Connect us       New User?     Subscribe Now
Confirm your Email ID for Updates
19.10.2016 - Voice of CA presents - Updates
Wednesday, October 19, 2016

I. Headlines Today    

  1. CBDT notifies final rules on buy-back of shares  (Click for detail)
  2. Taxmen to dissect 60 cases in foreign assets disclosure window  (Click for detail)
  3. GST Council mulls five rate slabs  (Click for detail)
  4. GST standard rate should be 26%  (Click for detail)
  5. Senior Citizen’s Welfare Fund (Amendment) Rules, 2016-Amendment in Rule 4  (Click for detail)
  6. Reconstruction or splitting up has been made to transfer any assets of the demerged company to the resulting company Agreement and Share Purchase Agreement  (Click for detail)
  7. ICAI: Guidance Note on Audit of Consolidated Financial Statements (Revised 2016)  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  CIT Vs. Mrs. Shakuntala Devi, I.T.A. No. 340/2009, Date of Order: 28.09.2016, High Court of Karnataka

Whether the sale consideration received by the assessee is entitled to benefit u/s 54 of the Income Tax Act, even though the transaction for purchase of new property was not completed and possession was also not handed over to the assessee within 2 years?

Held:  Yes

Brief Facts:
Assessee had sold a flat at Mumbai and had worked out a LTCG and had claimed exemption u/s 54 of the Act on the ground that she had reinvested the said amount for purchasing another property at Mumbai by paying an advance. The AO held that the sale transaction of new property had not been concluded, no registration of sale deed had taken place and balance consideration amount was yet to be paid even after 2 years of sale of the flat and as such, deduction claimed was disallowed. The ld. DR contended that the entire sale consideration had not been paid by the assessee for purchase of new property and what had been invested by her is only a portion of total sale consideration and also that possession of the property proposed to be purchased was not delivered to the assessee within two years and as such, assessee would not be entitled to claim benefit under Section 54. Whereas the ld. AR contended that it is the utilization of amount, which was received by the assessee by sale of property, which had to be reinvested for the purposes of claiming benefit and said exercise having been undertaken, must grant the assessee benefit of claiming LTCG as provided u/s 54.

It was held that the intention of Legislature was to encourage the investment in the acquisition of residential house or construction thereof and the condition precedent for claiming benefit under said provision is that the capital gains realized from sale of a capital asset should be reinvested either in purchasing a residential house or utilised for constructing a residential building and thus, if it is established that consideration so received on alienation of property has been invested in either purchasing a residential building or spent on construction of residential building, an assessee would be entitled to the benefit of Section 54 irrespective of the fact that transaction not being complete in all respects. The main purpose of Section 54 is to give relief in respect of profits on the sale of a residential house and in the instant case consideration paid by assessee under Memorandum of Understanding of the purchase of new flat covered fully the consideration of capital gains portion for being eligible to claim exemption.

(Please click here for judgment)

2.  M/s Power Grid Corporation of India Ltd. Vs. DCIT, I.T.A. Nos. 2397 & 2398/Del/2014, Date of Pronouncement: 06.10.2016, ITAT - Delhi

Whether Section 14A can be invoked, where no regular activities were undertaken by the Assessee in respect of the investments to earn exempt income and no change in the investments during the year?

Held: No

Brief Facts:
The assessee company is engaged in the business of transmission of power, telecom and consultancy. It filed its return of income on 22.09.2009 showing NIL income. MAT was paid on book profit under Section 115JB of the Income Tax Act, 1961. The return was revised by the company to claim the credit of TDS not claimed in the original return of income. During the course of scrutiny assessment proceedings, the AO found out that the assessee had made investment in the shares, securities and advances and has also received dividend as well as interest income from tax free bonds and advances. The assessee has so motu disallowed the expenses in respect of exempted income. However, the AO made the disallowance of the expenditure attributable to the income not forming part of the total income as per the provisions of Section 14A of the Income Tax Act, 1961 read with rule 8D. On making an appeal to the CIT(A), the orders of the AO were upheld. Aggrieved by which, the assessee is in appeal before the ITAT.

The assessee received dividend incomes. From the annual accounts of the assessee company, it is observed that there is no change in the investments during the year. The dividend received from the companies has been credited to the bank account. Also, there is no regular activities were undertaken by the Assessee in respect of the investments to earn income there from. Therefore, there was no basis for the AO to hold that the expenditure as disclosed by the Assessee towards earning exempt income was insufficient. The appeal of the assessee was allowed

(Please click here for judgment)

 Golden Rules:

  "Discussion is an exchange of thoughts and knowledge, promote it.
Argument is an exchange of ego and ignorance, avoid it."


  Thanks & Regards


Voice of CA 

« Back
Online Poll
Connect Us       New User?     Subscribe Now