INCOME TAX UPDATE NOV 10,2015
INCOME TAX ACT
SECTION 10(37)
AGRICULTURAL LAND, COMPENSATION FOR
Condition precedent : Where assessee was not carrying on any agricultural activity in land in question in preceding two years prior to its compulsory acquisition, appellant would not be entitled to benefit of section 10(37) – [2015] (Karnataka)
SECTION 10AA
SPECIAL ECONOMIC ZONE
“Existing SEZ unit” means every SEZ which was in existence on or before the commencement of the SEZ Act. As there was no definition of existing unit. Therefore, it could be concluded that all STP units enjoying special economic benefits would qualify to be “Existing Special Economic Units” – [2015] (Kolkata – Trib.)
SECTION 37(1)
BUSINESS EXPENDITURE – ALLOWABILITY OF
Illegal payments : Where assessee paid royalty at rate 29 per cent to State Government which exceeded prescribed statutory limit of 20 per cent as per instructions and guidelines of Central Government, it could not be said to be a payment hit by Explanation to section 37 – [2015] (Uttarakhand)
SECTION 40A(2)
BUSINESS DISALLOWANCE – EXCESSIVE OR UNREASONABLE PAYMENT
Labour Charges : Where Assessing Officer disallowed 50 per cent of labour charges paid by assessee to his family members treating it as excessive, since amount received by payees was duly reflected in their returns of income, impugned disallowance was to be deleted – [2015] (Ahmedabad – Trib.)
SECTION 64
TRANSFER OF ASSETS – FOR BENEFIT OF SPOUSE ETC.
Daughter-in-law : Where Assessing Officer took a view that job charges paid by assessee to his daughters-in-law were required to be clubbed with his income under section 64(1), in absence of any evidence showing that any income generating asset had been transferred by assessee to his daughters-in-law, impugned addition was to be set aside – [2015] (Ahmedabad – Trib.)
SECTION 69A
UNEXPLAINED MONEYS
Admission in sworn statement : SLP dismissed against High Court’s order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents – [2015] (SC)
SECTION 80-IA
DEDUCTIONS – PROFITS AND GAINS OF INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE UNDERTAKINGS
Revision : Where Assessing Officer had granted deduction under section 80-IA after obtaining certain details and documents, initiation of revision to withdraw deduction was unjustified – [2015] (Delhi – Trib.)
SECTION 92C
TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE
Comparables and adjustments/Adjustments – Interest : Arms length Interest rate charged by assessee-company on loan given to its AE should be LIBOR + 2 per cent – [2015] (Mumbai – Trib.)
Comparables and adjustments/Adjustments – Corporate guarantee : Corporate guarantee commission on corporate guarantee given by assessee for its subsidiary company should be benchmarked by taking rate of 0.50 per cent as held in earlier year – [2015] (Mumbai – Trib.)
SECTION 115BBC
ANONYMOUS DONATIONS TO BE TAXED IN CERTAIN CASES
Hindu religious trust : Where assessee-trust was involved in imparting of spiritual education through lectures/samagam and in distribution of medicines and clothes to needy and destitute, said activities could be included in broad conspectus of Hindu religious activity and, thus, anonymous donations received by trust were exempt from tax – [2015] (Delhi)
SECTION 145
METHOD OF ACCOUNTING – ESTIMATION OF INCOME
Rejection of book results : Where Assessing Officer made addition to assessee’s income by estimating gross profit at higher rate, since Assessing Officer had not made reference to any similarly situated assessee and, moreover, he failed to point out any particular defect in assessee’s books of account, impugned addition deserved to be deleted – [2015] (Ahmedabad – Trib.)
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