section 43

Disallowance of Depreciation | Section 43(1) | Cash Payment for Fixed Assets

Income Tax - Disallowance of Depreciation section 43(1)) Disallowance of Depreciation where cash payment exceeding Rs. 10,000 is made for purchase of asset (Amendment to section 43(1)) Clause (1) of section 43 defines ‘actual cost’ for the purposes of claiming depreciation. The cost in acquisition of any asset or part thereof in respect of...

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Disallowance of depreciation & capital expenditure on cash payment

Income Tax - Under the existing provisions of the Act, revenue expenditure incurred in cash exceeding certain monetary threshold is not allowable as per sub-section (3) of section 40A of the Act except in specified circumstances as referred to in Rule 6DD of the Income-tax Rules, 1962....

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Assessment of Income from Transactions in Shares and Securities as Business Income

Income Tax - Assessment of income from transaction in shares and securities under the Income-tax Act 1961 involves multiple issues. Such transactions give rise to income assessable under different heads of income e.g. business income, capital gain and income from other sources. This article is an attempt to discuss some major issues involved in assess...

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Income Tax Law Relating To Cash Transactions

Income Tax - A number of new provisions have been introduced in the Income Tax Act from time to time to put restrictions on cash transactions as well as to incentivise the non-cash transactions. Cash transactions have always played a major role in the Indian Economy and consistently were responsible for generation and accumulation of Black Money. The ...

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Restrictions on Cash Transactions under Income Tax Act, 1961

Income Tax - In order to restrict cash transactions, the government has come out with several provisions and related rules to prohibit various types of cash payments in the Finance Acts. The effects of restrictions under provisions of income tax act are as follows: Restrict cash transactions by disallowances of expenses or deduction under chapter VIA ...

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Depreciation cannot be claimed on Enhanced Value of second hand Windmill

V.Sabitamani Vs Asst.CIT (Madras High Court) - The issue under consideration is whether the actual purchase price of a second-hand asset can be ignored by purported recourse to Explanation 3 to Section 43(1) of the Income Tax Act, 1961?...

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ITAT allows set-off of Derivative losses against Business Income

Magic Share Traders Ltd Vs ITO (ITAT Ahmedabad) - Magic Share Traders Ltd Vs ITO (ITAT Ahmedabad) The issue under consideration is whether a company dealing in ‘derivatives’ could be considered as engaged in speculative business as per Section 73 or not? In the present case, the assessee seeks set off of losses arising from derivative losses as...

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Income arising out of trading of commodities at unrecognized stock exchange amounts to speculation income

DCIT Vs. Ms. Edelweiss Capital Ltd. (ITAT Mumbai) - Ms. Edelweiss Capital Ltd. Vs DCIT (ITAT Mumbai) From the record, we found that assessee was carrying out business of commodity trading on un-recognised exchange and also business of trading in shares. Assessee has claimed set off of loss arising out of trading in shares against the income arising o...

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Explanation to section 73 supersede provision of section 43(5)(d)

ITO Vs. M/s. Arandi Investments Pvt. Ltd. (ITAT Mumbai) - ITO Vs. M/s. Arandi Investments Pvt. Ltd. (ITAT Mumbai) Assessing Officer treated loss in future and options (F&O) transactions as speculation loss and disallowed the same. We find that on this issue, the A.O. has referred to Honorable Delhi High Court decisions on identical issue. The Honorable...

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Derivatives Profit / Loss: Section 43(5)(d) applies from AY 2006-07

M/s. Nilliampathy Tracon (P) Ltd. Vs. A.C.I.T. (ITAT Kolkata) - Kolkata bench of Income Tax Appellate Tribunal (ITAT) has recently held that loss derived from trading in derivatives carried out prior to 25/01/2006 cannot be treated as speculative loss and it should be treated as normal business loss under the provisions of the Income Tax Act, 1961. ...

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CBDT notifies more modes of e-payments; 6DD limit reduced to ₹ 10000

Notification No. 08/2020-Income-Tax [G.S.R. 56(E)] - (29/01/2020) - Notification No. 8/2020-Income-Tax- CBDT has notified Other electronic modes by inserting New Income TAx Rule 6ABBA. It also amended marginal heading of rule 6DD and in rule 6DD for the words ‘account payee bank draft, exceeds twenty thousand rupees’, the words, figures and letters ̵...

