When a partnership firm is dissolved and the erstwhile partner receives stock, it is a capital asset in his hands. When that asset is introduced into a business as stock, it gets converted into stock-in-trade. The value of this stock will have to be the market value on the date of introduction. The Tribunal’s reasoning that the assessee cannot value the stock introduced in the business at market value because that was not the price she paid for it is flawed because if the assessee on having received her distributed share of stock of jewellery from the dissolved firm had sold it, and thereafter commenced her proprietorship business of jewellery again; within short span; by buying the jewellery from the market from the proceeds of stock sold on dissolution of the erstwhile firms, the stock of the proprietorship concern would without doubt be valued at market value. The same principle would apply if the assessee used her share of the stock obtained from the dissolved firm in the new business.
Delhi High Court in the case of CIT v. Sandan Vikas (India) Ltd. (ITA No. 348 of 2011) (Judgement date: 24 February 2011, Assessment Year: 2005-06) held that the taxpayer was eligible to claim weighted deduction on in-house Research and Development (R&D) expenditure from the year in which the taxpayer made an application to the Department of Scientific and Industrial Research (DSIR). The High Court observed that the provisions of the Income-tax Act, 1961 (the Act) does not suggest or imply that the cut-off date mentioned in the certificate issued by the DSIR will be the cut-off date for eligibility of weighted deduction on the expenditure incurred on in-house R&D to avail benefit of Section 35(2AB) of the Act.
Permanent injunction against firm for violating copyright – The Delhi high court last week passed permanent injunction against a firm which violated the copyright and trade mark of Castrol Ltd in the field of oils and lubricants. The court further asked the guilty firm to pay “punitive damages” of Rs 10 lakh. This, explained the judgment of the high court, was “with a view to discourage and dishearten the law-breakers to indulge in such like violations with impunity.”
The tax effect involved in the present appeal is Rs. 4,65,860/-. As per the recent guidelines of the CBDT, appeal in those cases where the tax effect is less than Rs. 10 lacs, are not to be entertained. In this case court has taken the view that such circular would also apply to pending cases. A contrary view has been taken in CIT vs. M/s Varindera Construction Co (P&H High Court – Full Bench)
Circular dated 15.5.2008 laying down monetary limit controls the filing of the appeals and not their hearing. Appeals filed as per applicable limit at the time of filing cannot be governed by circular applicable at the time of hearing. The object of the Circular u/s 268A is only to govern monetary limit for filing of the appeals. There is no scope for reading the circular as being applicable to pending appeals.
Whether the waiver of a loan is taxable as income or not depends on the purpose for which the loan was taken. If the loan was taken for acquiring a capital asset, the waiver thereof would not amount to any income exigible to tax u/s 28(iv) or 41(1). On the other hand, if the loan was taken for a trading purpose and was treated as such from the very beginning in the books of account, its waiver would result in income more so when it was transferred to the P&L A/c in view of Sundaram Iyengar 222 ITR 344 (SC).
The Delhi high court last week held that the clause in a tender document for building contract permitting 5 per cent bid security amount to be forfeited in case of a non-responsive bid is “clearly penal in nature and thus provisions of Section 74 of the Contract Act would apply.” It cannot be categorized as a reasonable pre-estimate of damages for a non-responsive bid and thus the bank guarantee for 5 per cent of the bid amount cannot be encashed in such an eventuality. The high court ruled this in the case of IVRCL Infrastructure and Projects Ltd vs National Highway Authority of India. The “request for proposal” submitted by the firm for a road project in Tamil Nadu being responsive, the forfeiture was illegal the firm was entitled to refund of the amount from NHAI, the judgment said.
Interocean Shipping (I) (P.) Ltd. Versus Union of India (Delhi High Court) Dated: 03-03-2011 – Service Tax – Ship broking and other activities – Section 65(105)(zzb)read with 65(19) – Business Auxiliary Services – The said services became taxable by the Finance Act, 2003, whereby sub-section (zzb) to section 65(105) was enacted – The said clause has to be read with section 65(19). The assessment order shows that the primary and core issue raised was is with regard the actual nature and character of the activity undertaken by the petitioners.
The proviso to Section 14A only bars reassessment/rectification and not original assessment on the basis of the retrospective amendment. The proviso does not stipulate and state that Section 14A of the Act cannot be relied upon during the course of the original assessment proceedings. The Assessing Officer was, therefore, required to disallow expenses incurred for earning exempt or tax free income.
The onus cast on the assessee stands discharged where the assessee is able to establish the three ingredients of section 68 i.e., (a) the identity of the creditor, (b) the genuineness of the transaction, and (c) creditworthiness of the creditor.
