business income

Taxation of gold and gold products

Income Tax - Profit on sale of your gold is taxable as Capital Gains unless you are a dealer in gold and jewellery in which case it becomes taxable as Business Income...

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TDS deductible on Salary Paid to Partners?

Income Tax - o Employer Employee Relationship exist between a partnership firm and partners so TDS is not required to be deducted on Partner’s Remuneration....

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Profits on sale of shares when taxable as capital gains & when as business income

Income Tax - After my article on tax implication of different treatments of profits on sale of shares, I have received unprecedented number of mails asking for clarification as to when it is to be treated as capital gains and when it can be treated as business income. So I decided to write an article on the subject proper as to when it can be treated ...

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Difference between terms Business & Profession for income tax purposes

Income Tax - The Section 2(13) of the Income Tax Act, 1961, contains an inclusive definition of the term business. There are differences between the meaning of words business & profession in various English dictionaries. Also as per the terminology of income-tax difference has been made in the above words yet no demarcating line has been drawn in res...

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Slump Sale and Related Income Tax Provisions

Income Tax - In the process of integration of the Indian economy with the world economy, a number of companies are going for restructuring to gain benefits from large scale operations and focus upon its core competencies. In the restructuring exercise, certain companies sell off their unprofitable business activities and the business activity as a wh...

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Under DTC income arising on purchase and sale of securities by FIIs shall be deemed to be capital gain

Income Tax - The introduction of the Direct Taxes Code (DTC), which will replace the 50-year-old Income Tax Act, will make Foreign Institutional Investors (FIIs) liable to pay capital gains tax on their income from securities trade. All the FIIs will be subject to the capital gains tax after implementation of the Direct Taxes Code....

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Cut in corporate tax rate will not benefit all sectors as MAT will increase tax burden

Income Tax - The proposed reduction in corporate tax rate from 30% to 25% in the new direct tax code is only one side of the story. The cut has been offset by a reduction in exemptions and the dreaded change in the minimum alternate tax (MAT), which would hit companies that have to invest heavily in their businesses....

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Double Taxation Avoidance Agreement Signed Between India and Tajikistan

Income Tax - A Double Taxation Avoidance Agreement was signed between India and Tajikistan today, i.e. 20th November, 2008. The Agreement was signed by Mr. Narendra Bahadur Singh,Chairman, Central Board of Direct Taxes on behalf of Government of India and by Mr. Norinov Jamshed Nurmahmadovich, Deputy Minister of Finance of the Republic of Tajikistan o...

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Interest Income on FDR’s Pledged to obtain Contract is Business Income

Awasthi Traders Vs DCIT (ITAT Agra) - The issue under consideration is whether the interest income on FDR’s pledged for security purposes in obtaining the contract business comes within the ambit of business income?...

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Funds raised by FCCB Buy Back at Discounting Rate is Not Business Income

Ok Play India Ltd. Vs JCIT (ITAT Delhi) - The issue under consideration is whether the funds raised from buy back of FCCB at discounting rate is  considered as business income and tax u/s 28 of the Income Tax Act?...

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Income from Lease Money or Rentals taxable as Business Income if it is Exclusive or Predominant Business of Assessee

PSTS Heavy Lift and Shift Ltd Vs DCIT (Madras High Court) - The issue under consideration is whether the income earned by the Assessees during the Assessment Years in question from letting out of its warehouses or property to lessees, is taxable under the head 'Income from Business' or 'Income from House Property?...

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Interest on Bank Deposit earned by Assessee Engaged in Money Lending is Business Income

Muthoot Bankers Vs. ACIT (ITAT Cochin) - whether the interest on bank deposit earned by assessee engaged in money lending covered under head of Business Income or Income from Other Sources?...

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No Section 263 invocation If AO taken One possible view out of Many

Electro Urban Co-Operative Credit Society Ltd. Vs PCIT (ITAT Kolkata) - PCIT’s action under challenge is not sustainable since the Assessing Officer had taken one of the possible views only in this factual backdrop. It is reversed therefore....

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Draft notification for determination of FMV of inventory converted in Capital Assets

Clause (via) in section 28 is inserted by Finance Act, 2018, w.e.f. Financial year 2018-19 and it provides taxation of Inventory in the year in which it is converted in capital Assets. CBDT issued Draft of notification to be issued for amending Income-tax Rules, 1962 for prescribing the manner of d...

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CA certificate required to be given to the banker even in respect of import payments

03/RBI - (19/07/2007) - A. P. (DIR Series)CIRCULAR NO03/RBI under Section 195 of the Income Tax Act read with Rule 29B of the IT Rules, any person responsible for making payment to a non-resident or to a foreign company, any interest or any other sum chargeable under the IT Act, shall at the time of payment or credit of th...

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Recent Posts in "business income"

Interest Income on FDR’s Pledged to obtain Contract is Business Income

Awasthi Traders Vs DCIT (ITAT Agra)

The issue under consideration is whether the interest income on FDR’s pledged for security purposes in obtaining the contract business comes within the ambit of business income?...

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Funds raised by FCCB Buy Back at Discounting Rate is Not Business Income

Ok Play India Ltd. Vs JCIT (ITAT Delhi)

The issue under consideration is whether the funds raised from buy back of FCCB at discounting rate is  considered as business income and tax u/s 28 of the Income Tax Act?...

