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07.02.2019 - Voice of CA presents - Latest Updates
Thursday, February 7, 2019

  I. Headlines Today:   

  1. Union Cabinet approves abolition of Ombudsman for direct, indirect taxes  (Click for detail)
  2. Finance Bill, 2019: Key Amendments to the Indian Stamp Act, 1899  (Click for detail)
  3. No cut in subsidies, expect more tax steps in full budget: Piyush Goyal  (Click for detail)
  4. Income tax law needs to be a lot simpler: Piyush Goyal  (Click for detail)
  5. ED seizures to remain valid for one year  (Click for detail)
  6. Cabinet approves amendments to Banning of Unregulated Deposit Schemes Bill  (Click for detail)
  7. Banks cannot be absolved of liability for unauthorised withdrawals: Kerala HC  (Click for detail)
  8. SEBI issues framework to review performance of public interest directors  (Click for detail)

II. A Useful Presentation:

1.  Practical Tips on Survey, Search & Seizure under Income Tax Act, 1961

     (Please click here)

(Contribution by CA. Sanjay K. Agarwal, Founder - Voice of CA; and contributor is available at Email-id: )



  III. Direct Taxes Case Laws: 

1.  ITO Vs. KSK Wind Energy Halagali Benchi Pvt. Ltd., I.T.A. No. 1098 to 1105/Hyd/2017, Date of Pronouncement: 30.11.2017, ITAT -  Hyderabad

Whether the interest income earned during the pre- commencement period treated as a capital receipt?

Held: Yes

Brief facts:
The assesseecompanies were incorporated with the object of generation of electricity from nonconventionalsources.The assessee companies werecontemplating installation of windmills in the state of Karnatakafor generating the electricity. Return of income was filed which was assessed u/s 143(3) of theAct.The Ld. AO observed that the assessee did not commence commercialoperation of generating electricity and that during the relevantassessment years, the assessee has received interest income onthe fixed deposits with the banks and the same has been claimedas capital receipt and adjusted against the expenditure pendingallocation under the head capital work-in-progress. The Ld.AOcompleted the assessmenton the basis ofcontention that interest income is taxed under the head “income from other sources” as the same is neither derived from the business of the assesseenor can it be treated as capital work-in-progress.The hon’ble CIT (A)reversed the order of Ld. AO.Being aggrieved, the department filed an appeal before Hon’ble ITAT.

It was held that the interest income earned from the fixed deposits ofthe equity fund is to be treated as capital receipt which goes toreduce the project cost.The interest earned on funds primarily bought forinfusion in the business could not be classified as “income fromother sources”.For these reasons, the question is answered in favour ofassessee and against the revenue.
Hence, the appeal was held in favour of theassessee and against therevenue.

Cases cited:
Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT[1997] 227 ITR 172 (SC)
CIT Vs Bokaro Steel Ltd (1999) 236 ITR315 (SC)
CIT Vs Karnal Co-operative Sugar Mills Ltd., (2000)243 ITR 2 (SC)

(Please click here for judgment)


2.  The Wodehouse Gymkhana Ltd.Vs. ITO, I.T.A. No. 5795/Mum/2017, Date of Pronouncement: 30.01.2019, ITAT - Mumbai

Whether Provisions of Sec 14A are applicable on exempt income earned on the basis of principle of mutuality?

Held: No

Brief facts:
The brief facts of the case are that the assessee filed its return of income on 27.11.2014 declaring total income as Nil. The assessment was selected for scrutiny under CASS. Notice u/s 143(2) & 142(1) of the Income Tax Act’1961 were issued and served upon the assessee. The assessee showed the limited dividend income of Rs.22,07,008/- as exempt income. The Ld.AO by applying provisions of Section 14A r.w Rule 8D assessed the expenditure earned to earn the exempt income of Rs. 2,51,638/- which was confirmed by Ld.CIT(A). Being aggrieved, the assessee has filed an appeal before the Hon’ble ITAT.

The Hon’ble ITAT held that limited dividend income was earned on the basis of principle of mutuality. Further, income not relating to mutual activity such as interest on bank deposits was shown as taxable income for which no expenses were claimed by assessee. Therefore, provisions of Section 14A read with Rule 8D are not applicable on income earned on mutuality basis.
Therefore, the appeal was held in favour of assessee and against the revenue.

(Please click here for judgment)


Golden Rules:

  "If a Drop of Water falls on Lake , it looses Identity.
If it falls on Lotus, it Shines.
If on a Shell, it becomes a Pearl.
The Drop is same, but Company Matters


Thanks & Regards


Voice of CA

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