Income Tax : ‘Income’ & ‘Expenditure’ Pertaining to Pre-Commencement Business Period: Whether Capital or Revenue? – An Insight fo...
Income Tax : The government would introduce a scheme to provide a subsidy for advancing the development of industries mainly in backwards areas...
Fema / RBI : In CBS environment , most of the times , Management response is usually as All charges calculation and charging is done by system ...
Income Tax : When a lease is transferred it involves payment of some transfer charges to the lessor for the transfer of lease as well as paymen...
Income Tax : The alarming rate of ever increasing pollution is a matter of concern for each of us especially those living in the territory of D...
Finance : “There is no specific provision in Indian tax laws governing the deductibility of the payments made for acquiring spectrum,” a...
Income Tax : ITAT Ahmedabad ruled on Unimed Technologies' software license and renewal expenses, classifying them as revenue. The tribunal also...
Income Tax : The ITAT Ahmedabad has remitted the case of Gujarat State Road Development Corporation Ltd. for a fresh assessment due to insuffic...
Income Tax : ITAT held that entries in the books of accounts do not dictate tax treatment. As long as expenses were allowable under relevant se...
Income Tax : The issue under consideration is whether the expenditure incurred by the assessee on the lease premises towards civil furniture, ...
Income Tax : ACIT Vs Bajaj Holdings & Investment Ltd (ITAT Mumbai) The issue under consideration is whether the replacement of jigs and fix...
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.
It is quite common for the Revenue to treat such expenditure as capital in nature and administer depreciation allowance, only. An assessee would always put forth his argument that such replacement cost is only to maintain the existing level of efficiency of his manufacturing facility and would not result in any increase in its production capacity, thereby claiming it to be revenue in nature. In this context, it is quite pertinent to examine the current judicial thinking on this issue.
M/s. Sri Mangayarkarasi Mills (P) Ltd. (“assessee/SMMP Ltd.”), engaged in the manufacture and sale of cotton yarn, incurred expenditure on replacement of machinery. While on one hand, SMMP Ltd. capitalized the said expenditure in its books of account and in its return of income, on the other, the same was claimed as revenue expenditure on the basis that such expenditure was merely incurred on replacement of spare parts in the spinning mill system.
Secure Meters Ltd. („the assessee?) is engaged in the business of manufacture of energy meters. The Assessing Officer (AO) inter-alia disallowed expenses on the issue of convertible debentures on the basis that it was capital in nature. This was confirmed by the Commissioner of Income Tax (Appeals). On further appeal, the Income Tax Appellate Tribunal („Tribunal?), however, held that the expenses on issue of debentures was allowable as a revenue expenditure. Aggrieved by the decision of the Tribunal, the Revenue filed an appeal before the Rajasthan High Court.
The ITAT dismissed the appeal of the Revenue and the assessee by holding that the discount on stock options was notional in nature and was not deductible either in the year of grant or in the year when the option is exercised by the employees. In reaching the conclusion, the main consideration by the ITAT was the argument that the difference between market price and grant price is only a notional expenditure. Where ESOPs are granted by overseas parent companies and the difference between market price and grant price is charged to the Indian subsidiary, the allowability of expenditure would require further evaluation.
The taxpayer was a wholly owned subsidiary of Denso Thermal Systems, Italy. The taxpayer was engaged in the business of manufacturing certain automobile products and selling the same in India and abroad. For the impugned assessment year, the taxpayer claimed that the royalty paid to its parent company as revenue expenditure. After perusing the details called for, the AO, relying on the decision of CIT vs. Southern Switchgear Ltd. 148 ITR 272 (Mad) held 25% of the royalty claimed as capital expenditure and disallowed the same.
Interest paid on funds borrowed for acquiring controlling stake in a company will not be exempt from tax. The Income Tax Appellate Tribunal (ITAT) has ruled that such expenditure for investing in shares of a company cannot be exempted, since it has not been incurred ‘wholly and exclusively’ for the purpose of earning dividend income.
This article summarizes a recent ruling of the Mumbai Income Tax Appellate Tribunal (ITAT) in the case of Panatone Finvest Ltd.(Taxpayer) [2009-TIOL-717-ITAT-MUM]. The Taxpayer incurred interest expenditure on the funds borrowed for investing in shares of a company, with a view to acquire controlling interest. The ITAT held that the interest expenditure incurred is not allowable under Section 57(iii) (Section) of the Indian Tax Law (ITL), since it is not incurred ‘wholly and exclusively’ for the purpose of earning dividend income.
“There is no specific provision in Indian tax laws governing the deductibility of the payments made for acquiring spectrum,” a PwC report on the telecom sector said. With the allocation of spectrum, especially 3G being an issue of concern, rules governing the same in the taxation laws also assume significance. “Since, substantial amounts are to be involved for acquiring spectrum, determining its deductibility becomes critical,” the firm said.
A landmark decision recently delivered by the Delhi High Court in the case of CIT v. INDIAN VISIT. COM (P.) LTD. is sure to cheer the hearts of several business entities that spend large amounts in developing their websites.
