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Delhi High Court

Payment made for composite arrangement under franchises agreement not liable for TDS

January 21, 2010 10644 Views 0 comment Print

Delhi High Court (HC) in the case of CIT v NIIT Ltd. (Taxpayer) [2009-TIOL-533-HC-DEL-IT], on the issue of whether the amount paid by the Taxpayer to the franchisees, pursuant to a franchises agreement (Agreement), can be considered in the nature of rent, for the purpose of tax deduction at source (TDS) under the Indian Tax Law (ITL).

Admissibility of deduction from book profit of reduction in revaluation reserve under MAT provisions

December 30, 2009 984 Views 0 comment Print

This ruling provides guidance that withdrawal from a revaluation reserve is permitted to be reduced from the book profit, computed under the MAT provisions, only in a case where the book profit was increased by the amount of revaluation reserve in the year of creation.

A shareholder has no "say" in management of a company unless and until he becomes part of management

December 29, 2009 853 Views 0 comment Print

Brief facts relevant for the purpose of deciding this issue are that the defendant no.1 company was a tenant in property no. 3 Amrita Shergill Marg, New Delhi. This property was leased by defendant no.5 M/s H.G.Gupta & Sons (HUF) to defendant No. 1 Company for residence of its officers. The company by a resolution in the meeting of Board of Directors held on 27.2.1974 allotted this property to late Lala Hansraj Gupta in his capacity as CEO/Chairman of the company. Late Lala Hansraj Gupta was father of plaintiff no. 2 and defendants no. 2-4 and grandfather of plaintiff no. 1.

Whether individual asset is put to use in a particular year or not is of no consequence for purpose of allowing depreciation thereon

December 20, 2009 2641 Views 0 comment Print

It is not possible to accept the contention of the learned counsel for the Revenue that unless a particular asset is used for the purpose of business or provision, depreciation is not allowed. No doubt, as per Section 32(1) of the Act, in order to be entitled to claim depreciation, the asset is to be owned by the assessee and it is also to be used for the purpose of business or profession. However, the expression “used for the purpose of business” when applied to block asset would mean use of block asset and not any specific building machinery, plant or furniture in the said block asset as individual assets have lost their identity after becoming inseparable part of the block asset. That is the only manner in which various provisions can be harmonized.

Under “block of assets”, user of individual assets is not required: Delhi High Court

December 18, 2009 1863 Views 0 comment Print

The assessee purchased machinery which was not put to use during the year though it formed a part of the “block of assets”. On the question whether depreciation on the said machinery was allowable, the Tribunal held that once a particular asset falls within the block, it is added to the WDV and depreciation is to be allowed on the block.

AAR on Prima facie satisfaction for initiation of penalty proceedings required even post-amendment

December 11, 2009 942 Views 0 comment Print

Section 271(1)(c) of the Income-tax Act, 1961 (“the Act”) empowers the Assessing Officer (“AO”) to levy penalty if he is satisfied that the assessee has concealed the particulars of income or furnished inaccurate particulars of income. A new section 271(1B) was introduced by the Finance Act, 2008 with retrospective effect from 1 April 1989, providing that in a case where an addition/disallowance has been made in computing taxable income/loss, a direction given by the AO to initiate penalty proceedings would deem to constitute „ satisfaction? for initiation of penalty proceedings.

Whether the ITAT was correct in law in deleting the addition of interest income from FDRs amounting to Rs.6,85,624/- under the head “Income from Other Sources” by treating it as business income

November 29, 2009 441 Views 0 comment Print

In the present case the assessee had taken loans from the bank on which the interest was paid and as a security for those loans, FDRs in question were kept with the bank and, therefore, the assessee was entitled to the netting of interest for the interest income and expenses thereto. This is also categorically answered in Shri Ram Honda (supra). The Court was of the opinion that even in a case where the exporter is required to mandatorily keep monies in fixed deposit, in order to avail credit facility for the export business, and interest earned on fixed deposits for the purpose of availing of credit facilities from the bank, it was held that the interest income has to be treated as “income from other sources” and not business income as it does not have an immediate nexus with the export business.

When CIT cannot exercise jurisdiction u/s. 263 of Income Tax Act, 1961

November 24, 2009 600 Views 0 comment Print

The second ground for passing provisional order by the CIT under Section 263 of the Act relates to the provision for doubtful debts. As per the CIT, the provision for doubtful debts at Rs.818.03 lacs debited in the Profit and Loss account was not added back for calculating book profit under Section 115JB of the Act, which resulted into underassessment of income to that extent. In forming this opinion, the CIT has governed itself by the judgment of the Madras High Court in the case of Deputy Commissioner of Income Tax v. Beardsell Ltd., 244 ITR 256, wherein the Madras High Court held that where there is a statutory provision contained in explanation to sub-section (2) of Section 115JB of the Act, the provision made for uncertain liabilities are to be disallowed for calculating the book profits under Section 115JB of the Act.

Date of reckoning for limitation period provided U/s.154(7) of Income Tax Act, 1961

November 22, 2009 1745 Views 0 comment Print

Once an appeal against the order passed by an authority is preferred and is decided by the appellate authority, the order of the said authority merges into the order of the appellate authority; with this merger, order of the original authority ceases to exist and the order of the appellate authority prevails; the limitation for the purpose of section 154(7) is to be counted from the date of this order of CIT (A) and not the date of original order of assessment.

Advance in ordinary course of business cannot be considered as deemed dividend U/s. 2(22)(e) of IT Act, 1961

November 22, 2009 3383 Views 0 comment Print

Once it is held that the business transactions do not fall within section 2(22)(e), one need not to go further to section 2(22)(e)(ii) to take away the basic meaning, intent and purport of the main part of section 2(22)(e).

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