No capital gain on merely issuing allotment letter for giving possession

No capital gain accrued by mere issuing allotment letter which merely entitles the possession of the plot to the prospective buyers.

In the case of Sujata Farms Pvt. Ltd. Versus DCIT, Circle – 6, Pune – ITAT PUNE

The Assessing Officer claimed that the assessee company is following mercantile system of accounting and therefore, it was required upon the assessee company to recognize sales, on handing over the possession of the plot of land i.e. the date of letter of allotment. In the opinion of the Assessing Officer the assessee company has not recognized the sales and accordingly, correct income has not been declared in all these assessment years.

However assessee company claims that merely handing over possession of plots of land to the buyers by issuing the letters of offer and allotment, transactions would not declared as a sales. Continue reading

HC rules in favor of Vodafone in Transfer Pricing case.

Bombay High Court ruled in favor of Vodafone in transfer pricing dispute of Rs.3200 crore regarding under-priced valuation of shares. There are atleast 20 other companies that are facing the same disputes and the ruling of Bombay High Court in favor of Vodafone gives relaxation to these 20 companies to the some extent.

Vodafone India (Subsidiary) issued the right share at share premium to its UK based Parent Company ( Vodafone Group Plc) and method for the valuation of share was duly approved by RBI. However tax department disputed on valuation at which Vodafone India had issued shares to its UK based parent company, the tax department used a methodology called discounted tax flow to arrive at a higher value per share. Department has accused Vodafone India for violating transfer pricing regulations by claiming that the value of right share had been under-priced which is meant the Parent company ( Vodafone Group Plc) paid less to get a higher stake in Vodafone India and the same is liable to tax.

Now the question arises whether the issuance of shares gives rise to income under transfer pricing regulation? Continue reading

B/F unabsorbed depreciation can be set off against Unexplained Income u/s 68

The unexplained income under section 68 of Income Tax Act, 1961 is chargeable to tax as income from other sources and because of the same, it forms part of the total income of the assessee. Further section 32(2) of Income Tax Act provides that  brought forward depreciation merges with the depreciation of the current year and becomes current year’s depreciation which is permitted to be set off against any income of the current year other than salary. Hence brought forward unabsorbed depreciation can be set off against Unexplained Income u/s. 68 under Income Tax Act.

In the case ACIT vs. M/s. Shree Raghupati Fibres Pvt. Ltd., (ITAT Ahmedabad )

The A.O. was of the opinion that addition u/s 68 of the Act does not form part of any specific head of income and it is definitely not business income. He therefore held that brought forward unabsorbed depreciation cannot be allowed set off against unexplained income u/s 68 of the I.T. Act. Continue reading

Even standard rent not fixed, AO cannot ignore it while computing income from house property

Even if standard rent has not been fixed under the Rent Control Legislation by the competent authority with respect to the house property covered under rent control act, AO cannot ignore the standard rent while computing income from house property.

Currently in various state’s rent control act, ceiling defined for rent is surprisingly very low as compare to fair rent which similar property can fetch in same/similar locality. As per the Income Tax Act, 1961 income from house property is taxable even the owner of house property earning nothing from it (apart from one self occupied house property). Income from House Property is the only a head under which income tax is chargeable on notional basis. Further as per section 23 of Income Tax Act, 1961 if the property is covered by rent control act, then the annual letable value cannot exceeds the standard rent.  Continue reading

Interest on refund under section 244(1A) once granted, cannot be withdrawn

Interest on refund under section 244(1A) once granted, cannot be withdrawn through rectification order under section 154. Since granting the interest on refund cannot be said to be a mistake apparent from record as it was arrived after due application of mind.

Shri A. Younuskunju, Younus Cashew Industries Versus The Deputy Commissioner of Income-tax – ITAT COCHIN

In this case the Assessing officer issued notice u/s. 154 of the I.T. Act purporting to rectify mistake in the proceedings on the plea that these were an omission to charge interest u/s. 220(2) of the I.T. Act which constituted a mistake apparent on the face of the record. Further, there is levy of interest u/s. 245D(6A) and withdrawal of interest on refund u/s. 244(1A) of the I.T. Act.

Regarding withdrawal of interest on refund already granted u/s. 244(1A), the CIT(A) observed that u/s 244(1A), interest is to be granted if the whole or in part of the refund referred to in sub-section (1) of sec. 244 is due to the assessee as a result of any amount having been paid by him after the 31st day of March, 1975 in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceedings under this Act be in excess of the amount with such assessee is liable to pay as tax or penalty as the case may be under the Act. To be entitled to interest u/s. 244(1A) of the I.T. Act, the assessee must be entitled to refund. However, in this case, the CIT(A) observed that assessee is not entitled to any refund. Further with respect to the order u/s. 154 of the I.T. Act, the assessee was required to pay additional demand with reference to the tax and interest calculated vis-à-vis the payment made by him as tax. Hence, the CIT(A) confirmed the disallowance of interest u/s. 244(1A) of the Act made by the Assessing officer. Against this, the assessee filled appeal before tribunal. Continue reading