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17-11-2010 - Recent Updates as on 17.11.2010
Wednesday, November 17, 2010

1.   Karan Raghav Export (P) Ltd. Vs. Commissioner of Income Tax, ITA No. 955 of 2010, dated 01/11/2010, High Court of Delhi

Whether the depreciation claimed on the factory building owned by the assessee but used in the business of the firm in which the assessee was a partner, rightly rejected by the Tribunal ignoring the settled law on the issue?

The assessee's claim for depreciation allowance is required to be examined in terms of Section 32 which stipulates that asset should be owned by the assessee and it should have been used for the purpose of business of the assessee. First condition with regard to ownership of factory building is established. However, uncontroverted fact is that this factory building was not used by the assessee company but by the partnership firm for the purpose of its business. Since the use of building was not by the assessee for the purpose of its business,therefore there is no infirmity in the orders of lower authorities for declining the claim of depreciation in the hands of the assessee company in respect of factory building which was not put to use by the assessee but by the partnership firm to whom same was contributed as per the terms of partnership deed.

2.) Whether the claim for deduction of the insurance charges of `64,800 paid by the assessee against fire risk of the said factory building owned by the assessee but used in the business of the said firm in which the assessee was partner was rightly rejected by the Tribunal on the sole ground that only the interest paid on borrowals invested as capital in the partnership firm as capital is allowable as deduction? 

The assessee's claim for insurance premium in respect of this building cannot also be allowed against interest income. Only interest expenditure incurred on the amount borrowed for the purpose of contributing funds in the form of capital in partnership firm can be allowed against the interest income received from partnership firm on the credit balance of capital. Because by payment of insurance premium on building owned by assessee, it has not earned interest income. Interest income is earned because of capital contributed in the partnership firm. Had the premium paid by partnership firm the same could be considered for allowing while computing business income of partnership firm. We are therefore in agreement with learned DR that the premium paid for the building cannot be allowed in the hands of the assessee against its interest income from the partnership firm on account of capital contributed by the assessee.

(Please click here for judgment)

  

2.   The Institute of Chartered Accountants of India Vs. Director of Income Tax (Exemption),- Delhi ITAT dated 18/10/2010, ITA No. 1853/Del/2010

Held that: 

i) The major activity of the assessee revolves around chartered accountancy education and training and nominal fees are charged for this purpose. The discharge of a statutory function does not amount to a commercial or business activity. Further, the assessee is exempt not only u/s 10(23C)(iv) but also u/s 11 as an educational institute; 

(ii) There is no such requirement u/s 10(23C)(iv) of obtaining a prior permission of the CBDT as required u/s 11(1)(c) and as such the objection that overseas expenses could not have been incurred by the assessee without permission of the CBDT is not sustainable. The expenditure has been incurred on overseas travel, etc. and is for the purposes of its object Further, the mere fact that expenditure has been incurred on foreign travel does not mean that the assessee has incurred expenses for purposes which are not for India . Instead, the assessee has to maintain status and standard of professional qualification of chartered accountancy and observe developments taking place in the world.

(Please click  here for judgment)

 

3.   M/s Nahar Spinning Mills Ltd. Vs. Commissioner of Income Tax (Central), Ludhiana, ITA NO. 281 of 2004, Date of Decision: 7.10.2010, High Court of Punjab and Haryana

Whether on the facts and circumstances of the case, the Tribunal was right in law in not allowing deduction u/s 80-M of the Act to the assessee company in respect of income distributed by PNB Mutual Fund which partakes the same character as was in their hand and exempt u/s 80-M of the Act. 

The assessee has claimed deduction u/s 80M amounting to Rs.9,83,120/-. On scrutinizing the details with respect to the claim of this deduction it is seen that Rs.8,00,000/- PNB Mutual Funds is not a domestic company. It is simply a Mutual Fund whose trustee is the PNB Capital Services Ltd. Thus any receipts of dividend received from such entity which is not company itself does not make such receipts, eligible for deduction u/s 80M as under the provisions of this section, the dividend must flow from one domestic company to another domestic company. 

(Click here to see the judgment)

     

What's New 

a.   NOTIFICATION NO 10/(RE-2010)/2009-2014 - Amendment in S.No.65, Chapter 13 of Schedule 2 of ITC(HS) Classification of Export & Import Items relating to export of Gum Karaya  (Click for detail)

b.    NOTIFICATION NO 95/ 2010-Cus., (N.T.)  (Click for detail)

c.    NOTIFICATION NO 97/ 2010-Cus., (N.T.)  (Click for detail)

d.    Indirect tax collections up 42% in April-October  (Click for detail)

e.   Standing Committee on Finance invites suggestions on “the Direct Taxes Code Bill, 2010"  (Click for detail)

           
"A friend is one who has the same enemies as you have. Abraham Lincoln"
    
Thanks for your valuable time 

"Voice of CA"

CA. Sanjay Kumar Agarwal, Founder - Voice of CA
Member  Central Council - ICAI
Former Chairman - NIRC
Mob : 9811080342,
agarwal.s.ca@gmail.com 
   
   
CA. Kapil Goel, Moderator-Direct Taxes
Mob:9910272806,
kapilnkgoelandco@gmail.com

 
CA. Sidharth Jain, Co-Moderator
sidhjasso@yahoo.com 
  
CA. Mukesh K Bansal, Co-Moderator-FEMA
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mukbansal80@gmail.com 

 

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