In a major relief to equity brokers, the conflicts arising on their bad debt claims have been put to rest by the Bombay High Court. Affirming to a ruling by Mumbai ITAT special bench In the case of DCIT vs. Shreyas S. Morakhia 40 SOT 432, the court on Tuesday said stock brokers were eligible to claim deduction of the entire amount due to them from clients as a bad debt, even though only the brokerages is offered as income.
CIT vs. Darshan Securities Pvt. Ltd (Bombay High Court)- During the assessment year, the assessee returned an Income of Rs.2,25,04,588 from service charges. The assessee had a loss of Rs.02,23,32,127 in share trading. The assessee had a dividend income of Rs.4,79,325/. The assessee claimed that in computing the gross total income for the purpose of the explanation to Section 73, the income from service charges had to be adjusted against the loss in share trading.
Atlas Copco AB of Sweden v. CIT (Bombay High Court) – It was held that Amount received by the taxpayer was on account of right to use the know-how for a specified period and there was no outright transfer of know-how. Therefore, amount received was royalty and taxable in India.
Echjay Forgings Ltd. Vs. ACIT (2010) 328 ITR 286 (Bombay High Court)- Can expenditure incurred by a company on higher studies of the director’s son abroad be claimed as business expenditure under section 37 on the contention that he was appointed as a trainee in the company under “apprentice training scheme”, where there was no proof of existence of such scheme?
CIT Vs. Parle Plastics Ltd. (2011) 332 ITR 63 (Bom.) Under section 2(22), dividend does not include, inter alia, any advance or loan made to a shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company. The expression used in the exclusion provision of section 2(22) is ‘substantial part of the business’.
Though the Income Tax Department made a provision for electronic filing of returns, it appears that the ITR-V Form containing the due verification of the return of the assessee was required to be remitted only by ordinary post. The instructions which were furnished to assessees, a copy of which has been placed on record, specifically stipulate that the ITR-V form should not be sent either by registered post or by speed post or courier.
Spacewood Furnishers Pvt. Ltd. Vs. DGIT (Investigation)- Bombay HC – The mode and manner in which all these notes are prepared, show the absence of any relevant material with authorities which would have enabled them to have ‘a reason to believe’ that action under Section 132(1) of the Act was essential. No new material as such has been disclosed anywhere. No document or report of alleged discreet inquiry forms part of these notes.
CIT Vs.Nimbus Communications Limited (Bombay HC) – there is dispute that the assessee has in fact incurred the expenditure and that on account of the aborted public issue offer, no new asset has come into existence and consequently there is no question of the assessee getting any enduring benefit. With the approval of SEBI, the assessee was to increase the share capital and thereby promote its business activity. However, the same got aborted due to reasons beyond its control. In these circumstances, in view of the decision of this Court in the case of Commissioner of Income Tax V/s. M/s.Essar Oil Limited, Income Tax Appeal (L) No.921 of 2006 decided on 16th October 2008, in our opinion, no fault can be found with the decision of the Income Tax Appellate Tribunal in allowing the aborted share issue expenditure under Section 37 of the Income Tax Act, 1961.
Kimplas Trenton Fittings Ltd Vs ACIT (Bombay HC) – In the present case, admittedly, the reopening of the assessment is beyond a period of four years of the end of the relevant Assessment Year. The jurisdictional condition under Section 147 in such a case is that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that Assessment Year. As noted earlier, in the narration of facts, there was a disclosure by the assessee during the course of the assessment proceedings of the fact that (i) During the previous year ending 31 March 2004, a Memorandum of Understanding (MOU) was entered into with a Swiss Company; (ii) Under the MOU, the outstanding balance of the loan was settled at Swiss Francs 480,000 as against the outstanding balance of 800,000 Swiss francs;
The indexed cost of acquisition has to be determined with reference to the cost inflation index for the first year in which the capital asset was ‘held by the assessee’. Since the expression ‘held by the assessee’ is not defined under Section 48 of the Act, that expression has to be understood as defined under Section 2 of the Act. Explanation 1(i)(b) to Section 2(42A) of the Act provides that in determining the period for which an asset is held by an assessee under a gift, the period for which the said asset was held by the previous owner shall be included.
