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27.01.2017 - Voice of CA presents - Updates
Friday, January 27, 2017

I. Headlines Today    

  1. CBDT Circular: Guiding Principles for determination of Place of Effective Management (POEM) of a Company  (Click for detail)
  2. CBDT Circular: CBDT kept the Clarifications on Indirect Transfer provisions under the Income Tax Act, 1961 in abeyance for the time being  (Click for detail)
  3. CBDT Circular: Measures for reducing litigation - Clarification on Circulars 21/2015 and 8/2016  (Click for detail)
  4. CBDT issues corrigendum for TDS circular u/s 192 of Income Tax Act, 1961  (Click for detail)
  5. CBDT: Dedicated structure for delivery & monitoring of Tax Payer Services in the Income Tax Department  (Click for detail)
  6. Service tax blow for on line travel players  (Click for detail)
  7. Private equities, venture capital funds get tax breather for startups  (Click for detail)
  8. Demonetisation: Private entities to analyse data vis-a-vis ITR, TDS  (Click for detail)
  9. Budget 2017: What the upcoming GST reform means for the common man’s pocket  (Click for detail)
II.  Direct Taxes Case Laws: 

1. PCIT Vs. The Totagars Co-operative Sale Society, I.T.A. No. 100069/2016, Date of order: 05.01.2017, High Court of Karnataka

Whether for the purpose of Section 80P(2)(d) of the Income Tax Act,1961, a Co-operative Bank should be considered as a Co-operative Society?

Held: Yes

Brief Facts: The assessee filed its return of income, and claimed a deduction for the interest income earned from a co-operative bank u/s 80P of the Act. The AO was of the opinion that this interest income is not deductible u/s 80P and added the same to the total income of the assessee. However, CIT(A) has deleted the addition and aggrieved by the same, the revenue has preferred the appeal before the Hon’ble ITAT, whereas the Hon’ble ITAT has confirmed the order of CIT(A). Therefore, revenue has preferred an appeal before the Hon’ble High Court.

In this regard, the Hon’ble High Court held that “Co-operative Banks” was merely a variety of a Co-operative society, thus co-operative bank would necessarily be covered by the word “Co-operative society”.
Therefore, the appeal of the revenue is dismissed.

(Please click here for judgment)


2. ACIT Vs. Shri Sachin R. Tendulkar, I.T.A. No. 3217/Mum/2014 & 1411/Mum/2015, Date of Order: 25.01.2017, ITAT - Mumbai

Whether the assessee has discretion to show income earned on account of sale of shares and mutual funds either as Income from Capital Gain or Business Income?


Brief Facts:
The assessee had shown Long Term Capital Gains and Loss and Short Term Capital Gains and Loss from Sale of shares in his Return of Income from the past many years. The sale or purchase of shares is managed by the Portfolio Managers for which a huge amount of fees was paid every year. AO contended that this level of operations was not ordinary for a normal investor and therefore issued a show cause notice as to whether these capital gains should not be treated as business income. The assessee contended that the assessee is earning business income from sports endorsements and the investment in shares were made from long term point of view to earn dividends and maximize wealth. Also, the assessee was not a trader or dealer in shares.

The assessee contended that the services of the Portfolio Manager were availed for better administration and maximization of his wealth held in the form of shares and the same does not mean that the assessee was engaged in the business of sale-purchase of shares. In denial to the submissions made by the assessee, AO assessed all the income earned from sale and purchase of shares with or without the involvement of Portfolio Manager under head Income from Business. CIT(A) accepted the contentions made by the assessee. Aggrieved by which, the Revenue filed an appeal before ITAT.

It was held that the major income of the assessee is from sports endorsements and other shares. Also, the investment in the shares has been made by the assessee from his own funds. Further, the investment in shares with Portfolio Manager is merely to the extent of 4.8% of the total investments. The shares have been disclosed in the Balance Sheet on the purchase value and have not been revalued at market price as done in ordinary course of business for stock-in-trade. In the present case, the assessee did not carry out the activity of making investment in shares as a systematic and organized activity of carrying out share trading or business. As per the CBDT Circular No. 6 of 2016 dated 29.02.2016, it was clarified that the assessee on his own discretion can opt to treat shares and securities held by him as stock-in-trade or as investment but once a stand is taken, the same shall be applicable in the subsequent years and the assessee shall not be allowed to take a contrary stand in the subsequent assessment years. On the view of the above, the order of CIT(A) is upheld.
Therefore, the appeal of revenue is dismissed.

(Please click here for judgment)  


 Golden Rules:

  "Respect the heart who finds time for you in their busy schedule.
But love the heart who never see their schedule when you need them


  Thanks & Regards


Voice of CA 

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