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Income from Lease Money or Rentals taxable as Business Income if it is Exclusive or Predominant Business of Assessee

PSTS Heavy Lift and Shift Ltd Vs DCIT (Madras High Court)

The issue under consideration is whether the income earned by the Assessees during the Assessment Years in question from letting out of its warehouses or property to lessees, is taxable under the head 'Income from Business' or 'Income from House Property?...

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Interest on Bank Deposit earned by Assessee Engaged in Money Lending is Business Income

Muthoot Bankers Vs. ACIT (ITAT Cochin)

whether the interest on bank deposit earned by assessee engaged in money lending covered under head of Business Income or Income from Other Sources?...

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Taxation of gold and gold products

Profit on sale of your gold is taxable as Capital Gains unless you are a dealer in gold and jewellery in which case it becomes taxable as Business Income...

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Posted Under: Income Tax |

TDS deductible on Salary Paid to Partners?

o Employer Employee Relationship exist between a partnership firm and partners so TDS is not required to be deducted on Partner’s Remuneration....

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Posted Under: Income Tax |

No Section 263 invocation If AO taken One possible view out of Many

Electro Urban Co-Operative Credit Society Ltd. Vs PCIT (ITAT Kolkata)

PCIT’s action under challenge is not sustainable since the Assessing Officer had taken one of the possible views only in this factual backdrop. It is reversed therefore....

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Lease Income taxable as Business Income if property objective is income earning

Asset Investment Services Vs ACIT (ITAT Mumbai)

The issue under consideration is whether the lease income earned by the assessee is taxable under head Income from House Property or Income From Business ans Profession?...

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Profits on sale of shares when taxable as capital gains & when as business income

After my article on tax implication of different treatments of profits on sale of shares, I have received unprecedented number of mails asking for clarification as to when it is to be treated as capital gains and when it can be treated as business income. So I decided to write an article on the subject proper as to when it can be treated ...

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Posted Under: Income Tax | ,

Difference between terms Business & Profession for income tax purposes

The Section 2(13) of the Income Tax Act, 1961, contains an inclusive definition of the term business. There are differences between the meaning of words business & profession in various English dictionaries. Also as per the terminology of income-tax difference has been made in the above words yet no demarcating line has been drawn in res...

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Posted Under: Income Tax |

Slump Sale and Related Income Tax Provisions

In the process of integration of the Indian economy with the world economy, a number of companies are going for restructuring to gain benefits from large scale operations and focus upon its core competencies. In the restructuring exercise, certain companies sell off their unprofitable business activities and the business activity as a wh...

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Posted Under: Income Tax |

Presumptive taxation- Section 44AD, 44ADA, 44AE

To give relief to small taxpayers from the tedious job of maintenance of books of account and from getting the accounts audited, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, section 44ADA and section 44AE. In this part you can gain knowledge about various provisions of the presumptive taxation scheme ...

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Posted Under: Income Tax | ,

Nature of transaction depend upon facts & circumstances of case & not merely on rules or principle 

Haresh Khiamal Nanwani Vs ACIT (ITAT Mumbai)

Haresh Khiamal Nanwani Vs ACIT (ITAT Mumbai) The issue under consideration is whether ACIT is correct in treating the sale of investments in immovable properties as a business activity rather than considering it as capital gains, in spite of the appellant holding the flats for more than 36 months. Assessee state that, he had shown [&helli...

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Allowances / Exemptions Under Income Tax Act, 1961

Taxpayers are normally aware of deduction under the Income Tax Act, 1961 for which they are eligible but it is noticed that taxpayers are found unaware of Taxability of Various Allowances and exemptions available to them under different sources of Income i.e. Salary , Business Income, House property other sources etc....

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Posted Under: Income Tax |

Rent income from mall- Income from business or house property?

CIT Vs Prestige Estate Projects Pvt. Ltd. (Karnataka High Court)

The issue under consideration is whether tribunal was correct in holding rental income received from Forum Mall should be considered as 'Income from business' and not 'Income from house property', though agreement between landlord and tenant contemplating relationship of landlord and tenant and as such it would partake character of rental...

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Aseesee can have both Trading & Investment Portfolio for Business Income & Capital Gain

DCIT Vs Niketan Krishorchandra Patel (ITAT Ahmedabad)

The issue under consideration is that whether the assessee having business of land trading can show capital gains from arising out of transfer of land and claim exemption u/s 54F?...

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Pre Budget Recommendations of Income Tax for Union Budget, 2020

As we all are aware that The Union Budget for 2020-21 will be presented in the Lok Sabha on 1st February, 2020) at 11.00 am by our Finance Minister Nirmala Sitharman. As per every year, this year also Institute of Chartered Accountants of India has submitted its Pre Budget Memorandum to the government. Today we […]...

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Posted Under: Income Tax | ,

Section 44AD Presumptive Income 6% / 8% -Practical Issues

Section 44AD in Income tax act is the presumptive income section under which prescribed percentage of turnover will be deemed as your income. Till AY 2016-17, prescribed percentage was 8%....

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Posted Under: Income Tax |

Profits and Gains from Business and Profession- Brief Study

In this Article we have discussed briefly Different Provisions Applicable to Income from Business and Profession at one place. In coming articles we will also discuss Income Tax provisions related to Capital Gain & Income from Other Sources. ...

