Capital Reserve Created On Amalgamation Is Not Taxable As Perquisite U/S 28(iv) Of IT Act: Mumbai ITAT

The Mumbai ITAT held that capital reserve arising on account of amalgamation is a capital receipt and hence cannot be taxed as a benefit or perquisite arising from business u/s 28(iv). Section 28(iv) of Income tax Act provides that any value of benefit or perquisite, whether convertible in money or not, arising from business or exercise of a profession would be considered as income and shall be chargeable to income tax as business income Pointing that the assessee was the ultimate...

Taxpayer Can't Claim Credit Against Tax Payable In India If He Has Not Paid Any Tax In Country Where He Sourced Income: Mumbai ITAT

While observing that the assessee is a resident of India in terms of Article 4(2)(a) of the Indo-US DTAA, the Mumbai ITAT held that all his income derived in the USA, is chargeable to tax in India by virtue of the provisions of section 5 of the Income tax Act.Since the income tax return filed by the assessee in the USA, does not show that he is paid any tax in the USA, therefore, the ITAT clarified that in the absence of any payment of tax in the country of source, no credit is available against...

Capital Gains Arising Out Of Sale Of Long-Term Capital Assets Shall Be Taxable At Rate Of 20% U/S 112 Of IT Act: Mumbai ITAT Special Bench

While observing that the deeming fiction of section 50 cannot be imported u/s 112, the Mumbai ITAT in a split verdict ruled that capital gains u/s 50 of Income tax Act, arising out of sale of long-term capital assets, shall be taxable at rate of 20% u/s 112 of the Act. Section 50 of Income tax Act is a special provision for computation of capital gains in case of depreciable assets, whereas Section 112 deals with income arising from transfer of long-term capital asset. Relying upon...

Absence Of Controlling Interest Renders Sale Of Shares By Spanish Entity Not Taxable In India As Per Indo-Spain DTAA: Mumbai ITAT

The Mumbai ITAT held that capital gain arising out of transfer of shares of an Indian entity cannot be taxed at hands of foreign entity in India, if foreign entity has less than 10% shareholding in such Indian entity. The ITAT held so while referring to UN Model Convention commentary, which states that the provisions of Article 14(4) come into effect to prevent the case of indirect transfer of ownership of immovable property by transfer of shares owning these properties. The ...

Additions Made Under Income Tax Act Have No Bearing Under Black Money Act: Mumbai ITAT

The Mumbai ITAT held that any addition made as undisclosed foreign income and asset under the Black Money Act (BMA), shall not be repeated under the Income Tax Act. However, since there is no corresponding provision under the Income tax Act, the ITAT clarified that additions made under the Income tax Act have no bearing under the BMA. Single Third Member Bench comprising Narendra Kumar Billaiya (Accountant Member) observed that the entire BMA revolves around taxing only...

Assessment Was Based Solely On Existence Of Cash Deposits Linked To Incorrect PAN: Ahmedabad ITAT Deletes Addition U/S 69A Of IT Act

The Ahmedabad ITAT held that since the assessee/ appellant was consistently filing her returns under the original PAN and had also paid penalties for holding two PANs without contesting, the appellants effort reflects compliance of the provisions of Income tax Act rather than an intent to conceal any income. The Bench of T.R. Senthil Kumar (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that “the AO could not verify the books of account, tax audit report, or...

Stock-In-Trade Sold During Relevant Year Should Only Be Considered For Purpose Of Computing Capital Gains: Hyderabad ITAT

The Hyderabad ITAT held that the capital gain arising on account of conversion of capital asset into stock-in-trade should be proportionately computed by considering the stock-in-trade sold by the assessee and not the entire extent of land converted by the assessee. The Tribunal held so, after finding that the assessee has sold part of the stock-in-trade for the current financial year and remaining stock-in-trade is still held as closing stock. Referring to Section 45(2) of Income...

Infrastructure Companies laying Roads On BOT Basis Are Not Owners, Can't Claim Depreciation On Toll Roads: Mumbai ITAT

Emphasizing that ownership is a sine qua non for availing depreciation, and roads/ bridges are public properties, the Mumbai ITAT held that an infrastructural development company which has laid down roads cannot claim depreciation over same. The Division Bench comprising Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) denied depreciation claim on toll road to a company engaged in the business of infrastructure development (assessee), who, in execution of...

Foreign Entity Having Valid Tax Residency Certificate Is Eligible To DTAA Benefit On Long-Term Capital Gain From Sale Of Share Of Indian Entity: Delhi ITAT

While observing that the Assessee submitted a valid Tax Residency Certificate (TRC) which is certainly statutory evidence, the Delhi ITAT granted India-Singapore DTAA benefit under Article 13(4) on long term capital gains on sale of share of an Indian company. The Tribunal emphasized that the burden is on the Revenue Department to establish that the entity has been formed and operated in a manner that the only intention was to take DTAA benefit without there being actual intention of...

Reworking Value Of Investments Held In Subsidiary By Applying DCF Method Is Permitted, Once Correctness Of Valuation Stands Proved: Delhi ITAT

Referring to Explanation to Section 56(2)(viib), the Delhi ITAT held that the assessee is entitled to suitably modify the Net Asset Value (NAV) as long as the NAV is capable of being substituted by some proof or competent evidence. Further, finding that the assessee has produced the valuation report as well as the market valuation of Hotel Residence AG Switzerland in German currency, the Tribunal observed that the valuation of shares of subsidiary company to determine the FMV of the...

Unaccounted Money Brought In The Garb Of Unsecured Loan: Mumbai ITAT Confirms Addition U/s 68

Finding that loans were nothing but accommodation entries and the repayment is also nothing but return of accommodation entries, the Mumbai ITAT held that the money which has been brought in the garb of unsecured loan is nothing but the unaccounted money of the assessee, and deserves to be added u/s 68. Section 68 of Income Tax Act aims to ensure individuals and corporations transparently disclose their income by addressing unexplained cash credits in their books of accounts, placing...

AO Was Not Intimated About Removal Of Company's Name From ROC, Draft Assessment Can't Be Said To Have Passed In Name Of Non-existent Entity: Delhi ITAT

While finding that the AO/DRP was not informed about striking off the name of non-resident assessee from the ROC, the Delhi ITAT held that assessee cannot take a plea that draft assessment order was against the non-existing entity or the company whose name is struck off. Further, pointing that the objections of non-existence of company were filed only on the day on which the Registrar of Companies, Mauritius had removed the name of the company u/s 308 of the Mauritius Companies Act,...