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26.08.2016 - Voice of CA presents - Updates
Friday, August 26, 2016

I. Headlines Today    

  1. IT dept asks officers to suggest changes in direct tax laws  (Click for detail)
  2. Move to ban cash deals divides finance ministry  (Click for detail)
  3. Income Tax department expect income declaration scheme picking up next month  (Click for detail)
  4. Delhi Assembly ratifies GST Bill  (Click for detail)
  5. Large Corporate Loans To Cost More  From  FY18  (Click for detail)
  6. Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016  (Click for detail)
  7. Master Circular – Collection of Direct Taxes - OLTAS  (Click for detail)
  8. ICAI: Request to provide/update PAN details to avoid blocking of e-filing account by the Income Tax Department  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  M/s. Rayala Corporation (P.) Ltd. Vs. ACIT, Civil Appeal Nos. 6437 to 6441 of 2016, Date of Judgment: 11.08.2016, Supreme Court of India


Whether rent received from business of renting of house property should be treated as 'Business income', and not as 'income from house property'?

Held: Yes

Brief Facts
The appellant-assessee, a private limited company, is having house property, which has been rented and the assessee is receiving income from the said property by way of rent. The assessee company is in business of renting its properties and is receiving rent as its business income, the said income should be taxed under the Head “Profits and gains of business or profession” whereas the case of the Revenue is that as the income is arising from House Property, it must be taxed under the head “Income from House Property”. The ld. counsel submitted that as per its MOA its business is to deal into real estate and earn income by way of rent by leasing or renting the properties. The ld. counsel for the assessee submitted that the issue involved in these appeals is no more res integra as this Court has decided in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC).

The hon’ble supreme court held that, upon hearing the ld. counsel and going through the judgments cited by the learned counsel, the law laid down by this Court in the case of Chennai Properties and Investments Ltd., shows the correct position of law and looking at the facts of the case in question, the case on hand is squarely covered by the said judgment. In the judgment (supra), it was held that if an assessee is having his house property and receiving rent by way of renting it and claiming such rent as his business income. The said rental income, even if in the nature of rent, should be treated as “Business Income” because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income. Appeal is allowed.

(Please click here for judgment)

2.  M/S Rishi Hi-Tech Builders Pvt. Ltd. Vs. ITO, I.T.A. No. 6447/Del/2012, Date of Order: 08.08.2016, ITAT - Delhi


Whether where no exempt income is received or receivable by the assessee during the relevant assessment year, no disallowance can be made by invoking provisions of Section 14A of the Income Tax Act,1961?


Brief Facts:
The assessee company is engaged in the business of construction of building. From the audited balance sheet, it is noticed by the AO that assessee has shown investment of Rs.3,04,00,000/- and interest paid was Rs. 20,14,787/-. Thus,  the AO issued show cause notice to assessee as to why disallowance u/s 14A of the Act, read with Rule 8D of the Income-tax Rules, 1962 be not made?  Assessee contended that the has not recorded his satisfaction and also it has neither received any exempted income nor claimed any exempted income in return of income and hence provisions of Section 14A read with Rule 8D are not applicable. However, the  AO invoked the provisions contained u/s 14A read with Rule 8D and calculated the expenditure for earning dividend income and made addition of Rs. 17,36,661/-. On the appeal to CIT(A) by the assessee, the order of the AO was confirmed. Aggrieved by which, the assessee is in appeal before the Tribunal.

Before invoking provisions contained under Rule 8D(2)(iii), the AO has not recorded his dis-satisfaction of the correctness of the claim of expenditure made by the assessee nor AO came to the Conclusions that, “the claim of the assessee that no expenditure has been incurred” is incorrect. Assessee has come up with categorical plea that no exempt income has been earned during the year under assessment nor the assessee has incurred any expenses for managing the investments. From the books of account, AO has not identified any expenditure incurred by the assessee for earning any dividend income but proceeded to invoke the provisions contained under Rule 8D(2)(iii) merely on the basis of guesswork that too without recording his dis-satisfaction as to how the claim of the assessee that no expenditure has been incurred. Hon’ble jurisdictional High Court in judgment cited as Cheminvest Ltd. while examining the identical issue held that section 14A will not apply where there is no exempt income received or receivable during the year under assessment. Consequently, appeal stands allowed.

(Please click here for judgment)  

 Golden Rules:

  "Four steps to live life:
1st - look back and thank God,
2nd - look forward and trust God,
3rd - look around and believe God,
4th -look within and find God. "


  Thanks & Regards


Voice of CA 

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