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Posted Under: Income Tax |

Machinery rent cannot be taxed as Income from House Property for TDS deduction under wrong head

Heritage Hospitality Ltd. Vs DCIt (ITAT Hyderabad)

AO’s opinion that since TDS made u/s. 194-I, incomes are to be assessed under head ‘income from house property’ can not be accepted. Moreover, even if assessee has let out property but, when the Memorandum of Association permits the business of letting out of properties as such, the income cannot be brought to tax as ‘income from ...

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Income Tax on notional rental income in case of builders U/s. 23(5)

Builders generally as a matter of practice are not interested in leasing of such property (ies) hence even the department in most of the cases, did not invoke provisions of section 23 of Income-tax Act, 1961 (‘the Act’) to tax the notional income deemed to accrue on completed vacant property(ies) held as stock-in-trade by the builders...

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Posted Under: Income Tax |

Taxation of Income under Business/Profession

Business: It referred to any economic activity carried for earning profits. Economic activity refers to any trade, Commerce, Manufacturing Activity, Trading Activity or any other concern in nature of all. It is not compulsory for continuation of similar transaction or a series of transaction or carried the business permanently. Profession...

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Posted Under: Income Tax |

Draft notification for determination of FMV of inventory converted in Capital Assets

Clause (via) in section 28 is inserted by Finance Act, 2018, w.e.f. Financial year 2018-19 and it provides taxation of Inventory in the year in which it is converted in capital Assets. CBDT issued Draft of notification to be issued for amending Income-tax Rules, 1962 for prescribing the manner of determination of fair market value of the...

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Compensation received for providing amenities is taxable as income from house property

Star Gold Pvt. Ltd. Vs. Dy. CIT (ITAT Mumbai)

Receipts towards amenities are to be considered as part of rental income. However, the expenses incurred towards security service and pantry services are not connected to the rental income and hence, they should be deducted from the receipts from amenities....

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Rental Income from Real Estate Business is Business Income

Income Tax Officer Vs. M/s Zever Tower Pvt. Ltd. (ITAT Delhi)

Moreover, if the action of the AO is confirmed the assessee will be claiming additional deduction u/s 24 @ 30% in addition to the business and administrative expenses as the assessee is in the real estate business and the income of the assessee will be assessed lower than the returned income. ...

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Service Tax Paid on rent can be claimed as deduction from business Income

The DCIT Vs. M/s. Chadha Builders & Properties (ITAT Delhi)

DCIT Vs. M/s. Chadha Builders & Properties (ITAT Delhi) Service Tax is not an allowable deduction from Income from house property. But it is true that the assessee has paid Service Tax & it was not recovered from tenants and it has also filed the return of service tax. Service tax has been paid into […]...

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SC on income from property: Is it is chargeable as house property Income or business income

Raj Dadarkar & Associates Vs. ACIT (Supreme Court of India)

merely because there is an entry in the object clause of the business showing a particular object, would not be the determinative factor to arrive at a conclusion that the income is to be treated as income from business...

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Rent for amenities if not separable from Rent is House Property Income

M/s. Sree Seshachala Builders Ltd. Vs Deputy Commissioner of Income Tax (ITAT Bangalore)

These appeals are preferred by the assessee against the order of CIT(A) on common grounds. Therefore, these appeals were heard together and are being disposed off through this consolidated order....

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Section 73 / 43(5) cannot be interpreted to disadvantage of assessee

J. M. Financial Services Ltd Vs JCIT (ITAT Mumbai)

Under provisions of section 43(5), the transactions in derivatives at certain stock exchanges are deemed to be non-speculative, however, as per the explanation to section 73 for the purpose of computation of business loss the derivative transactions squarely fall within the scope of explanation to section 73....

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Mark to Market Losses cannot be disallowed unless incurred in respect of speculative contracts

CIT vs. M/s D. Chetan & Co. (Bombay High Court)

HC held that mark to market loss in respect of forward contracts claimed as loss from business income cannot be disallowed as the forward contracts were secured for to cover variation in foreign exchange rate which would impact its business of import and export of diamonds....

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Rental Income from business of leasing out house properties taxable as business income

M/s Rayala Corporation Pvt. Ltd. vs. ACIT (Supreme Court)

SC held that Rental Income from business of leasing out house properties taxable as business income and not income from House property...

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Tax on income from / and of investment funds

Tax Provisions on Income of Investment Funds and Income Received From such Fund Investment Funds pool resources from the investors and invest in new companies, social ventures and other areas which government considers as socially or economically desirable. Finance Act 2015 came with the concept of Investment Funds...

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Posted Under: Income Tax |

Trading in cash & derivative segment cannot be splitted as speculative & non-speculative

J.G.A Shah Share Brokers P. Ltd. Vs DCIT (ITAT Mumbai)

ITAT held that simultaneous trading of shares in cash segment and arbitrage in derivative segment by assessee company cannot be splitted into speculative and non-speculative transactions . So, as soon as it is found that assessee is trading in shares , the entire trading activity to be treated as speculative business as per explanatio...

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Waiver of loan is taxable u/s 28(iv) : Madras HC

CIT Vs Ramaniyam Homes (P.) Ltd. (Madras High Court)

Under one time settlement the bank waived loan amount (used by the assessee for acquiring capital assets) which includes both principal amount of loan and interest on loan. Held that Waiver of loan is taxable under section (‘u/s’) 28(iv) of the Income-tax Act, 1961 (‘the Act’)....

