INCOME TAX REPORTS (ITR) HIGHLIGHTS ISSUE DATED 16-8-2010
Volume 326 : Part 1
F Purchase of securities "cum-dividends" : Claim to set-off of loss permissible : CIT v. Walfort Share and Stock Brokers P. Ltd. p. 1
F Differential payments to cane-growers : Whether would constitute business expenditure : Whether reasonable or excessive : How decided : Deputy CIT v. Shri Satpuda Tapi Parisar SSK Ltd. p. 42
F Amount received under optional early retirement scheme exempt : Chandra Ranganathan v. CIT p. 49
F Tribunal finding fixed deposit represents undisclosed income of assessee : Finding of fact : Surinder Kumar v. ITO (P&H) p. 21
F Failure to file notification u/s 10(23C(vi) : No bar seeking exemption : CIT v. Mahasabha Gurukul Vidyapeeth Haryana (P&H) p. 25
F Assessee entitled to deduction u/s 80-IB where it deriving income from its own manufacturing and from job works done for others : CIT v. Impel Forge and Allied Industries Ltd. (P&H) p. 27
F Expenditure incurred in process of running of business to raise funds deductible : CIT v. Sukhjit Starch and Chemicals Ltd. (P&H) p. 29
F Penalty could not be imposed where transaction was bona fide and default technical : CIT v. Speedways Rubber P. Ltd. (P&H) p. 31
F Reassessment proceedings could not be kept pending till decision of Excise Tribunal : CIT v. Arora Alloys Ltd. (P &H) p. 34
F Duty draw back and DEPB not includible for computation of net profits for purposes of s. 80-IB : Jai Bharat Gum and Chemicals Ltd. v. Addl. CIT (P&H) p. 36
F Discovery that deduction u/s 80-IB allowed on duty draw back and DEPB entitlement : Reassessment to withdraw benefit valid :Jawand Sons v. CIT (Appeals) (P&H) p. 39
F Reassessment after four years not valid where no failure to disclose material facts : CIT v. Steel Tubes of India Ltd. (MP) p. 46
F Compensation in form of annual instalment is capital receipt :Anand Babu Agarwal v. ITO (All) p. 51
F Deduction u/s 80HHC : Gross interest and not net interest on fixed deposits in banks to be taken into account : CIT v. Asian Star Co. Ltd. (Bom) p. 56
F Reassessment proceedings void where no valid service of notice :Smt. S. Nachiar v. ITO (Mad) p. 77
F Rejection of application for waiver of interest solely for failure to pay interest : Matter remanded : Smt. Prakashkumari v. CIT (Bom) p. 82
F Recovery of tax : AO not considering submissions of assessee : Matter remanded : Dinesh T. Tailor v. TRO (Bom) p. 85
F Income would be business income if dominant purpose was commercial activity and it would be income from property if dominant object was to lease property : Matter remanded : Nutan Warehousing Co. P. Ltd. v. Deputy CIT (Bom) p. 94
F Assessee carrying on a business of real estate : Income assessable under "Profits of business" : CIT v. Rose Services Apartment India P. Ltd. (Delhi) p. 100
F Tribunal empowered to determine whether assessee entitled to claim a loss, if at all, under section or other : CIT v. Rose Services Apartment India P. Ltd. (Delhi) p. 100
F Tribunal finding provisions of s 41(1) not applicable : Proper : CIT v. Rose Services Apartment India P. Ltd. (Delhi) p. 100
F No liability for deduction of tax at source where assessee not paid any amount to procurement agencies on account of transportation, interest or storage charges : CIT (TDS) v. Asst. Manager (Accounts), FCI (P&H) p. 106
F No inference that assessee paid any amount of freight separately : Assessee not a defaulter u/s 194C : CIT v. Bhagwati Steels (P&H) p. 108
F Subsidy not received written off in books : Not a bad debt : CIT v. Khaitan Chemicals and Fertilisers Ltd. (Delhi) p. 114
F S 41(1)(a) not applicable where no record of remission or cessation of liability : S. I. Group India Ltd. v. Asst. CIT (Bom) p. 117
F Escaped income more than Rs. 50,000 : Reassessment not barred by limitation : Poonja Arcade v. Asst. CIT (Karn) p. 123
F Impossible to judge final report : Tribunal holding annual value of property cannot be assessed in hands of assessee u/s 22 : CIT v. Babukhan Builders (AP) p. 133
F Grant of interest-free loan by assessee-society to another society : Entitled to exemption : Director of Income-tax (Exemption) v. Acme Educational Society (Delhi) p. 146
F Reassessment not valid where no compliance u/s 147 :Travellers Choice v. ITO (Karn) p. 153
F Returns filed, assessment, revision and appeals in Bangalore and subsequent shifting of registered office of assessee to Punjab : Punjab and Haryana High Court has no jurisdiction to hear case : CIT v. Motorola India Ltd. (P&H) p. 156
F Order passed by Tribunal in Chennai and subsequent shifting of assessee's office to Punjab : Punjab and Haryana High Court has no jurisdiction : CIT v. H. F. C. L. Infotel Ltd. (P&H) p. 167
F Expenditure on transit accommodation not deductible u/s 37 :CIT v. IBM India Ltd. (Karn) p. 176
F Deduction for bad debt written off under clause (vii) of section 36(1) allowable only on excess over provision created and allowed under clause (viia) : CIT v. South Indian Bank Ltd. [FB] (Ker) p. 174
F Finding that funds invested by assessee and hire rent taxed in its hands : Assessee entitled to depreciation : CIT v. Varanasi Auto Sales P. Ltd. (All) p. 182
F Second hand medical equipment purchased for use as spare parts for existing equipment : Price paid was revenue expenditure : Dr. Aswath N. Rao v. Asst. CIT (Karn) p. 188
F Notifications :
Income-tax Act, 1961 : Notifications under section 10(15)(vii) : Exemption of interest payable on bonds issued by public sector companies p. 8
Income-tax Act, 1961 : Notifications under section 10(23C)(vi) : Institutions approved for the purpose of section 10(23C)(vi) p. 7
Income-tax Act, 1961 : Notifications under section 35(1)(ii)/(iia)(iii) : Scientific research associations notified by the Central Government for the purpose of section 35(1)((ii)/(iia)(iii) p. 1
Income-tax Act, 1961 : Notification under section 35(1)(ii)/(iii) : Corrigendum p. 7
F Weighted deduction to educational institutions for scientific research raised
The Income-tax Act, 1961, before amendment by Finance Act, 2010, allowed a weighted deduction of 125 per cent. for any sum paid out of business income to a university, college or other institution in case the amount is used for scientific research. Similar weighted deduction of 125 per cent. was also allowed for any sum paid out of business income to a national laboratory or a university or Indian Institute of Technology for the purpose of an approved scientific research programme. The Finance Act, 2010 has increased the abovementioned weighted deduction from 125 per cent. to 175 per cent. with effect from April 1, 2010. Any sum paid to a hospital does not qualify for weighted deduction under the Income-tax Act, 1961.
