Interest on capital payable to partners is not affected by the amount of depreciation not adjusted in the books:
In Sri Venkateswara Photo Studio v. Asst. CIT (2013) 81 DTR (Mad) 448
the court held that there is difference in treatment as regards payment of interest on capital to partners vis a vis working partners salary governed by section 40(b) of the Act. It held that for payment of salary to working partners Explanation 3 to section 40(b) mandates ‘book profit’ which has to be computed giving effect to the provisions of Chapter IV-D of the Act. The court held that there is no such requirement for adjustment of depreciation not provided in the books of account for computing the eligible capital on which interest is payable to the partners.
Excess amount received by retiring partner not chargeable as capital gain:
In Chalasani Venkateswara Rao v. ITO (2012) 349 ITR 423 (AP)
The assessee was a partner in a firm with 50% share. There was some dispute amongst the partners and the assessee sent a notice for dissolving the firm. As per section 43 of the Partnership Act, 1932 where the partnership is at will, the firm would stand dissolved by any partner giving notice in writing of his intention to dissolve the firm.
Under the compromise recorded in the apex court, the assessee received a sum much more than the amount standing to his credit in the capital account. The Assessing Officer taxed the amount so received in excess to the amount of capital as capital gain by applying section 45(4). The court held that section 45(4) is meant for taxing a partnership firm on its dissolution and distribution of assets. It cannot be applied for taxing a partner for the reason that he has received an amount which is much more than the amount standing to his credit in the books of account of the firm.
Waiver of loan by Central Government granted for acquisition of assets and reduction in cost of assets for the purpose of depreciation:
In Steel Authority of India Ltd v. CIT (2012) 80 DTR (Del) 345
The assessee took a loan sanctioned by Government of India out of Steel Development Fund. A sum of Rs.5277 crores was outstanding as at 31st March, 1999 and a sum of Rs.5073 crores was waived by the Government during the financial year 1999-2000. The assessee reduced the amount from the value of assets in the books of account but the claim of depreciation was made under section 32 without any reduction in asset values. The Court held that the assessee’s case is caught within the mischief of section 43(1) itself and it is not necessary to examine the impact of the Explanation 10 to section 43(1) inserted w.e.f. 1st April, 1999. The waiver of loan hence was held as deductible from the block value of assets for computing the value of depreciation.
Deduction under section 80-IB to be given proportionately for eligible units though the housing project may consist of both eligible and ineligible units:
In Viswas Promoters (P) Ltd v. Asst. CIT (2013) 81 DTR (Mad) 68 the assessee claimed deduction under section 80-IB in respect of flats measuring less than 1500 sq. ft and did not claim deduction in respect of flats which exceeded the said limit. The claim was disallowed in entirety for the projects which consisted of both eligible and ineligible units. The court held that in one of the blocks, the built up area exceeded 1500 sq. ft per unit but that does not mean that the assessee is not eligible for deduction in respect of the entire project which also consisted of residential units with built-up area of less than 1500 sq.ft. It held that the assessee is entitled to claim deduction in respect of all the blocks in respect of each residential unit which satisfied the conditions of section 80-IB of the Act. In other words, the assessee was held as eligible for relief on proportionate basis.
Amount advanced as interest-free to sister concern and write off as bad debt:
In CIT v. Epsilon Advertisers (P) Ltd (2012) 80 DTR (Kar) 366 the assessee engaged in consultancy service advanced Rs.5.34 crores to its sister concern to tide over its financial position. It was written off subsequently as bad debt for the reason that it could not be recovered. The court held that the assessee was not engaged in money lending business nor is it a financial institution to claim the amount advanced as bad debt occurring in the regular course of business. There was no systematic banking activity carried on by the assessee except an inter-corporate deposit and the said interest-free loan to sister concern.
The court accordingly held that the disallowance of bad debt made by the Assessing Officer as tenable in law.
Intimation under section 143(1) does not bar filing of revised return under section 139(5):
In Tarsem Kumar v. ITO (2012) 80 DTR (P&H) 164 the assessee filed a return which was processed under section 143(1) and a meagre sum was received by way of refund. The assessee filed a revised return after the receipt of intimation under section 143(1) in which the claim of refund was enhanced to Rs.3.61 lakhs. The revised return was treated as non est by the Assessing Officer.
The court held that intimation under section 143(1) is deemed to be a notice of demand under section 156 for the obvious purpose of making machinery provisions relating to recovery of tax workable.
Nothing more can be inferred from the deeming provision and such intimation under section 143(1) is not to be treated as an assessment order. Once the intimation is not taken as assessment order, the eligibility for filing revised return under section 139(5) is to be looked into independently subject to the time limit prescribed therein. The Court accordingly held that the revised return filed by the assessee including claim of refund of tax as valid in law.
A post-dated cheque accounted by the donee-trust will not be hit by disqualifications contained in section 13(2) if the donor has not claimed deduction under section 80G:
In Director of Income-tax (Exemptions) v. Raunaq Education Foundation (2013) 81 DTR (SC) 377
the assessee-trust received a post-dated cheque which was recorded in the books and at the end of the year shown as donation receivable. The donor did not claim deduction under section 80G for the said amount which was also confirmed. The court observed that the donor had not obtained any benefit by mere issue of cheque which is liable to be honoured in the next financial year and the donee-trust has accounted the donation so received and disclosed the same as donation receivable only. Such action, it held was not an irregularity to be caught within the mischief of section 13(2)(b) viz. any property of the trust being made available for the use of any person for any period without adequate rent or compensation; or section 13(2)(h) being the funds of the trust remaining or invested in any concern of an interested person. The court accordingly held that the donee-trust cannot be forfeited of the exemption under section 11 of the Act.
No comments:
Post a Comment