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14.10.2013 - Voice of CA presents - Updates
Monday, October 14, 2013



  I.  Today's Headlines   

1. CBDT issues circular on income tax deduction from salaries for financial year 2013-14. vide CIRCULAR NO : 08 /2013 F.No. 275/192/2013-IT(B), dated the 10th October, 2013. (Click here for detail).
 
2. RBI permits banks to access overseas funds from international financial institutions till November 30, 2013(Click here for detail).
 
3. SEBI permits listing of SMEs without IPO. (Click here for detail) .
 
4. Foreign borrowing norms eased; banks can access overseas funds from other entities as permitted by RBI. (Click here for detail).

II.  Direct Tax Case laws:

1. COMMISSIONER OF INCOME TAX VERSUS M/S EXCEL INDUSTRIES LTD., CIVIL APPEAL NO.125 OF 2013, 08.10.2013, SUPREME COURT OF INDIA.
 
Whether income has accrued must be considered from a realistic & practical angle.
 
Held Yes
 
The assessee accounted for the benefit of the entitlement to make duty free imports in the year of export but claimed that the benefit was not chargeable to income-tax in the year in which the exports were made but it was chargeable to tax only in the year in which the imports were availed of and the raw materials consumed. The AO rejected the contention and held that as the assessee was following the mercantile system of accounting, the right to receive the benefit accrued as soon as the export obligation was fulfilled and it was chargeable to tax in that year u/s 28(iv). On appeal, the CIT(A), Tribunal and High Court upheld the assessee’s stand. On appeal by the department to the Supreme Court, HELD dismissing the appeal:
(i) Three tests have been laid down by various decisions of the Supreme Court to determine when income can be said to have accrued: (a) whether the income is real or hypothetical; (b) whether there is a corresponding liability of the other party to pay the amount to the assessee & (c) the probability or improbability of realisation of the income by the assessee has to be considered from a realistic and practical point of view. Applying these tests, on facts, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee. Also, from a realistic and practical point of view (the assessee may not have made imports), no real income accrued to the assessee in the year of exports and s. 28(iv) would be inapplicable. Essentially, the AO is required to be pragmatic and not pedantic. 
 
2. CAIRN UK HOLDINGS LTD. V. DIRECTOR OF INCOME-TAX, WRIT PETITION (CIVIL) NO. 6752 OF 2012, DATE OF ORDER: OCTOBER  7, 2013 
 
Whether the assessee who avails benefits of the first proviso to Section 48, is entitled to benefit of lower rate of taxunder the proviso to Section 112(1) of the Act.

Held Yes

Proviso to section 112(1) doesn't deny benefit of lower tax rate of 10% on long-term capital gains from sale of listed securities to a non-resident investor availing benefit of exchange rate neutralization under first proviso to section 48. The said benefit of lower tax rate of 10% can't be denied on the ground that indexation benefit under 2nd proviso is not applicable. It is incorrect to say that 10% rate under proviso to section 112(1) applies only where indexation benefit under 2nd proviso to section 48 applies and still assessee opts to not avail it.


 Golden Rules:

"When something goes wrong, take a moment to be thankful for the many more things that are still going right"

  Thanks & Regards

Team

Voice of CA 

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