On transfer of technical manpower upto 50%, deduction u/s 10A/AA cannot be denied.

Mere transfer or redeployment of existing technical manpower to the extent of “50% of total technical manpower actually deployed in new unit” from an existing unit to a new SEZ unit in the first year of commencement of business will not construed as splitting up or reconstruction of an existing business. Hence deduction under section 10A or 10AA of the act cannot be denied.

Earlier, CBDT had issued circular no. 12/2014 dated 18th July, 2014 to clarify that mere transfer or re-deployment of existing technical manpower from an existing unit to a new SEZ unit in the first year of commencement of business will not be construed as splitting up or reconstruction of an existing business, provided the number of technical manpower so transferred does not exceed 20 percent of the total technical manpower actually engaged in developing software at any point in the given year in the new unit.
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Tolerable limit for determination of Arm Length Price changed

Tolerable limit for determination of Arm Length Price with respect to international transactions and specified domestic transaction has been notified separately for “wholesale trading” and “cases other than wholesale trading” at the rate of 1% and 3% respectively.

The “arm’s length principle” of transfer pricing states that the amount charged between related parties for a given product must be the same as if the parties were not related. An arm length price for a transaction is therefore what the price of that transaction would be on the open uncontrollable market. For commodities, determining the arm’s-length price can sometimes be as simple a matter as looking up comparable pricing from non-related party transactions, but when dealing with proprietary goods and services or intangibles, arriving at an arm’s length price can be a much more complicated matter. 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

NIL TDS Certificate issued to each deductor separately

With effect from 24th September, 2014, Certificate for NIL TDS under section 197 to be issued to each deductor separately. No Nil TDS Certificate shall be valid if issued otherwise than to the person responsible for deducting the tax. However, common certificate for lower deduction of TDS to be issued to deductee only. Notification No. 46/2014 w.e.f 24-09-2014. Continue reading