In a recent ruling, in the case of LG Asian Plus Ltd. Vs. Asst. Director of Income-tax the Mumbai Income-tax Appellate Tribunal has held that income earned by a Foreign Institutional Investor from derivative trading would be taxable as `capital gains’ in view of special provisions under section 115AD of the Income-tax Act, 1961. The Tribunal also held that under the Act, income could be treated as ‘speculative’ only if it was taxable as ‘business income’. The Tribunal accordingly ruled that FII income would not be treated as ‘speculative business income’. While ruling in favour of the assessee, the Tribunal held that loss incurred from derivative transactions would not be treated as ‘speculation loss’ but would be treated as capital loss, and hence, it could be adjusted against capital gains earned by the assessee.
A relation between the business of a non-resident and activity carried on in India would result in a ‘business connection’ for the purpose of deemed accrual of income in India as well as for considering the resident as the agent of the non-resident
Gajendra Kumar T Agarwal vs. ITO (ITAT Mumbai) -Assessee was eligible for setting of losses of business of dealing in derivatives, incurred in the assessment years prior to the assessment year 2006-07, against the profits of the same business in assessment year 2006-07.
Symantec software Solutions Pvt Ltd vs. ACIT (ITAT Mumbai)- The Mumbai bench of the Income Tax Appellate Tribunal (Tribunal) recently pronounced its ruling in the case of Symantec Software Solutions Private Limited, Mumbai (Taxpayer), on transfer pricing issues arising from provision of marketing support and consulting services by the Taxpayer to its Associated enterprise (AE). The Tribunal ruled in the favour of the Revenue for all issues except one issue which was decided in the favour of the Taxpayer.
The Tata Power Co. Ltd. Vs Addl. CIT(ITAT Mumbai) – The stage at which set off of carried forward long term capital loss is to be given is subsequent to the stage at which income under the head capital gains is computed and deduction under section 54EC is to be given in the course of the latter. In this view of the matter, the question of setting off brought forward long term capital loss arises only after the income under the head capital gains is computed and that the processing in computing the income under the head capital gains must also taken into account section 54EC as well.
Mahendra C Shah vs. Addl CIT (ITAT Mumbai) – The fact that the assessee borrowed for the purpose of buying shares is not conclusive that the assessee intended to do business in shares and not merely invest in them if the interest is capitalized as cost of the shares & not claimed as a revenue expenditure (Shanmugam 120 ITD 469 (Pune) followed). The fact of borrowing cannot be held against the assessee if there are other predominating factors in favour. Also as the assessee has own funds, it can be presumed that the shares were bought out of those funds.
The income received by the assessee (Sachin Tendulkar) from modelling and appearing in T.V. commercials and similar activities can be termed as income derived from the profession of an artist. As admitted by the ld. D.R., the assessee can have more than one profession. Therefore, there is no bar on the part of the assessee to have its second profession as an artist apart from playing cricket. In this view of the matter, we are of the considered opinion that the amount of Rs. 5,92,31,211/- received by the assessee amounts to income derived by the assessee in the exercise of his profession as an artist and therefore entitled to deduction u/s 80RR of the Act.
Manori Properties Pvt. Ltd., Vs. Income Tax Officer 6(3)(3), Mumbai.The appellant has purchased debts of amount due to Rose Patel Mercantile Co. Ltd. for Rs.10,85,000/- by paying the said amount on 10-1-1996 Rs. 5,00,000/- and on 29-1-1996 Rs. 5,85,000/-. The amount was due from Qualitron Components Ltd. Unfortunately due to losses the company closed down its operations and ultimately wound up by the order of Gujarat High Court. The Assessing Officer has clearly pointed out that the said debts of Rs. 10,85,000/- was not trading debt. Therefore the conditions specified u/s. 16(1)(vii) r.w.s. 36(2) is not fulfilled as the amount has not been taken into consideration while arriving to the profit of the appellant company.
Recently ITAT Mumbai in the case of Standard Chartered Bank (Taxpayer) (ITA No. 3827/ MUM/ 2006) on the issue whether data processing charges paid by the Taxpayer would constitute ‘royalty’ under the Indian Tax Laws (ITL) and the India – Singapore Tax Treaty (Tax Treaty) held that the payments were made for use of a facility and not any process. Furthermore, in the absence of control or physical access to any equipment, it cannot be said that the payment was made for any use or right to use the equipment. Hence, payment would not amount to ‘royalty’ under the ITL and the Tax Treaty and would be business income not chargeable to tax in absence of PE.
ITO vs. Radha Birju Patel (ITAT Mumbai) – Transactions carried out via Portfolio Management Scheme are clearly in the nature of transactions meant for maximization of wealth rather encashing the profits on appreciation in value of shares. The very nature of Portfolio Management Scheme is such that the investments made by the assessee are protected and enhanced and in such a circumstance, it cannot be said that Portfolio Management is scheme of trading in shares and stock. Whether, the assessee is engaged in the business of dealing in shares or investment in shares is essentially a question of fact and it has to be determined with regard to the entirety of the circumstances. Where the assessee is engaged in systematic activities of holding portfolio through a PMS Manager, it cannot, by any stretch of imagination, be said that the main object of holding the portfolio is to make profit by sale of shares during the course of maintaining the portfolio investment over the period. The high number of transactions shown in the statement is misleading because these are computer-split transactions and not independent transactions.
