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08.04.2016 - Voice of CA presents - Updates
Friday, April 8, 2016


I. Headlines Today    

  1. MCA notifies amendment in General Instructions for preparation of Balance Sheet and Statements of P/L of a Company under Schedule-III of the Companies Act, 2013  (Click for detail)
  2. ITR 2, ITR 2A and ITR 3 for AY 2016-17 are also available for e-Filing. Other ITRs will be available shortly.
  3. I-T to challenge HC verdict in Vodafone transfer pricing case  (Click for detail)
  4. GST will boost states revenue make industry competitive  (Click for detail)
  5. Tax collection estimate for FY16 crossed  (Click for detail)
  6. Panama Papers' India probe checks misuse of legal routes  (Click for detail)
  7. Take tax advantage for losses made in equities  (Click for detail)
  8. RBI issues guidelines on priority sector lending certificates  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  Indian Aluminium Company Limited Vs. CIT, I.T.A. No. 278 of 2007, Date of Judgment: 18.03.16, High Court of Calcutta

Whether the expenditure incurred on the development of software can be said to be of capital nature and disallowed u/s 32 merely on the basis of its enduring nature?


Brief Facts:
The assessee is engaged in manufacture and production of aluminum. It incurred an expenditure of Rs. 41,08,556/- on software development. AO disallowed this expenditure holding it to be of capital nature, while CIT (A) allowed the expenditure. ITAT upheld the order of AO disallowing the expenditure. Therefore, the assessee appealed before the High Court of Calcutta u/s 260A of the Income Tax Act.

Hon’ble High Court of Calcutta held that test of enduring nature of expenditure cannot be applied without taking into account the facts and circumstances of the case as there may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. Moreover the software developed by the company is the application software used for lithography and study of vermiculture of bio-degradable wastes and is subject to advancements and changes at a lightning pace. Further, the developed software neither adds to the capital of the company nor leads to the creation of new asset. Hence, the debated expenditure will be allowed as revenue expenditure for the AY 1997-98 as per section 32 of the Income Tax Act.  
The appeal of the assessee is allowed.

(Please click here for judgment)


2.  M/s DMA Investment Pvt. Ltd. Vs. DCIT, I.T.A. Nos. 5688-5691/Del/2013, Date of Judgment: 05.04.2016, ITAT - DELHI

Whether any additions can be made to the assessed income of the assessee u/s 153A without any incriminating material found during the search and seizure operation?


Brief Facts:
A search and seizure operation was carried out on the premises of the assessee company M/s DMA Investments Pvt. Ltd. Subsequently notice u/s 153A(1) was issued to the assessee, in response of which assessee filed a return declaring NIL income. Thereafter, AO completed the assessment at Rs. 50,000/- for making disallowance u/s 14A. CIT(A) partly allowed the appeal of the assessee. Aggrieved by such order, assessee is in appeal before the ITAT.

As per section 153A, assessment cannot be made without any relevance or nexus with the seized material. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search. If no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.
The appeal of the assessee is allowed.

(Please click here for judgment)  

 Golden Rules:

  "Expectations is the mother of all problems
and patience is the father of all solutions"


  Thanks & Regards


Voice of CA 

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