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Tax treatment of share profits- Business income vs. Capital gains

The present tax laws of India provides for taxation of income under specified heads. Any income for which a specific head is specified has to be taxed under the head and cannot generally be taxed under any other head. However since law cannot provide for every eventually, disputes arise as to whether a particular income shall be taxable u...

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Posted Under: Income Tax |

Amount received in pursuance of agreement of construction of additional area, not assessable as business income

Raj Dulari Bhasin Vs CIT (Delhi High Court)

Delhi High Court held In the case of Raj Dulari Bhasin vs. CIT that merely because the Assessee approached the builder for constructing the flats on the portion apart from the already constructed portion, would not make the transaction an 'adventure in the nature of trade'. ...

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Mere Collaboration agreement with Builder & subsequent receipt of Property and Sale cannot be termed as business

Shanti Banerjee (deceased) by LRs. Vs DCIT (Delhi High Court)

The facts of the case are that the Assessee, (who died during the pendency of this appeal and is substituted by her legal representatives) was a housewife, having no source of income other than the pension of her deceased husband. The Assessee was the owner of property No. F-23, Hauz Khas, New Delhi wherein she was residing since 1956....

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Expanding Scope of Income Under Income Tax

The word income has a special significance in Income-tax machinery as the income-tax is a tax upon the 'income'. Section 2 (24) of the Indian Income-tax Act, 1961 [which corresponds to section 2 (6C) of the Income-tax Act, 1922] contains the inclusive definition of income. ...

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Posted Under: Income Tax |

SC on Taxability of income from letting of properties (House Property or Business Income)

Chennai Properties & Investments Ltd Vs CIT (Supreme Court of India)

The appellant-assessee is a company incorporated under the Indian Companies Act. Its main objective, as stated in the Memorandum of Association, is to acquire the properties in the city of Madras (now Chennai) and to let out those properties....

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Tax Planning for Business Expenditure

There is a prevailing practice of a businessman taking loan of stock from another businessman and returning the same. Since he may have to pay for replacement at a higher price for return of loan of stock, can a provision made for the extra cost be deductible? ...

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Posted Under: Income Tax | ,

Important FAQs with Case Laws under Various heads of Income

Some Important Case Laws From INCOME FROM SALARIES :- 1. Whether the amount received by the employee on cessation of employment with his Employer will be exempted from tax under section 17(3)(i) of the Income-tax Act? ...

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Posted Under: Income Tax |

Fast Track Quick revision of Return of Income

This is our third video of FAST TRACK - QUICK REVISION of Return of Income. Aim of this video is revision of return of income in shortest possible time covering 90% of syllabus from examination point of view. However in class we devote almost 3 hours to return of income which we have tried to condensed in 12 minutes approx....

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Posted Under: Income Tax |

Fast track quick revision of Profits and gains of business or profession

This Video covers the chapter Profits and Gains from Business or Profession. Aim of this video is revision of Profits and gains of business or profession (PGBP) in shortest possible time covering 90% of syllabus from examination point of view. ...

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Posted Under: Income Tax |

Under Explanation to section 73 of Income Tax Act, 1961 even delivery-based loss on shares is “speculation” loss

Paharpur Cooling Towers Ltd. Vs. Commissioner of Income Tax IV (Calcutta High Court)

he Explanation to s.73 creates a fiction that the loss suffered by certain companies from the business of purchase & sale of shares shall be deemed to be speculation loss. The Explanation is not inconsistent with the object of introduction. The CBDT ...

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Interest on fixed deposits effectively connected with PE is taxable as Business Income

DDIT Vs. Samsung Engineering Co. Ltd. (ITAT Mumbai)

The Tribunal has once again reiterated the principle that interest on fixed deposits kept as margin with banks is effectively connected with the business and would be taxable as business income. Furthermore, the Tribunal held that the direct expenses...

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Amounts receivable by a British company (EMEIA) from the applicant under the Area Services & Market Development Agreement not liable to be taxed under the I-T Act as fee for `included services’ or as business profits under Indo-UK Treaty

In re. Ernst & Young (P.) Ltd. (AAR Delhi)

Dissemination of informations, furnishing guidelines and suggesting plans of action aimed at uniformity and seamless quality in business dealings of participating group entities do not per se amount to making available to them technical knowledge and experience possessed by EMEIA to a substantial extent; There is no transfer of technical ...

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Income from supply of information relating to various markets should be taxed as business profits under the India-Singapore tax treaty

JCIT Vs. Telerate (ITAT Mumbai)

Mumbai bench of the Income-tax Appellate Tribunal held that the income from supply of information relating to various markets should be taxed as business profits under Article 7(3) of the India-Singapore tax treaty (tax treaty) and accordingly the expenses incurred for earning the income should be allowed as a deduction. Further, the ...

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Characterization of income from sale of shares

Management Structures & Systems Private Ltd. Vs. ITO (ITAT Mumbai)

The Mumbai Tribunal, following earlier judicial pronouncements and Circulars, has once again highlighted that the characterization of income from sale of shares as „capital gains or business income is a fact-based analysis. The decision of the Mumbai Tribunal in the case of Management Structure & Systems Pvt. Ltd is significant because ...

