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15.06.2013 - Voice of CA Presents - Updates
Saturday, June 15, 2013

 I.  Headlines Today:   

  1. IT Noti. No. 43 - Double taxation agreement - for exchange of information with respect to taxes with foreigh countries  (Click for detail)
  2. Compilation of Penalties under Income Tax Act  (Click for detail)
  3. Enhancement in Foreign Investment Limits in Govt. Debt  (Click for detail)
  4. MNCs seek advance ruling to avoid tax rows  (Click for detail)
  5. How to tackle corporate tax avoidance  (Click for detail)
  6. Food Bill: Neither populist nor unaffordable  (Click for detail)
  7. Sebi notifies norms for listing of preference shares  (Click for detail)
  8. Banks pay more advance tax this quarter  (Click for detail)

II.  Case laws - Direct Tax:

1.   M/s Management Structure & Systems Pvt. Ltd. Vs. ITO, ITA No. 6966/Mum/2007, Date of pronouncement: 30.04.2010, ITAT - Mumbai

Whether the income from trading of shares would constitute business income merely on the business that the assessee had profession knowledge of the market?

Held: No

Points of determination

•    It is well settled principle as has held in the case of H. Holsck Larzen (supra) that whether the activity of buying and selling of the shares is in the nature of trade and investment. It is a mixed question of law and fact.

•    Perusal of Balance Sheet filed by the assessee and the books of account stated that the assessee has treated the entire investment in the shares as an investment only and not as a stock in trade.

•    Another important aspect to be considered here is the assessee is not a share broker nor he is having a registration with any Stock Exchange.

•    Some scripts are held for more than five years and there was no derivative transactions by the assessee, also the case is not that where the transactions was without delivery.

•    The intention of the assessee cannot be read from his mind but it reflects in its conduct, the way he treats the transactions.

•    The assessee has not borrowed any money for investing in shares and used his own surplus funds and these facts have not been disputed by the A.O. The proposition has been accepted by the Board also in Circular No. 4/ 2007 that the assessee is entitled to maintain two portfolios.

•    In the preceding years, the assessee is consistently declaring the gain/profit on the sale of the shares under the head ‘Capital Gain' either Long Term and Short Term and the same has been accepted by the A.O.

•    It is true that the rule of res judicata is not applicable to the Income Tax Proceedings, but at the same time, it is also well settled principles that if there is no change in the facts, then, there should be consistency in the approach of the Revenue authorities while deciding the tax liability of the assessee.

(Please click here for judgment)

2.  Dy. CIT Vs. Ashish Jhunjhunwala, ITA No: 1809/Kol/2012, Date of pronouncement: 14.05.2013, ITAT - Kolkata

The assessee earned income by way of dividend. During the assessment u/s 143(3) of the Income Tax Act, 1961. The AO asked the assessee for the details of expenditure incurred for earning the exempted income (dividend income). The assessee contended that no expenditure was being incurred for earning the dividend income. On being dissatisfied with the assessee contention the AO invoked Rule 14A read with rule 8D and made the addition of Rs. 3,243,23/-.

On appeal by the department before Tribunal, the Tribunal affirmed the decision of CIT (A), that once 100% of expenses amounting to Rs.1,95,483/- claimed by him under the head Income from Other Sources has been disallowed separately by the AO, there is no reason to make any further disallowance of expenditure u/s. 14A of the Act i.e., and as such hon’ble ITAT pronounced in favor of assessee under a view that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value following the following the coordinate bench decision in the case of J. K. Investors (Bombay) Ltd., ITA No.7858/Mum/2011, AY 2008-09 dated 13.03.2013.

(Please click here for judgment)

III. Useful Presentation:

[ Contribution by Respected Central Council Member CA Rajkumar S. Adukia Ji ]

"New Challenges - The Chartered Accountancy Profession" 

(Please click here)  


 Golden Rules:

"If we realize our quality, we become smart,
if we know our weakness, we become intelligent,
and if we know both,
we become successful...............


  Thanks & Regards


Voice of CA




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