Recently, the Mumbai bench of the Income-tax Appellate Tribunal held that the payment received by the taxpayer company towards the sale of copyright article does not amount to royalty within the provisions of Article 12(3) of the India-USA tax treaty (tax treaty).
In this case Special Bench of the Income-tax Appellate Tribunal dealt with the issue of allowability of losses on account of unmatured forward contracts in foreign exchange entered into by the taxpayer. The Special Bench while dismissing the contentions of the tax department held that the loss on unmatured forward contracts is in the nature of anticipated losses and not a contingent loss. The Special Bench observed that a binding obligation (although not fully ascertainable) arose against the taxpayer the moment it entered into forward foreign exchange contract. The Special Bench has relied on the recent decision of the Supreme Court in the case of CIT v. Woodward Governor of India [2009] 312 ITR 254 (SC) wherein the Supreme Court had held that exchange fluctuation loss arising on mark- to-market restatement of liability which is revenue in nature is an allowable loss. The Special Bench further observed that where profits were being taxed by the tax department in respect of such unmatured foreign exchange contracts then there was no reason to disallow the loss on such contracts.
Since the inception of Cenvat Credit Rules, there has been a debate on the application of Cenvat Credit Rules viz a viz trading activity. The Cenvat Credit Rules do not have any provision to govern a situation where common ‘inputs’/‘input services’ are used by an assessee engaged in providing output service/ manufacturing dutiable goods and, at the same time, also undertaking ‘trading activity’.
Recently, the Delhi bench of the Income-tax Appellate Tribunal dealt with the issue of taxability on sale of shares under India-Mauritius tax treaty (tax treaty). The Tribunal asked for either third party evidence or evidence by any government agency either situated in Mauritius or in India to be brought on record to substantiate taxpayer’s claim regarding holding board meetings in Mauritius. The Tribunal held that the documents placed on record needed examination regarding their authenticity and relevance, accordingly restored the case back to the Assessing Officer (AO) to decide the same afresh.
The Bombay High Court held that expression “order” for the purposes of section 264 of the Income-tax Act, 1961 (the Act) has a wide connotation. The words used under section 264(1) of the Act are ‘any order other than order under section 263’. Hence, the rejection of an application by the Assessing Officer (AO) for lower withholding rate under section 197 (See Note-1 Below) of the act is an ‘order’ eligible for revision by the Commissioner of Income-tax (CIT) under section 264 of the Act.
The assessee, a broker in the BSE, disclosed short-term capital gains and long-term capital gains on sale of shares. The AO accepted the LTCG as such though he held that the STCG was assessable as “business profits” on the ground that the assessee was a stock broker & there was large volume and frequency (more than 300) transactions. On appeal, the CIT (A) reversed the AO. On appeal by the department to the Tribunal, HELD dismissing the appeal:
The Adjudicating Authority has proceeded on the basis of provisions of Rule 7 and Board’s circular which according to him, the credit distributor should have distributed the service tax credit to all units. We find strong force in the contentions raised by the ld. Counsel that the decision of the Tribunal in the case of Ecof Industries (P.) Ltd. (supra) where the provisions of Rule 7 has been analysed in depth and has been settled that the ISD can distribute the credit even to only one unit.
Kerala High Court dismisses Fed. Bank’s appeal, ruling against 60% depreciation on EPABX and mobile phones. No merit found in prior period expenditure dispute.
The argument that section 90 & 91 are confined to USA Federal taxes and not to USA State taxes and that therefore the bar in s. 40(a)(ii) does not apply to USA State taxes is not acceptable because any payment of income-tax is an application of income as held in Inder Singh Gill 47 ITR 284. Further, the scheme of ss. 90 & 91 does not discriminate between Federal taxes and State taxes and though the India-USA DTAA confines the credit only to Federal taxes, the assessee will be entitled to relief u/s 91 in respect of both taxes as that will be more beneficial to the assessee vis-à-vis tax credit under DTAA. Consequently, the bar against deduction in s. 40(a)(ii) will apply to USA State taxes as well though the assessee will be entitled to credit in respect of USA State taxes.
As a pawnee/pledgee, the assessee does not have absolute rights over the shares. He could sell the security in a manner contemplated by law. In case the proceeds were greater than the amount due to him, he had to pay the surplus to the pawnor.