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CBDT notifies Ace Derivatives and Commodity Exchange Ltd.’ for trading of commodity derivative U/s. 43(5)

Notification No. 15/2014-Income Tax - (20/03/2014) - Notification No. 15/2014-Income Tax entral Government hereby notifies the Ace Derivatives and Commodity Exchange Limited, Ahmedabad as a recognised association for the purposes of clause (e) of the proviso to clause (5) of the section 43(5), with effect from the date of publication of this notificat...

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Recent Posts in "section 43"

Disallowance of Depreciation | Section 43(1) | Cash Payment for Fixed Assets

Disallowance of Depreciation section 43(1)) Disallowance of Depreciation where cash payment exceeding Rs. 10,000 is made for purchase of asset (Amendment to section 43(1)) Clause (1) of section 43 defines ‘actual cost’ for the purposes of claiming depreciation. The cost in acquisition of any asset or part thereof in respect of...

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Posted Under: Income Tax |

Depreciation cannot be claimed on Enhanced Value of second hand Windmill

V.Sabitamani Vs Asst.CIT (Madras High Court)

The issue under consideration is whether the actual purchase price of a second-hand asset can be ignored by purported recourse to Explanation 3 to Section 43(1) of the Income Tax Act, 1961?...

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Disallowance of depreciation & capital expenditure on cash payment

Under the existing provisions of the Act, revenue expenditure incurred in cash exceeding certain monetary threshold is not allowable as per sub-section (3) of section 40A of the Act except in specified circumstances as referred to in Rule 6DD of the Income-tax Rules, 1962....

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Posted Under: Income Tax | ,

Assessment of Income from Transactions in Shares and Securities as Business Income

Assessment of income from transaction in shares and securities under the Income-tax Act 1961 involves multiple issues. Such transactions give rise to income assessable under different heads of income e.g. business income, capital gain and income from other sources. This article is an attempt to discuss some major issues involved in assess...

Read More
Posted Under: Income Tax |

Income Tax Law Relating To Cash Transactions

A number of new provisions have been introduced in the Income Tax Act from time to time to put restrictions on cash transactions as well as to incentivise the non-cash transactions. Cash transactions have always played a major role in the Indian Economy and consistently were responsible for generation and accumulation of Black Money. The ...

Read More
Posted Under: Income Tax |

ITAT allows set-off of Derivative losses against Business Income

Magic Share Traders Ltd Vs ITO (ITAT Ahmedabad)

Magic Share Traders Ltd Vs ITO (ITAT Ahmedabad) The issue under consideration is whether a company dealing in ‘derivatives’ could be considered as engaged in speculative business as per Section 73 or not? In the present case, the assessee seeks set off of losses arising from derivative losses as non-speculative business losses. The Re...

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Restrictions on Cash Transactions under Income Tax Act, 1961

In order to restrict cash transactions, the government has come out with several provisions and related rules to prohibit various types of cash payments in the Finance Acts. The effects of restrictions under provisions of income tax act are as follows: Restrict cash transactions by disallowances of expenses or deduction under chapter VIA ...

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Posted Under: Income Tax |

Cash Transaction – Limit & Consequences of Non-Compliance under Income Tax Act

Cash transaction leaves no trail of the payer that causes tax evasion & black money. It affects the Indian economy by dual aspect one is revenue deficit to government and another one is unaccounted money that cannot flow in the economy.  Both of these problems terribly effects the development of a country. That’s why government [&h...

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Posted Under: Income Tax |

Taxation of Derivatives

Since, there is no transfer or delivery of the underlying asset in case of futures, the income or loss from it cannot be taxed under the head “capital gains. Therefore, depending upon the fact whether the assessee is a trader or an investor, the head of income — that is, income from business and profession or income from other sources...

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Posted Under: Income Tax |

CBDT notifies more modes of e-payments; 6DD limit reduced to ₹ 10000

Notification No. 08/2020-Income-Tax [G.S.R. 56(E)] (29/01/2020)

Notification No. 8/2020-Income-Tax- CBDT has notified Other electronic modes by inserting New Income TAx Rule 6ABBA. It also amended marginal heading of rule 6DD and in rule 6DD for the words ‘account payee bank draft, exceeds twenty thousand rupees’, the words, figures and letters ‘account payee bank draft or use of ele...

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All About Speculative Business and Speculative Transactions

Article explains how Speculative Business is Distinct Business, What is speculative transaction, What shall not deemed to be speculative transactions, What is Eligible Transaction for security derivative, Recognised stock exchange for Section 43(5), Recognised association for Section 43(5), What are the Eligible Transaction for Commodity ...

