After reading statutory provisions as contained in section 80IB(1), 80IB(2) & 80IB(4) of the Act, we find that provisions do not provide in any way separate registration or maintenance of separate records for claiming deduction u/s 80IB of the Act. The requirement under section 80IB(1), 80IB(2) and 80IB(4) is that profit must derive from an industrial undertaking.
The capital expenditure incurred by the assessee on purchase of motor cars could not be considered as expenditure incurred by the assessee on in-house research & development and, therefore, the same was not eligible for weighted deduction under section 35(2AB). Similarly, capitalized interest on purchase of car was also not eligible for this benefit for same reasons because it was equal or similar to cost of car. Hence, this ground was to be rejected.
There is no dispute with the fact that assessee has commenced business activity during the year. As seen from the nature of the expenditure claim by assessee under the head research expenses, the entire expenditure pertains to use of raw material, freight and other expenditure which are in revenue field and there is no capital expenditure involved nor any capital asset was purchased as part of these expenses. Just because the benefits of research may have some enduring benefit, the expenditure cannot be considered as capital in nature. Following the principles laid down by the Supreme Court in the case of Empire Jute Co. Ltd, vs. CIT (supra), we hold that this expenditure is revenue in nature.
The assessee is an individual who is the Managing Director of Cadence Design Systems India Pvt.Ltd. For the AY 2004-05, he filed a return of income at `1,75,05,081/- comprising of salary income at `1,02,72,400/- from Cadence Design Systems India Pvt.Ltd. and salary income of `65,97,305/- from Cadence Design System Inc.,USA. The assessee has been granted stock option under an incentive stock option agreement dated17th September, 1993with Cadence Design Systems,USA. During the year under consideration, the assessee sold the stock options and received the sum of `11,36,829/- on sale of such stock options. The same was declared as long term capital gain. The Assessing Officer assessed the same as short term capital gain and also levied penalty under Section 271(1)(c) thereon at `2,50,102/- being the difference between the tax as short term capital gain and tax as long term capital gain on the sum of `11,36,829/-. The learned CIT(A) cancelled the penalty. Hence, the Revenue is in appeal.
Hon’ble Delhi High Court in the case of Vardhman Overseas Ltd. (supra) has observed that section 41(1) has been incorporated in the Act to cover a particular facts situation. Section applies where a trading liability was allowed as a deduction in earlier years in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in later year by way of remission or cessation of the liability. In such a case, the section says that whatever benefit has arisen to the assessee in the later year by way of remission of the liability will be brought to tax in that year.
In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the Hon’ble High Court. In the circumstances, the reliance placed on the report of the DVO was misconceived”. By observing these observations, the decision of Hon’ble High Court was set aside and the order passed by the Tribunal was restored by the Hon’ble Apex Court. The facts in the present case are similar as in this case also no books of account were rejected before referring the matter u/s 142A of the Act.
This finding of the Tribunal in the case of Jaswant Singh (supra), clearly upholds the view that the provisions of section 57 do not provide for any deduction of expenditure from such salary income, etc. of an MLA. Only those exemptions as laid out as per the provisions of section 10(14), read with rule 2BB(1) and section 10(17) are allowable from an MLA’s salary and other allowances granted in such capacity. Thus, the Commissioner (Appeals)’s action in rejecting the assessee’s claim for allowing deduction of expenditure under section 57 has to be upheld.
In case of securities the ‘date of purchase’ has to be taken from the broker’s note/contract note and the period of holding is also to be reckoned from the ‘date of purchase’ and not from the ‘date of dematerialization’. Since the holding period of the shares as per the broker’s note and its subsequent sale after dematerialization is more than 12 months, the shares become long-term capital asset and the assessee’s claim of long-term capital gain is correct.
A plain reading of document on records demonstrate that FADV-US is acting as an agent of the assessee for various purchases/ upgrades. This cannot be a reimbursement. It is purchase on behalf of the assessee. In other words, what can be said is that the assessee has routed its purchases through FADV-US. Such routing of purchases cannot be called as reimbursement of expenses.
ACIT v. Result Services (P.) Ltd. – The assessee is paying rent to the holding company as reimbursement since last many years. This position has been accepted by the department all through and it has been never disputed even when provisions for TDS were on statute since 1994. Section 194-I of the Income-tax Act, 1961 was inserted in Act w.e.f. 01.06.1994. Similarly, this position was also not disputed even after the amendment in section 40(a)(ia) of the Act by the Taxation Law (Amendment) Act, 2006 w.e.f. 1.4.2006.
