1. Radials International Vs. Asstt. CIT, ITA No.485/2012, Date of order: 25.04.2014, Delhi High Court
Whether
profit on sale of share invested through portfolio management scheme
(PMS) is taxable as capital gain or business income.
In brief,
assessee engaged in the business of providing technical, marketing and
maintenance services and also trades in tyres. The AO raised contention
that the gains realized on sale of shares are in the nature of business
income, and not capital gains. However, the assessee contended that its
intention is not to earn trading profit and relationship between the
investor and the investment manager, as indicated by the agreements
entered by Portfolio Management Schemes (“PMS”), is one of principal and
agent. Further, the investment was made out of its own surplus funds
and not out of borrowed funds and holding period for a majority shares
was substantial.
Held_that the intention of an assessee must be inferred holistically,
from the conduct of the assessee, the circumstances of the transactions
and not just from the seeming motive at the time of investing the
money. And other crucial factors like the substantial nature of the
transactions, frequency, volume etc. must be taken into account to
evaluate whether the transactions are adventure in the nature of trade.
In the instance case, the PMS agreement was a mere agreement of agency
and cannot be used to infer any intention to make profit. About 71% of
the total share have been held for a period longer than 6 months, and
have resulted in an accrual of about 81% of the total gains. Only 18% of
the total shares are held for a period less than 90 days, resulting in
the accrual of only 4% of the total profits. Therefore, profit on such
shares is taxable as capital gain.
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2. M/s. Kerala Vision Ltd. Vs. Asstt. CIT, ITAT No. 794/Coch/2013, Date of pronouncement: 06.06.2014, ITAT - Cochin
Section 40(a)(ia) r.w.s. 194J of the Income Tax Act
Whether disallowance u/s 40(a)(ia) of the Act can be made for earlier
payments on the basis of subsequent amendment in the Act with
retrospective effect.
Held: No
In brief, the
assessee engaged in the business of distributing cable signals. It
receives satellite signals from various channel companies in the
capacity of Multi System Operator and liable to make payment for “Pay
channel charges”. The AO raised contention that these charges falls in
the category of “royalty” as per the amendment made by F.A., 2012 w.r.e.
and thus assessee liable for deduction TDS u/s 194J of the Act and
consequently made disallowance u/s 40(a)(ia) of the Act.
Held that the Explanation 6 to sec. 9(1)(vi) inserted by Finance Act,
2012 “for the removal of doubts, it is hereby clarified that the
expression "process" includes and shall be deemed to have always
included transmission by satellite (including up-linking, amplification,
conversion for down-linking of any signal), cable, optic fibre or by
any other similar technology, whether or not such process is secret”, is
clarificatory in nature only. The Tribunal has placed reliance on the
decision pronounced by the Delhi High court in the case of Asia
Satellite (2011) 332 ITR 340 and held that assessee is not liable to
deduct TDS on the payments made earlier on the basis of retrospective
amendment.
Case referred: Sonata Information Technology Ltd Vs. DCIT (2012) 19
ITR(T) 408 (Mumbai-Trib), Infotech Enterprises Limited Vs. Addl. CIT
(2014)30 ITR(T) 542 (ITAT – Hyderabad) and Channel Guide India Limited
Vs. ACIT (2012) 139 ITD 49 (ITAT-Mum)
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