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Unabsorbed depreciation of AYs 1997-98 to 2001-02 not eligible for relief granted by amended s. 32(2) in AY 2002-03- Special Bench Reverses S. 32 Depreciation Law

DCIT Vs. Times Guaranty (ITAT Mumbai)

Till AY 1996-97 unabsorbed depreciation could be set off against income under any head. From AY 1997-98 to 2001-2002 unabsorbed depreciation could be set off only against business income. From AY 2002-2003 onwards unabsorbed depreciation could again be set off against income under any head of income. ...

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Importance of Keeping proper documents of inherited property from taxation point of view

Any profits or gains arising from the transfer of a capital asset is taxable as ‘capital gains’ and is deemed to be the income of the tax payer in the financial year in which the transfer takes place. Similarly, income of every kind, which is not specifically taxed under any of the specified heads of income, like salary, house propert...

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Posted Under: Income Tax |

Under DTC income arising on purchase and sale of securities by FIIs shall be deemed to be capital gain

The introduction of the Direct Taxes Code (DTC), which will replace the 50-year-old Income Tax Act, will make Foreign Institutional Investors (FIIs) liable to pay capital gains tax on their income from securities trade. All the FIIs will be subject to the capital gains tax after implementation of the Direct Taxes Code....

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Posted Under: Income Tax |

Profits from shares is business profits: ITAT Mumbai

Smt. Sadhana Nabera Vs. ACIT (ITAT Mumbai)

The assessee, a director and shareholder in a company engaged in share trading, returned income of Rs. 78,89,499 earned by her on transfer of shares as a “short-term capital gain”. The AO took the view that as there were voluminous transactions, the assessee was engaged in share trading and the income was assessable as “business inc...

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ITAT Mumbai laid down principles to determine whether income from shares is “business” income or “capital gains”

Management Structure & Systems Vs. ITO (ITAT Mumbai)

The assessee, engaged in management consultancy, offered profits of Rs. 1.03 crores earned by it on sale of shares as long-term and short-term “capital gains” depending on the period of holding. The AO took the view that as the assessee was regularly dealing in shares throughout the year, ...

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Interest on surplus funds is “other income” and not eligible for deduction U/s. 80P of Income Tax Act, 1961

M/s. The Totgars' Cooperative Sale Society Limited Vs ITO (Supreme Court of India)

The assessee, a co-op credit society, was engaged in providing credit facilities to its members and also marketing the agricultural produce of its members. The assessee had surplus funds which it invested in short-term deposits with banks and govt securities. The question arose whether the said interest earned on the said deposits was “...

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Income from even an isolated transaction of sale of land can be considered as business income of an assessee though not carrying on real estate business

Cherukuri Ramesh Vs ACIT (ITAT Visakhapatnam)

The process of purchase of land, conversion thereof and sale, compel us to come to the conclusion that the * purchase of land, in itself, was with an intention to sell at a profit in the form of an 'adventure in the nature of trade' and hence though it is an isolated' transaction the income thereon can still be considered as business inco...

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Shares activity treated as investment in earlier years cannot be treated as business in subsequent years if facts are the same

CIT Vs. Gopal Purohit (Bombay High Court)

The income from investment activity was offered as capital gains while the income from dealing activity was offered as business income. This position was accepted by the AO in the earlier years. In AY 2005-06, the AO took a different view and held that even the shares held on investment account had to be assessed as business income...

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Income from Cultivation of parent hybrid seed is non agricultural Income and taxable as business income

Pioneer Overseas Corporation Vs. DDIT (International Taxation) [ITAT Delhi]

The income attributable to the operations of developing/producing breeder seeds or hybrid germplasm or parent hybrid seed containing desired traits cannot be treated as agricultural income and should be treated as business income....

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Tax on Rent Income forming Part of complex commercial activity

Hiranandani Developers P. Ltd. Vs JCIT (ITAT Mumbai)

It depends on the facts of each transactions, whether the letting out of the property is incidental and subservient dominant object of selling the property or not. If the property has merely been let out b> the assessee then the same cannot be held to be exploitation of the property for commercial purpose in view of the decision of the Ho...

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AO not justified in adjustment to a international transaction whose arm’s length character is accepted by Transfer Pricing Officer (TPO)

Oracle India (P) Ltd. Vs. ACIT (ITAT Delhi)

The Delhi bench of the Income-tax Appellate Tribunal (the Tribunal), in the case of Oracle India (P) Ltd. V. ACIT (2009-TIOL-540-ITAT-DEL) (the taxpayer) held that section 40A(2) of the Income-tax Act, 1961 (the Act) overrides the provisions relating to computation of business income only and thus in relation to international transactions...

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Applicability of rule of limitation in respect of appeal filed after an inordinate delay without reasonable cause

Foramer France Vs. DCIT (ITAT Delhi)

Coming to the general proposition regarding condonation of delay, the learned counsel relied on a number of cases, which have already been summarized. In the case of Shakuntala Devi (supra), the Hon'ble Supreme Court held that liberal construction should be placed on the words "sufficient cause" provided that no negligence,...

