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Archive: 16 January 2011

Posts in 16 January 2011

Some banks not monitoring use of loans- RBI

January 16, 2011 676 Views 0 comment Print

Even as India has been cited as an example of prudential banking norms, the Reserve Bank of India (RBI) today said some lenders are not monitoring effectively use of loans by borrowers, which is facilitating diversion of funds. This came to light whe

Citibank fraud – RBI probes possible violation of KYC, STR norms

January 16, 2011 699 Views 0 comment Print

In the alleged Rs 400-crore fraud by a senior employee at a Gurgaon branch of Citibank, RBI is probing whether there have been any violations of norms related to customer verification and monitoring of accounts. The initial probe by the banking regul

Empanelment with Navodaya Vidyalaya Samiti of CA Firms for Internal Audit Work

January 16, 2011 1952 Views 0 comment Print

Sealed Tenders are invited from Registered Chartered Accountant Firms having minimum 10 years experience to be empanelled for internal audit work of Jawahar Navodaya Vidyalayas located in the State of Uttar Pradesh and Uttarakhand. Tender forms with

Depreciation allowable on Assets forming part of Block of Assets even if same not used during the year

January 16, 2011 4290 Views 0 comment Print

Pursuant to the insertion of the concept of “block of assets” w.e.f. 1.04.1988, depreciation is allowable on the WDV of the “block of assets” and individual assets lose their identity upon introduction into the block. The department’s argument that user of each and every asset is essential is not acceptable because it would mean that the assessee has to maintain the details of each asset separately and this would frustrate the very purpose for which the amendment was brought about.

Even if commercial transaction is at arms’ length, debt overdue for long period attracts transfer pricing interest

January 16, 2011 511 Views 0 comment Print

The fact that the international transactions are at ALP does not mean that no addition can be made on the funds kept by the assessee with the AE. If the assessee had received funds within the normal period, it could have earned interest on the same. The potential loss is a factor to be considered while evaluating the financial impact of the international transactions between the assessee and the AE. However, a reasonable period has to be provided as interest-free period;

No Disallowance u/s. 14A of interest on borrowed funds if AO does not show nexus between borrowed funds and tax-free investment

January 16, 2011 2130 Views 0 comment Print

As the funds were mixed, it is not possible to ascertain whether the investment in tax free bonds is out of the assessee’s own funds. The source of investment in the tax free bonds was not identified. The AO did not establish any nexus between the borrowed funds and the investments in the tax free bonds. The cash flow of the assessee was not seen. Therefore, the apportionment on a pro rata basis was improper in the absence of anything brought by the AO to rebut the assessee’s stand that the investment in the tax free bonds had been made out of the funds of own funds (Minda Investments, Hero Cycles 323 ITR 518 (P&H) and Winsome Textile Industries 319 ITR 204 (P&H) followed);

Exception provided in both the provisos of s. 92C(2) with regard to the +/- 5 Percent variation applies only when more than one price is determined

January 16, 2011 1620 Views 0 comment Print

1. Under the Proviso to s. 92C(2) (pre-amendment w.e.f. 1.10.09) the option to the assessee to choose a price which may vary from the arithmetical mean by an amount not exceeding five per cent is available only where more than one price is determined and not where there is only one comparable instance (Sony India vs. DCIT 114 ITD 448 (Del) & DCIT vs. BASF India not followed. Perot System TSI (India) Ltd 130 TTJ 685 followed); 2. The said Proviso as amended w.e.f 1.10.09 is a substantive provision and not clarificatory and applies only from AY 2009-10 and onwards. Even otherwise, the exception provided in both the provisos of s. 92C(2) with regard to the +/- 5% variation applies only when more than one price is determined. Even under the amended law, the benefit is not available to the assessee if only one price has been determined by applying CUP method. 3. Circular No. 12/2001 dated 23.8.2001 which states that the AO shall not make any adjustment to the ALP determined by the assessee if such price is upto +/- 5% the price determined by the AO is not applicable because the assessee has not “determined” a price but has relied upon the “Agriwatch” data base. Even the AO has relied on the same data base. So, “the price determined by the assessee and the AO is the same” and the Circular is not applicable. There is also no absurdity in this interpretation; 4. The argument that the position should be seen as a whole with respect to all the transactions and not only with respect to the disputed transactions is not acceptable because the assessee has not shown that various purchases were a part of pre-arranged scheme or agreement so as to constitute a part of the indivisible transactions of purchase.

Minor irregularities (non-production of vouchers) cannot be a ground for rejection of renewal of recognition of a charitable trust under section 80G

January 16, 2011 408 Views 0 comment Print

Non-production of vouchers for few expenditure incurred by the charitable trust will neither change the basic characteristic of the trust nor could it be inferred that the trust has deviated from its activities, which are not charitable in nature.

A computer software when put into a media and sold, it becomes goods like any other audio cassette

January 16, 2011 359 Views 0 comment Print

When the amount paid by the assessee to the Singapore company for purchase of computer software cannot be treated as royalty, the assessee is not liable to deduct tax at source from such payment.

Payment for warding off competition in business even to a rival dealer will constitute capital expenditure and to hold them capital expenditure it is not necessary that non-compete fee is paid to create monopoly rights

January 16, 2011 642 Views 0 comment Print

Where the assessee-company entered into non-compete agreement with one party and the same was applicable for 5 years, which period has been considered to be sufficient to give enduring benefit to the assessee, the expenditure claimed by the assessee in pursuance of non-compete agreement is capital expenditure, the deduction of which cannot be granted to the assessee as revenue expenditure

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