No Depreciation to development of roads/highways

As we all aware as per section 32(1) no assessee can claim depreciation on any asset until unless assessee owned such asset wholly or partly.

The problem is that whether the assessee developing roads and highway on BOT basis is eligible for depreciation ?

In simple words, A big No if assessee do not own such infrastructure facility.

No doubt assessee incurred the huge expenditure on developing such infrastructure facility and he has right to recover the cost by charging toll from the users of such infrastructure facility.

So can assessee claim depreciation u/s 32(1)(ii) on account of “right to collect toll” ??

Again a big no by AO.

This will create harassment to the infrastructure companies by disallowing the very genuine expenditure incurred by them on account of developing roads/highways.

Now CBDT clarify that the above assessee can claim a business expenditure by amortizing the development expenditure over the period of concessionaire agreement (Excluding the period taken for development of facility).

However the above benefit is only available to those assessee where ownership is not vested to them on account of development of roads/highways.

Refer circular Continue reading

Partners share of profit always exempt under section 10(2A).

CBDT vide circular 8/2014 clarify that the Partner’s share of profit in the partnership firm shall be always exempt under section 10(2A).

The clarification has been issued to remove the doubt that under no circumstances share of profit be taxed in the hands of its partner even though the partnership firm paying no tax on its profit on account of claiming deduction or exemption.

Refer circular Continue reading

No additional income tax u/s 115R on redemption/repurchase/allotment of bonus units

CBDT clarify that section 115R is applicable only in respect of  income distributed by way of dividend.

No additional income tax is required to be paid by a specified company or a mutual fund in respect of redemption/repurchase of units as well as at the time of allotment of bonus units to existing units.

Consequently CBDT also clarify that the benefit of exempt income under section 10(35) is only available in respect of dividend distribution and normal tax shall be payable by assessee on redemption/repurchase/allotment of bonus units as per Income Tax Act.

Refer Circular  Continue reading

Disallowance u/s 14A irrespective of Exempt Income earned or not during the relevant FY

There was controversy that whether disallowance can be made invoking section14A of the Act even in those cases where no income has been earned by an assessee which has been claimed as exempt during the financial-year.

Now CBDT issued the clarification that the disallowance of expenses by invoking section 14A shall be made irrespective of the fact that exempt income has been earned or not during the relevant financial year.

Refer circular  Continue reading