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II. Direct Tax Case laws:
1. ITO
Vs. M/s. Wadhwa & Associates Realtors Pvt . Ltd., ITA No.
695/Mum/2012, Date of Pronouncement: 03.07.2013, Assessment Year :
2008-09, ITAT - Mumbai
Section: 194I of the Income Tax Act, 1961
Whether the payment of lease premium for allotment of a plot of land attracts provision of section 194-I of the Act.
Held: No
Facts:
The
assessee has made payment of lease premium to M/s. MMRD Ltd. amounting
to Rs. 949.92 crores for allotment of a plot of land and also for
additional FSI in respect of the said plot. The AO was of the firm
belief that the assessee was liable to deduct tax as per provisions of
Sec. 194-I and as the assessee has committed default within the meaning
of Sec. 201(1) of the Act and therefore, the assessee is treated as
assessee in default and accordingly directed the assessee to make
payment of interest alongwith TDS.
Held_lease
deed transpires that the premium is not paid under a lease but is paid
as a price for obtaining the lease, hence it precedes the grant of
lease. Therefore, by any stretch of imagination, it cannot be equated
with the rent which is paid periodically.
Following the decision of the Hon’ble Jurisdictional High Court in the case of Khimline Pumps Ltd. 258 ITR 459 that
payment for acquiring leasehold land is a capital expenditure, it was
held that the provisions of section 194-I are not attracted to the case
and assessee is not liable to deduct tax at source on such payment.
(Please click here for judgment)
2. CIT Vs. Samsung India Electronics Ltd., ITA 131/2010, Date of Pronouncement: 9.07.2013, Delhi High Court
Section: 2(11) and 37 of the Income Tax Act, 1961
Whether
the AO is justified in making the disallowance u/s 37 for the expenses
incurred by the assessee before the commencement of business operation
but after setting up of the business.
Held: No
Assessee
company was incorporated on 03/08/95 and obtained certificate of
commencement of business on 29/08/95. Assessee entered into technology
licence agreement on 12/09/95 and started its commercial operations on
01/10/95. Assessee has claimed expenses incurred on/or after 03/08/95
till 30/09/95 as revenue. The AO is of the opinion that these expenses
are pre setup expenses and they are capital in nature, therefore, they
should not be allowed u/s 37 of the Act. on appeal tribunal held that
business of the assessee could be said to have been set up on 3.9.95 as
prior to this necessary agreements had been entered into, key personnel
had been recruited and the assessee had started working necessary infra
structure like office premises, office equipments etc. and ready to
commence trading operation as on the date of incorporation viz. 3.8.95.
Accordingly, A.O. is directed to allow the revenue expenditure incurred
after the setting up of business which was 3.9.1995, notwithstanding the
fact that commercial operations started w.e.f. 1.10.1995. On further
appeal the Hon’ble High Court of Delhi upheld the decision of tribunal.
Further,
As per the definition of “Previous Year” mentioned in section 2(11),
for the purpose of a business it starts from the date of setting up of
business and in that previous year the expenses incurred in the business
can be claimed as permissible deductions.
Case Referred: Western India Vegetables Products Ltd v. CIT (1954) 26 ITR 151 (Bombay)
(Please click here for judgment)
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