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Posted Under: Income Tax |

Contribution to Provident Fund- Tax ability- Employer’s View

According to section 36(1)(iv) any sum paid by the assessee as an employer by way of contribution towards a recognized provident fund shall be allowed as a deduction in computing the income referred to in section 28 (income under PGBP)....

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Posted Under: Income Tax |

Speculative Transactions A Brief Note

Speculative transaction means a transaction in which a contract for the purchase or sales of any commodity including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips [section 43(5)]. Here important term is periodically or ultimately settled otherwise than...

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Posted Under: Income Tax |

Treatment of Cash Transactions above Rs 2 Lakhs

As we all are aware of Section 269ST which was introduced by finance act, 2017 in Income tax act, 1961 by the central government in order to curb the tax evasion, regulation and circulation of Black money. This article will cover the detailed analysis of the said section alongwith some practical examples. 1. Basic Understanding […]...

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Derivatives- Income Tax Provisions

According to Securities Contract Act 1956, the derivative is a contract between two or more parties, and its price is directly related to the fluctuations of price of the underlying asset. The most common types of derivatives in India are futures and options. Futures: Future is a contract to buy or sale an underlying asset […]...

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Posted Under: Income Tax |

Income arising out of trading of commodities at unrecognized stock exchange amounts to speculation income

DCIT Vs. Ms. Edelweiss Capital Ltd. (ITAT Mumbai)

Ms. Edelweiss Capital Ltd. Vs DCIT (ITAT Mumbai) From the record, we found that assessee was carrying out business of commodity trading on un-recognised exchange and also business of trading in shares. Assessee has claimed set off of loss arising out of trading in shares against the income arising out of trading in commodities. The [&hell...

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Explanation to section 73 supersede provision of section 43(5)(d)

ITO Vs. M/s. Arandi Investments Pvt. Ltd. (ITAT Mumbai)

ITO Vs. M/s. Arandi Investments Pvt. Ltd. (ITAT Mumbai) Assessing Officer treated loss in future and options (F&O) transactions as speculation loss and disallowed the same. We find that on this issue, the A.O. has referred to Honorable Delhi High Court decisions on identical issue. The Honorable Delhi High Court in the case of CIT [&h...

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Trading in agricultural commodity derivatives – Non-speculative transaction

It is proposed to amend the provisions of clause (5) of section 43 to provide that a transaction in respect of trading of agricultural commodity derivatives, which is not chargeable to CTT, in a registered stock exchange or registered association, will be treated as non-speculative transaction....

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Posted Under: Income Tax |

Derivatives Profit / Loss: Section 43(5)(d) applies from AY 2006-07

M/s. Nilliampathy Tracon (P) Ltd. Vs. A.C.I.T. (ITAT Kolkata)

Kolkata bench of Income Tax Appellate Tribunal (ITAT) has recently held that loss derived from trading in derivatives carried out prior to 25/01/2006 cannot be treated as speculative loss and it should be treated as normal business loss under the provisions of the Income Tax Act, 1961. ...

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Section 43(5)(d) applicable only on derivatives trading (future & options) and not on share trading

ACE India Medical Systems Vs ACIT (ITAT Jaipur)

In the case of ACE India Medical Systems Vs. ACIT Jaipur Bench of ITAT held that from the bare reading of the section 43 (5) (d) it is prima facie clear that Section 43(5)(d) is for trading in derivatives not trading of shares....

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Loss from Forex Derivative trading upto export turnover is business loss & not speculative loss

M/s. Majestic Exports Vs JCIT (ITAT Chennai)

In the case of M/s. Majestic Exports vs. JCIT, ITAT Chennai held that the loss in the transactions of the forex derivatives contracts will be considered to be the business loss and the same can be set off against the business income. ...

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Is Loss from derivative trading is a speculation loss & can it be set-off against normal business profits

ITO Vs Emperor International Ltd (ITAT Delhi)

In the present case, it is an admitted fact that the assessee was engaged in the business of dealing in shares & securities and has incurred loss from dealing in derivatives (shares futures). It is not the case of the AO that the share futures in which the assessee was dealing were not recorded in recognized Stock Exchange, the loss incur...

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CBDT notifies Ace Derivatives and Commodity Exchange Ltd.’ for trading of commodity derivative U/s. 43(5)

Notification No. 15/2014-Income Tax (20/03/2014)

Notification No. 15/2014-Income Tax entral Government hereby notifies the Ace Derivatives and Commodity Exchange Limited, Ahmedabad as a recognised association for the purposes of clause (e) of the proviso to clause (5) of the section 43(5), with effect from the date of publication of this notification in the Official Gazette. ...

