No disallowance if interest free loan for biz purpose

If interest free loan given in business expediency to Sister concern, no disallowance can be made towards interest paid to banks.Interest free Loan to sister concern

AO has to establish the nexus between the interest bearing borrowings and interest free loan to prove that interest expenditure was for non-business purposes.




Total turnover not includes Scrap sale while computing deduction

For the purpose of calculating the deduction, according to the export related deduction provisions such as Section 10AA,80HHC, etc of the Income Tax Act, one has to take into account the profits from the business of the assessee, export turnover and total turnover.

The deduction is determined as under:

Profits of the Business          X              Export Turnover/Total Turnover

Thus, to determine the amount of deduction, the assessee and the Revenue must be aware of the following three ingredients:
i) Profits of the business
ii) Export turnover
iii) Total turnover

The term ‘turnover’ has neither been defined in the Act nor has been explained by any of the CBDT circulars. In the aforestated circumstances, one has to look at the meaning of the term ‘turnover’ in ordinary accounting or commercial parlance.

Now the dispute is that, whether sale proceed of scrap is constitute as a part of total turnover or not ?

One can very well see that if the total turnover increases, the advantage of deduction would decrease because the amount deductible substantially depends upon the ratio between the export turnover and total turnover.

IN THE SUPREME COURT OF INDIA, Commissioner of Income Tax-VII, New Delhi Versus Punjab Stainless Steel Industries Continue reading

No TDS require to be deduct on Interest payable on FDRs made in the name of the court

No Requirement to deduct TDS on Interest payable on FDRs made in the name of the Registrar General of court.

In the Honorable Delhi High Court, UCO Bank Versus DCIT


Bank accepted a Fixed Deposit (FD) in the name of Register General of this Court and issued a Fixed Deposit Receipt (FDR).

ACIT issued a show cause notice  to the petitioner bank for not deducting TDS on the interest accrued and to show cause why the petitioner bank be not treated as an assessee in default under Section 201(1)/201(1A) of the Act. The petitioner, by its reply, submitted that the said FD was in the name of Register General of this Court as a custodian and no TDS was deducted on the accrued interest because the actual beneficiary was not known as the matter was sub judice. It was also submitted that the TDS would be deducted on when payment is made to the beneficiary as may be decided by the Court. Continue reading

Roads Highway was a building & not a plant for the purpose of claiming depreciation

Whether  Bypass Toll Road Highway was a building and not a plant for the purpose of claiming depreciation?

Toll road was treated as building for the purpose of claiming depreciation @ 10% and not as a plant irrespective of the facts that assessee has sole object of construction of roads and highways.

In the case of Moradabad Toll Road Co. Ltd. Versus ACIT – DELHI HIGH COURT  Continue reading

Estimation of Income under section 145 without disclosing materials relied on is invalid.

The estimation of income made by the AO without disclosing the materials relied on and also denying assessee an opportunity was not only in violation of the statutory provisions but also in violation of the principles of natural justice.

In the case M/s. Podikunju Musaliar Memorial Educational& Charitable Trust Chandanathope, Kollam Versus Commissioner of Income Tax-KERALA HIGH COURT

Search and seizure under Section 132 of the Income-tax Act has been conducted in the premises of the assessee. After completing all procedural formalities, assessments for the years 2003-04 to 2009-10 were reopened. Accordingly, the assessments were completed where, rejecting the books of accounts of the assessee and estimated the gross profit at 40% of the gross receipts and estimated the net profit at 15% of the gross receipts. Continue reading