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29.11.2016 - Voice of CA presents - Updates
Tuesday, November 29, 2016

I. Headlines Today    

  1. Amendment Bill introduced in Lok Sabha to tax unaccounted cash/deposits  (Click for detail)
  2. Pay 50 per cent tax on unaccounted deposits, or 85 per cent if caught: Government  (Click for detail)
  3. PM Modi asks all BJP MPs, MLAs to submit bank account details to track transactions from Nov 8  (Click for detail)
  4. FEMA - RBI Circular No. 20: Exchange facility to foreign citizens  (Click for detail)
  5. RBI Act, 1934 - Sec. 42(1A) Requirement for maintaining additional CRR  (Click for detail)
  6. RBI relaxes cash withdrawal limits to spur deposits  (Click for detail)
  7. Sebi issues norms for bourses, clearing corporations at IFSC  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  M/s. Ripe Component Technologies Pvt. Ltd. Vs. ACIT, I.T.A. No. 163/Del/2012, Date of Order: 21.10.2016, ITAT - Delhi

Whether  Temporary structure constructed on a factory premises on lease is eligible for 100% depreciation.

Held: No

Brief Facts:
The assessee company filled its return of income and claimed 100% depreciation on temporary structure made on a leased property. The Ld. AO disallowed the assessee’s claim of depreciation on temporary structure at the rate of 100% and allowed depreciation at the rate of 10%.

The Ld. AR submitted that, the assessee took a factory premises on lease and constructed temporary structure. He further submitted that the structure erected was on purely temporary basis and once broken, would have no commercial value. On the other hand, the Ld. DR submitted that the construction carried out was in the nature of improvement of leasehold premises after taking it on lease and was for enduring benefits and not in the nature of repairs or renovation of the leased premises.

The Hon’ble Delhi ITAT held that the renovation made by the assessee company is in the nature of permanent structure by way of Brick Wall partitions, panelling of Aluminium , Flooring etc. which cannot be covered under current repairs as provided in section 30 of the Income Tax Act. Thus the expenditure so incurred is certainly capital in nature on which depreciation can only be allowed.  Further Hon’ble ITAT placed reliance on the judgment of ITAT Delhi in the case of Marubeni-Itochu Steel India Pvt. Ltd. Vs. DCIT in ITA No. 1716/Del/2014, wherein it was held that “the expenditure incurred by the assessee on the premises in the capacity of non-owner should firstly be in the nature of capital expenditure and amount so incurred would be capitalized entitling the assessee to depreciation as per the eligible rate”.

Therefore it is held that such amount was not in the nature of current repair but a capital expenditure not deductible in full.

(Please click here for judgment)


2.  ITO Vs. M/S. Empire Developers, I.T.A. No. 2321/Mum/2015, Date of Order: 01.09.2016, ITAT - Mumbai

No disallowance of interest expense can be made u/s 36(1)(iii) of the Income Tax Act, 1961 , where revenue failed to produce any evidence, indicating that the interest bearing funds were used in making investment without commercial exigencies.

Brief Facts:
Assessee  filed Tax Audit  Report and show  Nil income . The assessee, however given loans and advances and no interest has been charged on these loans.  The assessee was issued a show-cause notice as to why the interest should not be disallowed u/s 36(1)(iii) as interest bearing funds were diverted  as  interest  free loans  and advances. In reply to show cause notice assessee submitted that no new loan or advances has been  made during the year and there is no source for the same in current year and hence the details called in show cause notice is not applicable. Since assessee had not furnished any documentary evidences, AO disallowed the the claim of assessee.

The Hon’ble Mumbai ITAT  held that no evidence has been produced by the Revenue evidencing that the funds were diverted without commercial exigencies. So far as, making investment is concerned, it is the businessman who is to make the investment protecting his business interest. The AO cannot be expected to sit in the chair of the assessee and decide in which manner the investment has to be made. Action can only be taken or disallowance can be made only in a situation when it is found that the investment or granting loans is contrary to the provisions of the Act.

Appeal of the Revenue is dismissed

(Please click here for judgment)  

III. A Useful Article:

1.  Government releases Revised Model GST Law along with Draft GST Compensation Bill

(Please click here for detail)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id: 

 Golden Rules:

  "Worrying for past is like paying interest on money already paid
and worrying for future is like paying interest on money not yet borrowed"


  Thanks & Regards


Voice of CA 

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