Recently, the Delhi High Court in the case of CIT v. DCM Limited (ITR Nos.87-89/1992) held that payments made for transfer of comprehensive technical information and know-how, which included all trade secrets and technical information, designs and drawings, etc. cannot be treated as income from royalty under the India-UK tax treaty (tax treaty). Accordingly, the taxpayer was not liable to deduct tax on the payments made to the foreign company.
It was not disputed by the learned counsel appearing for the respondent that the averments raised by the appellant herein need to be decided on merits by the appellate authority in view of the issue raised by the appellant with regard to his liability. The impugned order has been passed on a prima facie view of the appellate authority. Keeping in view the averments raised by the appellant and the fact that he is an aged person of about 80 years and has no source of income of his own and the fact that he has already deposited a sum of Rs.5.00 lakhs as a pre-deposit for hearing the appeal, we are of the view that the pre-deposit order of an additional amount of Rs.20.00 lakhs is not justified. In the given circumstances, we set aside the impugned order to the extent of asking for the pre-deposit of Rs.20.00 lakhs.
CIT vs. Moni Kumar Subba (Delhi High Court – Full Bench) – If Assessing Officer Finds that the actual rent received is less than the “fair/market rent‟ because the assessee has received abnormally high interest free security deposit, he can undertake necessary exercise in that behalf. However, by no stretch of imagination, the notional interest on the interest free security can be taken as determinative factor to arrive at the “fair rent”. Section. 23(1)(a) of Income Tax Act, 1961 does not mandate this.
CIT V. Govind Nagar Sugar Ltd. (ITA No. 164 of 2008) (Del)- Taxpayer filed its return of income for the assessment year 2001-02 on 31 March 2003 declaring a loss. The due date of filing the return of loss in terms of provisions of section 139(3) of the Income Tax Act,1 961 (the Act) was 31 October 2001. In the assessment order, the Assessing Officer (the AO) did not allow the carry forward of unabsorbed loss including the unabsorbed depreciation. The Commissioner (Appeals) confirmed the AO’s order and held that the taxpayer was not allowed to carry forward the losses by virtue of section 80 of the Act. On appeal, the Income Tax Appellate Tribunal (the Tribunal) allowed the carry forward of unabsorbed depreciation for the assessment years 2000-0 1 and 2001-02. Aggrieved by the order of the Tribunal, the tax authorities filed an appeal before the High Court.
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).