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Jobbing is not speculative in view of proviso(c) to section 43(5)

Commissioner Income Tax Vs Sri Ram Kishan Gupta (Allahabad High Court)

This proviso makes it very clear that any profit or loss on account of jobbing will not be in the nature of speculation profit or speculation loss. Thus, even if it is accepted that the loss suffered by the appellant was on account of self-trading in view of proviso (c) to section 43(5) such loss cannot be treated as speculation loss....

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FII cannot have business profits – Derivatives income not taxable as speculation income to FIIs

Platinum Asset Management Ltd. Vs Dy. Director of Income Tax (ITAT Mumbai)

In view of above order and respectfully following the decision of Co-ordinate Bench of the Tribunal (supra), we decide Ground No.2 of the appeal in favour of assessee. Accordingly, we hold that the income arising from transaction in derivative by assessee(s), being sub-account FII cannot be treated as business profit or loss....

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Despite Section 43(5) Exemption, Derivatives Loss Is Speculation Loss For Companies

The Commissioner of Income Tax Delhi-IV Vs DLF Commercial Developers Limited (Delhi High Court)

Did the Income Tax Appellate Tribunal (ITAT) fall into error in not holding that the loss of Rs. 4,92,71,000/- on account of derivative transaction was a speculative loss, and was entitled to the benefit of Section 73, in view of the Explanation to Section 73 of the Income Tax Act...

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Recent drop in Ruppee Value gives rise in tax depreciation -Relevant provisions of Section 43A

On the question whether an Assessee is entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at the time of making PAYMENT towards the whole or part of cost of the asset or towards repayment of whole or a part of the moneys borrowed by him from any person direc...

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Posted Under: Income Tax |

Foreign Currency Forward Contract Loss is not Speculation Loss

Commissioner of Income Tax III Vs Panchmahal Steel Ltd (Gujarat High court at Ahmedabad)

Learned counsel for the Revenue stated that said decision of this Court was not carried in appeal on the ground that it involved tax effect lower than what is prescribed by the CBDT in circular dated 9.2.2011 permitting the Revenue to carry such appeal before the Supreme Court. Counsel for the Revenue was unable to point out any factual d...

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Section 43A : Actual payment was not a condition precedent for making necessary adjustment in carrying cost of fixed asset acquired in foreign currency

Oil & Natural Gas Corp. Ltd. Vs Commissioner of Income Tax (Supreme Court of India)

Opining that the amendment of Section 43A of the Act by the Finance Act, 2002 with effect from 1st April, 2003 is amendatory and not clarificatory and would thus, apply prospectively, the Court explained that under the unamended Section 43A, adjustment to the actual cost takes place on the happening of change in the rate of exchange, wher...

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Rate of depreciation applicable to bridges and flyovers constructed and owned by an infrastructure company

Maharashtra State Road Development Corpn. Ltd. Vs. ACIT (ITAT Mumbai)

Thus we find, if the functional test for a plant enunciated by Apex Court and jurisdictional court in their decisions referred to supra is applied to the facts of the present case, we have no hesitation in holding that roads, flyovers bridges etc., constructed and owned by the assessee and utilised in its business of ...

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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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Derivative transactions prior to amendment in section 43(5) (effective from AY 2006-07) are speculative transaction

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

Recently, the Special Bench of the Kolkata Income-tax Appellate Tribunal (the Tribunal) in the case of Shree Capital Services Ltd. v. ACIT (2009-TIOL-542-ITAT-KOL-SB) while dealing with a case prior to the amendment to section 43(5) of the Income-tax Act, 1961 (the Act) exempting derivative transaction as speculative in nature, held that ...

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Burden to determine "actual cost" of assets in accordance with law is on Assessing officer

Chitra Publicity Co. Pvt. Ltd. Vs ACIT (ITAT Ahmedabad)

After careful consideration of1 above provisions and facts and circumstances of the case, I am unable to accept the stand of the Revenue. As noted above actual cost should ordinarily mean real cost or real worth of assets. If it is not market value, then what is it? Mechanism to take W.D.V as provided in Explanation 2 to Section 43(6)(c) ...

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Allowability of Interest liability discharged by way of issuance of shares

SRF Ltd. Vs DCIT (ITAT Delhi 'H' Bench)

SRF Ltd. v. DCIT, (ITAT Delhi) In the present case it is seen that the liability was discharged by way of issuance of shares. When the assessee issues shares the assessee does not incur any expenditure as the assessee is not to make any payment legally towards shares issued. The shares cannot be equated with debentures, which is purely b...