The weighted deduction from business income is allowed for incentivising research and development in the country. Consequently, the weighted deduction is allowed with a condition that the donation received by the recipient organisation will be used for scientific research and development. As an orphanage is not engaged in any research and development, it cannot be included in the scheme specifically meant for encouraging research and development. However, donation to a hospital approved under section 80G of the Income-tax Act, 1961 qualifies for deduction at the rate of 50 per cent. of the donation. [Source : www.pib.nic.in dated August 3, 2010]
F Long-term infrastructure subscriptions, round-up deduction under Income-tax Act
The Finance Act, 2010 has inserted a new section 80CCF in the Income-tax Act, 1961, which provides that an amount up to the extent of Rs. 20,000 paid or deposited during the financial year 2010-11 as subscription to long-term infrastructure bonds shall be allowed as deduction in computing the income of an individual or a Hindu undivided family. The deduction will be over and above the existing overall limit of Rs. 1,00,000 available under sections 80C, 80CCC and 80CCD of the said Act on savings and other prescribed investments. This amendment takes effect from April 1, 2011 and is applicable for the subscriptions to eligible/notified infrastructure bonds made during the financial year 2010-11.
Consequent to this amendment, "long-term infrastructure bonds" have been notified vide Department of Revenue, Central Board of Direct Taxes, Notification No. 48/2010 [S. O. 1639(E), dated July 9, 2010], specifying the details such as the tenure, interest rate, agencies which can issue the bonds, etc. [Source : www.pib.nic.indated August 3, 2010]
F Access to Swiss accounts boosted by talks to revise treaty
The Government has concluded the renegotiation for widening the ambit of its tax treaty with Switzerland to access information on Swiss bank accounts, a big step towards tracing Indian money stashed away overseas.
The tax treaty has been amended on the lines of the OECD Model Tax Convention, which means it will not provide for roving enquiries, or fishing expeditions as they are commonly called.
The revised agreement is expected to be taken up by the Cabinet shortly, a senior official with the Central Board of Direct Taxes said.
The new treaty will be notified by India immediately after it is signed, but the Swiss authorities will be able to put the agreement into effect only after it is ratified by their Parliament.
India's income-tax authorities will be able to access information on Swiss bank accounts of Indians more easily, but only in specific cases where they have a prima facie evidence of wrongdoing.
The Enforcement Directorate has already issued show cause notices to some Indian citizens for maintaining banks accounts in Switzerland and the Government has initiated steps to elicit requisite information from Swiss authorities.
"The renegotiation of the Double Taxation Avoidance Agreement (DTAA) between India and Swiss Confederation has been concluded. The matter is being actively pursued for early entry into force of the amended DTAA", the Finance Minister said in reply to a query in Lok Sabha.
The Government had approached Switzerland in April 2009 to renegotiate the DTAA to get access to information on bank accounts.
Switzerland has also amended tax treaties with the US, France and Italy.
The issue of tainted money stashed away in Swiss bank accounts had taken centre stage during general elections in India last year and has again come to limelight after the US entered into a deal with leading Swiss bank UBS on information exchange on tax evaders.
India is pursuing the issue of exchange of information with other countries as well and would seek amendment in tax treaties with them. The move is in line with a decision taken at the G-20, which took up the issue of tax havens. [Source :www.economictimes.com dated July 31, 2010]
F Tax sops for SEZs more than meets the eye
Section 80-IA(4)(iii) of the Income-tax Act, 1961 provides for a tax holiday for 10 out of 15 years in respect of profits of any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone. The tax benefit is available to such industrial parks subject to the condition that it is notified by the Central Government in accordance with the Scheme framed and notified in this behalf for the period beginning on April 1, 1997 and ending March 31, 2006. The terminal date for availability of this tax incentive was extended up to March 31, 2011 by the Finance (No. 2) Act, 2009. As a consequence, the Industrial Park Scheme, 2008 has been notified by the Ministry of Finance in exercise of the powers conferred by the aforesaid section vide Notification No. S.O. 51(E), dated January 8, 2008.
The Government of Uttarakhand has requested for extension of the industrial package for the State up to 2020. The incentives under Industrial Package for Uttarakhand are admissible till January 6, 2013. Only, the excise duty exemption benefits for the industrial units set up after March 31, 2010 have lapsed. [Source : www.pib.nic.indated August 2, 2010]
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