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SB rules income from derivative trading in shares prior to financial year 2005-06 is speculation income

Shree Capital Services Ltd. Vs. ACIT (ITAT Kolkata)

This Tax Alert summarizes a recent ruling of the Special Bench (SB) of Kolkata Income Tax Appellate Tribunal (ITAT) in the case of Shree Capital Services Ltd. (Taxpayer) vs. ACIT (ITA No. 1294 (Kol) of 2008) in which the SB held that, prior to financial year 2005-06 (assessment year 2006-07), derivative transactions in shares were covered...

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Applicability of year end rate for conversion of business income earned in foreign currency

DCIT Vs Dolphin Drilling Pvt. Ltd. (ITAT Delhi)

This article summarizes ruling of the Delhi Income Tax Appellate Tribunal (ITAT) in the case of DCIT v Dolphin Drilling Pte. Ltd. (Taxpayer) [2009-TIOL-754- 1TAT-DEL]. The ITAT held that the conversion of business income earned in foreign currency into INR, in accordance with Rule 115 (Rule) of the Indian Tax Law (ITL), is to be made by a...

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Interest income from Fixed deposits not eligible for deduction u/s 10A/10B

Tricom India Ltd. Vs. ACIT (ITAT Mumbai)

The learned counsel for the assessee has vehemently argued that in this case interest from deposit was offered as business income and was also assessed as business income and therefore, automatically once it is assessed as business income then the same becomes eligible for deduction u/s.10B....

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Section 14A submission accepted by AO can not be sent back to AO for reconsideration by tribunal

Topstar Mercantile Pvt. Ltd Vs. ACIT (Bombay High Court)

The Bombay High Court ruled that once the taxpayer’s submissions with respect to section 14A was accepted by a tax officer, the Tribunal cannot send back the same matter for the tax officer’s re¬consideration. Recently, the Bombay High Court in the case of Topstar Mercantile Pvt. Ltd v. ACIT (2009-TIOL-458-HC-MUM-IT) has held that t...

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Tribunals upheld the concept of ‘make available’ and held specified services not Fees for technical services

Tribunals upheld the concept of ‘make available’ and held specified services not Fees for technical services Mumbai and Bangalore bench of Tribunal upheld the concept of ‘make available’ in two different cases and held that the specified services were not in the nature of Fees for included/technical services....

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Posted Under: Income Tax |

Issues under Income Tax on Shares & Securities Transactions

With the tax authorities out to prove that the existence of a large number of transactions in shares is to be treated as business income, while the focus of assessees generally has been on trying to refute the tax authorities arguments through stressing the various factual aspects related to the transactions, very often one tends to miss ...

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Posted Under: Income Tax |

Expenditure related to exempt income to be disallowed even if assessee has not earned any tax-free income

Cheminvest Ltd. (ITAT Delhi)

Special Bench of the Income Tax Appellate Tribunal, New Delhi in the case of Cheminvest Ltd. (ITA Nos.87Del//2008, 4788/Del/2007 and 233/Ahd/ 2006) holds that expenditure relating to exempt income to be disallowed even if assessee has not earned any tax-free income....

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The Direct Taxes Code (DTC) Bill 2009 – Capital Gains Tax

The definition of Capital asset continues in DTC. However the DTC classifies assets into two broad categories i.e. investment assets, and business assets. DTC envisages taxing income from transfer of investment assets as capital gains. Under the Income Tax Act 1961 (“Act”), income from transfer of capital assets even if used for busin...

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Posted Under: Income Tax |

Disallowance u/s 14A is to be made even when exempt income is not earned or received during the year

Cheminvest Ltd. Vs ITO (ITAT Delhi)

Special Bench of the Income Tax Appellate Tribunal, New Delhi holds that expenditure relating to exempt income to be disallowed even if assessee has not earned any tax-free income....

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Procurement of orders by South African company for Indian company on commission basis is not taxable in India

SPAHI Projects (P.) Ltd., In re (Authority for Advance Rulings)

S. 9, Treaty with South Africa; in favor of taxpayer: - Z, a South African company, offered to promote and market the products of the taxpayer, an Indian company, on commission basis. Z will procure and negotiate orders and forward these to the taxpayer. The taxpayer will execute the orders directly and will receive the consideration in I...

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Profit element on sale of DEPB, i.e., the amount in excess of sale proceeds over the face value is covered u/s 28(iiid)

Jindal Drugs Ltd. Vs Asst. Commissioner of Income-Tax (ITAT Mumbai)

S. 80HHC; in favor of taxpayer: Post the amendment by Taxation Law Amendment Act, 2005 (effective from 1 April 1998), controversy had arisen as to whether in case of an exporter having export turnover of more than INR100 million (where generally conditions mentioned in section 80HHC cannot be satisfied), the entire sale proceeds of DEPB...

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Penalty levied with reference to revised return is bad in law when the revised return has been treated as non-est

Variable Insurance Products Fund Vs DIT (ITAT Mumbai)

S. 271(1)(c); in favor of taxpayer : The taxpayer was a trust organized in the US and was a resident of the US. As regards India, it was registered with SEBI as a sub- account of M/s Fidelity Management Resources Co. It filed a return of income declaring short-term capital gains and dividend income. Thereafter, based on an AAR ruling in ...

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Write back of provision of bad debts, not previously allowed as deduction, is not taxable

Bank of Tokyo Vs DIT (ITAT Delhi)

The taxpayer was a banking company. In the current appeal, the Revenue’s grievance was that the CIT(A) had erred in directing that the written back ”provision of bad-debts” was not taxable as ”business income” especial y when a deduction of a sum was already al owed under Section 36(1) (vi a). The AO in the assessment order he...

