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13.01.2017 - Voice of CA presents - Updates
Friday, January 13, 2017

I. Headlines Today    

  1. Budget 2017 and income tax rates: Why Arun Jaitley should cut rates instead of hiking tax exemptions  (Click for detail)
  2. Budget 2017: NITI Aayog wants 10% I-T slab tweaked  (Click for detail)
  3. Income tax: All you want to know about changes in personal tax over last 5 budgets  (Click for detail)
  4. Deadline extended for companies to get registered with EPFO  (Click for detail)
  5. Direct Tax Notification: Agreement between the Government of the Republic of India and the Government of Republic of Cyprus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes  (Click for detail)
  6. FEMA Circular: Evidence of Import under Import Data Processing and Monitoring System (IDPMS)  (Click for detail)
  7. You may soon be taxed on cash withdrawals if govt has its way  (Click for detail)
  8. Supreme Court won’t interfere with whistleblower law  (Click for detail)
  9. Sebi may lower broker fee to Rs 15 per transaction of Rs 1 crore  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  Shri Fazal Sarang Vs. DCIT, I.T.A. No. 1456/Mum/2012, Date of Pronouncement: 04.01.2017, ITAT - Mumbai


Whether the order passed u/s 143(3) r.w.s. 153A is Void if the Learned Assessing Officer erred in assuming jurisdiction u/s 153A of the Income Tax Act, 1961 ?

Held: Yes

Brief Facts:
The Ld. Assessing officer has issued the notice u/s 153A of the act and initiated the assessment proceeding on the factually erroneous basis i.e. that a search and seizure action under section 132 of the Act was also carried out on the assessee, when search operations were carried out in the case of Hicons and Pranay group of cases. While the correct factual position is that no search under section 132 of the Act was carried out on the assessee’s premises, but only a survey action under section 133A of the Act was carried out at the assessee’s premises on same day. On this assumption ld. Assessing officer has passed the assessment order u/s 143(3) r.w.s 153A of the Act and mentioned the same in the assessment order.

The Hon’ble ITAT held that in absence of any warrant of authorization to search the assessee’s premises u/s 132 of the Act, the AO has no jurisdiction to issue the notice u/s 153A of the Act, thereby rendering it invalid and consequently the assessment order passed u/s 143(3) r.w.s 153A of the Act is also held to be void ab initio and accordingly cancelled.
Therefore, the appeal of the assessee is allowed.

(Please click here for judgment)


2.  DCIT Vs. J.M. Financial Services Ltd., I.T.A. No. 3660/M/2014, Date of Pronouncement: 28.12.2016, ITAT - Mumbai

Whether where assessee is involved in arbitrage activities, the transactions of shares in cash segment and future segment cannot be segregated to calculate profit and loss from each segment separately?


Brief Facts:
The assessee had carried out cash future arbitrage and earned a profit from the said activity. The activity of buying and selling of shares in cash segment and future segment was a composite activity carried out by the assessee and the transactions are so managed that if there is loss in one segment, there is profit in the other segment, such that the assessee gets profits only. However, AO has contended that the transactions which are not specifically excluded under the provisions of section 43 of the Act, those transactions result into speculative profit or loss which cannot be adjusted or set off from the profit and loss of normal business transactions. Therefore, AO treated the loss of cash segment of Rs.25,96,01,368/- as speculation loss and made addition on account of deemed speculation loss contending that assessee has set off speculation loss with non-speculative income. Being aggrieved by that, assessee preferred an appeal before CIT(A). CIT(A) deleted the addition by saying that the assessee is involved in arbitrage activities i.e. non-speculative transactions (specifically excluded under the provisions of section 43 of the Act under clause (c)). Therefore, the profit or loss against both the segments can be adjusted or set off against each other. Against the order of CIT(A), the revenue has filed an appeal to ITAT.

The Hon’ble ITAT upheld the order of CIT(A) holding that the peculiarity of the business of the assessee is such that the transactions carried out by the assessee in cash segment and in future segment cannot be segregated and it survives on the ultimate resultant figure arrived at after setting off/ adjusting of the profit and loss from each segment. It cannot be said that the transactions in each segment done by the assessee are independent of each other. It is further held that certain exceptions have been carved out under section 43(5) vide which certain transactions in derivative named as ‘eligible transactions,’ done on a recognized stock exchange, subject to fulfillment of certain requirements, are deemed to be non-speculative for the benefit of the assessee so that the assessee may be able to set off and adjust his profit and losses from derivatives in commodities against the normal business losses. However, these exclusions given to the assessee cannot be allowed to be so interpreted to the disadvantage of an assessee so as to give it a different meaning and thereby denying the assessee the set off of otherwise eligible business loss from one segment as against the other segment, especially when the activity done by the assessee is a composite activity and profit and loss in one segment not only depends but the very transaction is done taking into consideration not ‘expected’ but certain future profit or loss in other segment.
Therefore, the appeal of the revenue is dismissed.

(Please click here for judgment)

 Golden Rules:

  "Happy is the person who knows:
What to forget of the past,
What to enjoy in the present and
What to plan for in the future"


  Thanks & Regards


Voice of CA 

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