1.  M/S. SIVA INDUSTRIES & HOLDINGS LTD. Vs. ACIT, I.T.A. NO. 2148/MDS/2010, ASSESSMENT YEAR : 2006-07, DATE OF ORDER : 20TH MAY 2011, ITAT – CHENNAI

For the applicability of s. 14A there must be (a) taxable income and (b) tax-free income. If either one is absent, s. 14A has no applicability. If it is assumed that s. 14A would apply even when the assessee does not have tax-free income, the expenditure would get disallowed year after year so long as the assessee held the shares and if he sold them and made a capital gain that would be taxed as well. This is not contemplated by s. 14A. If there is no claim for tax-free income, there cannot be any disallowance u/s 14A.

(ii) If the transaction of lending monies between the assessee and the AE is in foreign currency and the transaction is an international transaction, it has to be evaluated by applying the commercial principles applicable to international transaction. So, the PLR would have no applicability and the international rate being LIBOR has to be considered while determining the arm’s length interest rate in respect of the transaction between the assessee and the AE.

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2.  COMMISSIONER OF INCOME TAX, BHOPAL Vs. KEWALCHAND PRATAPCHAND, ITR No.38/98, Dated: 24th February, 2011, HIGH COURT OF MADHYA PRADESH

Whether Board Circular fixing tax effect limit for filing appeals in High Court applies even to old references made.

The Board Circular dt.27.3.2000 was applicable even to the old references which are still pending and are undecided. By circular dated 27.3.2000 financial limit to the extent of tax liability of Rs.2 lakh was fixed, which is applicable in this case. In view of the aforesaid settled position of the law by the Division Bench, the question need not be answered in the light of the aforesaid circular of the CBDT and the judgment of this Court in Ashok Kumar Manibhai Patel & Co.

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