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Worldwide Tax Trends Treatment of Tax Losses

In the current times where several MNCs are facing the issue of operating losses (the term ‘operating losses’ for the purpose of this article denotes business losses) in various jurisdictions, it becomes imperative for them to evaluate the provisions on utilisation of tax losses in these jurisdictions so as to optimise the overall tax...

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Posted Under: Income Tax |

AO not empowered to select head of income for computation of permissible deductions U/s 40(b)

S. P. Equipment & Services Vs ACIT (ITAT Jaipur)

A golden rule of interpretation is the contextual interpretation. A word has always to be interpreted only with the context with which, one is seized. Here we are concerned with the provisions of Sec.40(b) hence, the interpretation has to be done accordingly. Interpretation of the provisions otherwise or the way the Id. AO has done, if a...

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Mumbai ITAT rules on taxability of waiver of loan

Cipla Investments Ltd. Vs. ITO (ITAT Mumbai)

This article summarizes a recent ruling of the Mumbai Income Tax Appellate Tribunal (ITAT) [2009-TIOL-707-ITAT-MUM] in the case of Cipla Investments Ltd. (Taxpayer) on taxability of waiver of loan. The ITAT held that since the loan received was on capital account, its subsequent waiver too was on capital account. Hence, the loan waived wa...

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Validity of re-opening when no concealment of income and department applied higher tax rate of tax for framing re-assessment

ACIT Vs Hyundai Heavy Industries Co. Ltd. (ITAT Delhi)

In assessment years 1995-96 and 1996-97, the only identical reason recorded by the Assessing Officer for reopening the assessment, with variation in the amounts involved, is that the interest income under section 244 A has escaped assessment and to reassess the same under section 147 of the Act notice under section 148 of the Act was issu...

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S.14A disallowance can be made with regard to partner’s share of profits

Dharmasingh Popat Vs. ACIT (ITAT Mumbai 'H' Bench)

The assessee, a partner in a firm, received ‘share of profit’ and ‘salary’ from the firm. While the ‘share of profit’ was exempt u/s 10(2A), the ‘salary’ was taxable as business income u/s 28 (v). The assessee claimed deduction for business expenditure incurred by him. The AO held that as the assessee had exempt income, s....

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AAR on taxability of income from execution of contract in India by German company, having no PE in India

In re Pintsch Bamag (Authority for Advance Rulings)

The contention of the Revenue is that the sub-contractor is undertaking various activities which constitute the core of the contract work entrusted to the applicant. All the activities undertaken by the sub-contractor are on behalf of the applicant and in connection with the execution of the contract between the applicant and TPT. It is p...

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New Tax Code and Corporate Taxation

The new code attempts to change the methodology of taxation of business profits from the existing model where the taxable income is equal to business profits with specified adjustments even though this model does not provide for items of receipts which form part of business profit and deduction to be made there from....

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Posted Under: Income Tax |

Taxability of Sale Proceed of Assets Purchased before introduction of block concept and sale thereafter

Nectar Beverages Pvt. Ltd. Vs DCIT (Supreme Court of India)

Each of the sub-sections to section 41 deal with different and distinct topics and one cannot read recoupment under one sub-section into another; the depreciation recovered on sale of the capital asset was includible in the total income as balancing charge only under section 41(2); that concept was foreign to the scheme of section 41(1)....

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Loan waived by lender is not taxable in the hand of borrower

Cipla Investments Ltd. Vs ITO (ITAT Mumbai)

As the facts indicate the holding company has advanced funds to the assessee company in 1998 which was received as share application money, later on transferred to unsecured loan. The amounts were utilised in investments and the incomes thereon were offered under the head 'capital gains' and not as 'business income'. ...

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Sec. 143,rws 234A to 234C, of the IT Act and articles 12 and 7 of DTAA between India and USA

Microsoft Regional Sales Corporation Vs Assistant Director of Income-tax (ITAT Delhi)

The application of 15 per cent rate of tax on the amount shown in the return of income would not fall under the category of determination of tax payable on the returned income on the basis of return of income under section 143(1) when the assessee had categorically stated in the note enclosed with the return of income that the returned in...

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Revision under section 263 of IT Act, 1961 is not reassessment

Geometric Software Solutions Co. Ltd. Vs. ACIT (ITAT Mumbai 'G' Bench)

The revision u/s. 263 is not like the reopening of the assessment where once the assessment is reopened entire assessment is open before the Assessing Officer to be reconsidered in accordance with law. In the revision proceedings, the CIT cannot travel beyond the reasons given by him for revision in the show cause notice....

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Treatment of profit on sale of shares when Assessee hold shares for more than 12 months

ITO Vs Rohit Anand (ITAT Delhi 'B' Bench)

Apart from said business, the assessee invested in shares and treats shares as investment in his books of account. This itself manifests the intention of the assessee as to whether he proposed into dealing in shares or earn dividend and profit out of such investment. The Assessing Officer was guided more because of the total amount involv...

