can be without interest and a transaction of loan implies an agreement to repay the money that is borrowed, which also gives reply to the revenue's query regarding the existence of the obligation to repay the money at the time of taking such loan." Section 56 (2)(v) was introduced to fill up the vacuum created by the abolition of the Gift Tax Act in 1997, which was donor-based, meaning the giver of a gift was taxed.

Section 115-O(5) did not, in any way, restrict allowability of claim u/s 80 M

Section 115-O(5) did not, in any way, restrict allowability of claim under section 80M - [2011] 10 taxmann 135 (Bom.)

An income already taxed under one head cannot, at subsequent period, be tax

An income already taxed under one head cannot, at subsequent period, be taxed under a different head - [2011] 10 taxmann.com 139 (Cal.)

Society , trading activity can not be claimed benefit u/s 12A & 80 G

Society for The Small & Medium Exporters Vs DIT [ITA No.3182 & 3183/Del/2008, dtd. 29.04.2011]
Benefits of Sec. 12A and 80G cannot be allowed if there is no charitable activity and assessee undertakes only commercial activity

ITAT Delhi bench held that in a case where the objects of the society may be charitable, but, in the absence of carrying on those activities despite the fact that the activities which were carried on were for the purpose of generating income, the society is not entitled for registration for benefits of Sec. 12A and 80G for that year. It has been held that for assessment years in which the assessee does not carry out charitable activity, the assessee has been rightly refused to get benefit of registration as charitable institution. The only activity which has been carried out is for the purpose of generating income, which is not a charitable activity in itself........

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Losses in non-delivery based share transactions can be set off against speculation profit

Losses in non-delivery based share transactions can be set off against profits of speculation business under deeming fiction of Explanation to section 73 - [2011] 11 taxmann.com 385 (Mum. - ITAT)

Interest received by public financial institution

 

Interest received by public financial institution on loans and advances made under bills re discounting scheme from different banking companies to which Banking Regulation Act, 1949 applies, does not form part of chargeable interest - [2011] 11 taxmann 412 (Cal.)