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02.07.2016 - Voice of CA presents - Updates
Saturday, July 2, 2016


I. Headlines Today    

  1. Companies(Acceptance of Deposits) Rules, 2014  (Click for detail)
  2. I-T Dept Clears Air on Income Declaration Scheme  (Click for detail)
  3. CBDT notifies rules for calculating assets' fair market value  (Click for detail)
  4. Taxpayers can now file a new ‘ e-nivaran’ form  (Click for detail)
  5. Govt eases remuneration disclosure norms for firms  (Click for detail)
  6. Govt. provides extra 6 months time to Cos for complying with provisions of appointment of auditors  (Click for detail)
  7. New amnesty scheme levies 31% effective tax, Centre won't question income source  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  The Principal CIT Vs. B. A. Research India Ltd., Tax Appeal No. 233 & 234 of 2016, Date of Judgment: 16.06.2016, High Court of Gujarat

Whether the Revenue can ignore the approval granted by the prescribed authority under Rule 18D(2) of the Income Tax Rules, 1962  and hold that the prescribed conditions are not fulfilled by the assessee and therefore, deny deduction u/s 80IB (8A) of the Income Tax Act, 1961 r.w. Rule 18D & 18DA of the Rules?


Brief Facts:
The assessee company is engaged in scientific research activities. For the AY 2008-09, it has claimed the deduction u/s 80IB (8A) of the Act. The assessee had an income of Rs. 22.81 lacs as sample storage income, which was questioned by AO. The assessee in response stated that such income has arisen on account of charges received from respective customers for holding and storage of clinical samples under specific conditions which were collected from volunteers for carrying out research work and thus this income is derived from the research activities of the company. Such income was disallowed from the deduction u/s 80IB (8A) and all other deductions were allowed by the AO. The order of AO was taken in revision by CIT u/s 263 and it was held that the assessee was not eligible for claiming any deduction u/s 80IB (8A) as the prescribed conditions under Rule 18DA are not fulfilled. Further, the appeal of the assessee was allowed by the Tribunal holding that the Revenue cannot question the approval granted by the prescribed authority for establishing eligibility for claiming deduction u/s 80IB (8A). Aggrieved by which, the revenue appealed before the High Court.

It was held that once the approval is granted by the prescribed authority and such approval is valid, it would no longer be open for AO to verify the satisfaction of the conditions prescribed under Rule 18DA in order to refuse deduction u/s 80IB (8A) of the Act but that does not imply that any claim of deduction under the said section would be granted mechanically without any verification as the other issues relevant to the claim of deduction would be within the jurisdiction of the Assessing Officer. The AO can verify the accounts and refuse deduction which does not form part of section 80IB (8A) and the income which does not arise out of the eligible business.
The appeal is answered in the favour of the assessee.

(Please click here for judgment)


2.  Homecare Retail Marts Pvt. Ltd. Vs. ACIT, I.T.A. No. 6484/Mum/2014, Date of Pronouncement: 22.06.2016, ITAT - Mumbai

Whether the amount of security deposit forfeited and adjusted against outstanding rent and other charges payable by the assessee to the lessor may be allowed as business expenditure?


Brief Facts:
The assessee company is engaged in the business of Super Market/ Hyper Market. For the AY 2010-11, it has debited a sum in P&L A/c on account of ‘sundry balances written off’. This amount pertains to the security deposit given to the lessor for the building taken on lease by the assessee for its business which was subsequently forfeited. AO contended that the said amount was not revenue expenditure and hence not allowable. Assessee submitted that the deposit was adjusted against the outstanding rent and other charges and therefore should be allowed.

The CIT(A) sustained the disallowance holding that it is not allowable u/s 36(1)(vii) as bad debt and further held that since it is not allowable as bad debt the same is also not allowable expenditure u/s 37(1). Therefore, the assessee is in appeal before the hon’ble ITAT.

The revenue contended that to write off a debt in the books of accounts, the same amount should have been offered as income in the past. The assessee submitted that the cancellation deed was executed between the lessor and the assessee to terminate the original deed. As per the new deed, the amount of security deposit paid by the assessee would be adjusted against the outstanding rent, outstanding taxes, charges, electricity bills, telephone bills and other charges relating to the said property up to 30.06.2009 and there would be no outstanding amount to be paid or refunded by either party. All the expenses adjusted against security deposit are revenue expenditure and hence should be allowed.  It was held by the Tribunal that the contention of the assessee is allowed as the security deposit is adjusted against the allowable expenses and the disallowance by the AO is deleted.
The appeal of the assessee is allowed.

(Please click here for judgment)     

III. Useful Articles:

1.  Key Highlights of Draft Model GST Law 

(Please click here for detail)

2.  No KKC if invoice is raised and services are rendered on or before May 31, 2016 

(Please click here for detail)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id:

 Golden Rules:

  "We cannot have all that we desire,
but time will give us all that we deserve"


  Thanks & Regards


Voice of CA 

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