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Depreciation on transfer of Investment from available for sale (AFS) to held to maturity (HTM) category by banks

State Bank of Mysore Vs DCIT (ITAT Bangalore)

Assessee is treating the securities held under the, category 'held for maturity' as stock-in-trade. If there is appreciation in the market value as compared to the market value at the opening of the year and such appreciation is also accounted for. It is not claiming depreciation only for the years, when the value has gone down. ...

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Taxability of Income to American company by allowing use of its database located abroad to customers in India

FactSet Research Systems Inc., In re (Authority for Advance Rulings)

The applicant maintains a `database' which is located outside India and which contains the financial and economic information including fundamental data of a large number of companies world-wise. The customers of the applicant are mostly financial intermediaries and investment banks which have the need for such data. The databases contain...

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Major changes proposed in Direct Tax Code related to Capital Gain tax

The new draft Direct Taxes Code proposes to tax capital gains as regular income at normal tax rates, thereby removing the benefits of lower rates for long-term capital gains on sale of shares....

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Posted Under: Income Tax |

Cut in corporate tax rate will not benefit all sectors as MAT will increase tax burden

The proposed reduction in corporate tax rate from 30% to 25% in the new direct tax code is only one side of the story. The cut has been offset by a reduction in exemptions and the dreaded change in the minimum alternate tax (MAT), which would hit companies that have to invest heavily in their businesses....

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Posted Under: Income Tax |

AAR on taxability of payments made by applicant to a British company for rendering telecom services in India

Cable & Wireless Networks India Pvt. Ltd., In re (Authority for Advance Rulings)

9. (1) The following incomes shall be deemed to accrue or arise in India :— (i) to (v) xx xx xx xx xx xx xx xx xx (vi) income by way of royalty payable by—...

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Mistakes people commit generally in filing income tax return

Wrong selection of ITR :- One may sorely miss the old ‘one size fits all’ SARAL forms for the sheer ease and convenience of filling up the one page return, but they were not e-friendly. It was also cumbersome to attach a whole lot of supporting documents and spend a day away from the office […]...

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Posted Under: Income Tax |

Income cannot be assessed as "income from house property just because income is attached to immovable property

Bigg Investments & Finance Pvt. Ltd. Vs DCIT (ITAT Delhi 'F' Bench)

5.8 The question whether income from property should invariably be taxed under the head "income from house property" is to be decided after taking into consideration the cumulative effect of all factors prevailing in a given case. The Courts have formulated different tests to determine the head under which such income can be taxed. Merely...

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Tribunal can set aside the order of CIT Appeal only after considering the evidence and material on record

ITO Vs Sicgil India Pvt. Ltd (ITAT Chennai 'C' Bench)

This appeal came before me as Third Member to express my opinion on the following question:- "Whether in view of the facts and circumstances, the issue relatable to computation of deduction under section 801B, the order of the Id. CIT(A) could be reversed and that of the Assessing Officer could be restored or matter can be set aside and ...

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Allowability of expenses claimed by PSU on direct operations/grants

Oil Industry Development Board Vs ACIT (ITAT Delhi)

20. Deduction which are allowed while computing business income have been laid down in section 30 to 36. section 37 is a residuary section extending the allowance of expenses to items of expenditure not covered by Section 30 to 36, the list of allowances enumerated in sections 30 to 36 being not exhaustive. An item of expenditure, which i...

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Income from property leased to sister concerns is Income from House Property

Margadarshi Housing Pvt. Ltd. Vs ITO (ITAT Hyderabad)

4. We have considered the rival submissions on either side and also perused the material available on record. The claim of the assessee is that construction of the dwelling units and leasing out the same to sister concerns amounts to exploiting of a commercial asst. In fact, the sister concerns which took the property on lease utilized th...

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Interest income from banks on fixed deposits not necessarily Income from Other Sources

ACIT Vs. Niru Impex (ITAT Mumbai)

6.1 The main question before us for decision is whether the interest income could be treated as "business income" or "income from other sources". The answer to this question has to depend on how the interest income derived by the assessee. No doubt, normally, on the placing of funds in banks on short-term or long-term deposits the interes...

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Treatment to be given to unclaimed debenture amount when same is used by assessee-company for its business: HC Mumbai

Hindustan Foods Ltd. Vs. DCIT (Bombay High Court)

9. In the instant case, since it is not in dispute that the amount, in question, has already been utilized by the Assessee for the purpose of its business from time to time and by Board Resolution the Assessee has transferred the amount to the Reserve Fund Account, and considering the judgment of the Supreme Court in the case of Commissio...

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Computation of depreciation in cases covered by Rule 8 of Income Tax Rules, 1962

CIT Vs Doom Dooma India Ltd. (Supreme Court of India)

10. In the case of Commr. of Income-tax, Madhya Pradesh, Nagpur and Bhandara v. Nandlal Bhandari Mills Ltd. - (1966) 60 ITR 173, which judgment was in the context of composite income, the question inter alia arose whether depreciation "actually allowed" would mean depreciation deducted in arriving at the taxable income or the depreciation...

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Determination of head of income in respect of payment received by an assessee from his employer under a non-compete agreement

Kanwaljit Singh Vs ACIT (ITAT Delhi)

(iii) Even in the case of the assessee, the department is accepting the earning of income albeit on a different footing i.e. claiming the same to be salary income in contra distinction to assessee's claim being business income by virtue of Section 28(va). Though reference is made to colourable devise in the hands of the assessee following...

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