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Reopening under section 147 by the AO on the same set of facts, without there being any additional information, can only be considered as change of opinion

Fluroscent Fixtures Pvt. Ltd. Vs ITO (ITAT Mumbai 'F' Bench)

As can be seen from the above the adjustment made by the assessee is according to the provisions of the Act. Since both the industrial galas fall within the block the WDV is increased by the actual cost of the asset falling within the block and reduced by the amount payable in respect of the asset sold. Accordingly we do not find any mist...

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Loan ‘waiver’ does not fall into either of three terms subsidy / grant and reimbursement

Steelco Gujarat Ltd. Vs ACIT (ITAT Ahmedabad)

. The undisputed facts are that the assessee had plant and machinery already existing prior to the receipt of finance from Wipro Finance Ltd. It is apparent from the chart of payment referred to by the learned AR of the assessee. This clearly indicates that the loan was not given directly or indirectly for the purpose of purchasing plant ...

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The depreciation cannot be taken as ‘notionally allowed’, but only as ‘actually allowed’

Padmavathi Srinivasa Cotton Ginning & Pressing Factory Vs DCIT (ITAT Vishakhapatnam)

The effect of omission of section 34 and Rule 5AA and consequential amendment in section 32 by omitting reference to section 34 makes it clear that one cannot taken support from the decision of the Hon'ble Apex Court in the case of Mahendra Mills, supra, after the amendment. Section 43(6) of the Act which defines the term "Written Down Va...

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Allowability of deduction U/s. 10B to company engaged in business of contract research and in providing of laboratory facility to its parent company in USA

Enem Nostrum Remedies (P.) Ltd. Vs Assistant Commissioner of Income-tax (ITAT Mumbai)

Section 10B of the Income-tax Act, 1961 - Export oriented undertaking - Assessment year 2003-04 - Assessee-company was engaged in business of contract research and in providing of laboratory facility to its parent company in USA - It had claimed exemption under section 10B - Assessing Officer observed that assessee was not manufacturing o...

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In mercantile method of accounting allowability of expenditure depend on liability to pay

CIT Vs Panacea Biotech Ltd. (Delhi High Court)

So far as the contention with regard to the disallowing the claim on the expenditure incurred on the purchase of two machineries is concerned, the counsel for the Revenue has urged that though with respect to the first machinery an advance payment was made within the Assessment year, with respect to the second machinery no payment at all ...

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Derivatives in which underlying asset is shares, will fall within the meaning of ‘commodity’ used in Sec. 43(5) of the Act

Shree Capital Services Ltd. Vs ACIT (ITAT Kolkata)

Speculative transaction is a transaction in which contract for purchase and sale of any commodity is settled otherwise than by actual delivery. It is not in dispute that in the case of transaction in derivatives, the transaction is always settled otherwise than by actual delivery. ...

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Voluntary retirement compensation and chargeability to tax if payment is stretched over a period of years

ITO Vs Dhan Sai Srivas (Chhattisgarh High Court)

Benefit in lieu of salary payable to an employee opting for voluntary retirement is exempted from being charged to tax to the extent of Rs. 5 lakhs by reason of section 10(10C); even if the payment is stretched over a period of years, the same would not become chargeable to tax in any subsequent assessment year...

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If part of company business is deal in shares then all types of transactions, whether delivery based or non-delivery based, will be treated as speculative transactions

Metropolitan Traders Pvt. ltd. Vs ITO (ITAT Mumbai)

Admittedly, the assessee company was dealing in Cement and also engaged in the business of dealing in shares. There is no dispute over the fact that the assessee had taken delivery of shares before selling them. The assessee company had claimed set off of unabsorbed speculation loss relating to assessment year 1995-96 and 1997-98 carried ...

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Even if Income is exempt Assessee need to adjust written down value of fixed Assets with depreciation as per Income tax Act, 1961

1/ 2009 (27/03/2009)

Some persons were exempt from tax and, therefore, not required to compute their income under the head “profits and gains of business or profession”. Upon withdrawal of exemption, such persons became liable to income-tax and hence were required to compute their income for income-tax purposes. In this context, dispute has arisen regardi...

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Posted Under: Income Tax |

Income Tax – No physical delivery of shares – Share trading loss is speculative loss – ITAT

THE Assessing Officer during the course of assessment proceedings observed that the assessee has claimed share trading loss of Rs.7,91,263/ -. From the various bills furnished by the assessee including the brokers notes, the Assessing Officer observed that the assessee has not taken physical delivery of shares purchased but only paid marg...

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Posted Under: Income Tax |

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