/ Foreign Exchange Management Act

SHARES HELD BY RELATIVES CAN’T BE CONSIDERED TO DETERMINE SUBSTANTIAL INTEREST OF SHAREHOLDER UNDER SEC. 2(22)(E):-

SHARES HELD BY RELATIVES CAN’T BE CONSIDERED TO DETERMINE SUBSTANTIAL INTEREST OF SHAREHOLDER UNDER SEC. 2(22)(E)

Section 2(22), read with section 2(32), of the Income-tax Act, 1961 – Deemed dividend -Loans or advances to shareholder/substantial interest

In order to determine substantial interest of a shareholder for invoking provisions of section 2(22)(e), it is ownership of shareholder alone in company to which loan/advance has been made by assessee-company, and not his or her relative or family members, which is determinative factor[2015] 11- ITAT DELHI –ACIT v.Maharishi Ayurveda Products(P.) Ltd.

Facts

The assessee-company was engaged in the business of manufacturing and exporting in all kinds of ayurvedic and herbal preparations. It filed return declaring certain taxable income.

In course of assessment, the Assessing Officer made addition to the assessee’s income under section 2(22)(e) on ground that 90 per cent beneficial and registered shareholding in companies to whom loan had been given by assessee-company was with family members of ‘A’, who was a substantial shareholder of the assessee-company as well.

The Commissioner (Appeals) took a view that there was nothing in section 2(22)(e) or section 2(32) so as to suggest that the holding or ownership of voting rights of the shares held by the family could be taken into consideration for the purposes of determining substantial shareholding of a person/shareholder.

The Commissioner (Appeals) opined that it was the ownership of the shareholder alone in the company to which the loan/advance was made by assessee-company, and not his or her relative or family members, which was the determinative factor. Accordingly, inclusion/clubbing of beneficial ownership of family members with that of ‘A’ was not mandated by the provision of the Act.

The Commissioner (Appeals) thus deleted the impugned addition made by the Assessing Officer.

On Revenue’s Appeal it was held by Tribunal:-

The intention behind enacting the provisions of section 2(22)(e) is that closely held companies (i.e., companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would become taxable in the hands of the shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholder or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder. In such an event, by the deeming provisions such payment by the company is treated as dividend

The intention behind the provisions of section 2(22)(e) is to tax dividend in the hands of shareholder. The deeming provisions as it applies to the case of loans or advances by a company to a concern in which its shareholder has substantial interest, is based on the presumption that the loan or advances would ultimately be made available to the shareholders of the company giving the loan or advance.

Keeping in view of the facts and circumstances of case, as explained above, it is held that First Appellate Authority has deleted the addition in dispute by following the judgment of the Supreme Court in the case of CIT v. Nalin Behari Lall Singha [1969] 74 ITR 849 and decision of the ITAT, Mumbai, Special Bench in the case of Asstt. CIT v. BhaumikColour (P.) Ltd. [2009] 27 SOT 270, which does need any interference, hence, the impugned order is upheld.

In the result, the Appeal filed by the Revenue stands dismissed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-233 433 33

/ Foreign Exchange Management Act

INSTRUCTIONS TO SUBORDINATE AUTHORITIES – CONDO NATION OF DELAY IN FILING REFUND CLAIM AND CLAIM OF CARRY FORWARD LOSSES UNDER SECTION 119(2)(B)

INSTRUCTIONS TO SUBORDINATE AUTHORITIES – CONDO NATION OF DELAY IN FILING REFUND CLAIM AND CLAIM OF CARRY FORWARD LOSSES UNDER SECTION 119(2)(B)

In supersession of all earlier Instructions/Circulars/Guidelines issued by the Central Board of Direct Taxes (the Board) from time to time to deal with the applications for condonation of delay in filing returns claiming refund and returns claiming carry forward of loss and set-off thereof under section 119(2)(b) of the Income-tax Act, (the Act) the present Circular is being issued containing comprehensive guidelines on the conditions for condonation and the procedure to be followed for deciding such matters.

  • The Principal Commissioners of Income-tax/Commissioners of Income-tax (Pr.CsIT/CsIT) shall be vested with the powers of acceptance/rejection of such applications/claims if the amount of such claims is not more than Rs.10 lakhs for any one assessment year. The Principal Chief Commissioners of Income-tax/Chief Commissioners of Income-tax (Pr.CCsIT/CCsIT) shall be vested with the powers of acceptance/rejection of such applications/claims if the amount of such claims exceeds Rs.10 lakhs but is not more than Rs. 50 lakhs for any one assessment year. The applications/claims for amount exceeding Rs.50 lakhs shall be considered by the Board.
  • No condonation application for claim of refund/loss shall be entertained beyond six years from the end of the assessment year for which such application/claim is made.This limit of six years shall be applicable to all authorities having powers to condone the delay as per the above prescribed monetary limits, including the Board. A condonation application should be disposed of within six months from the end of the month in which the application is received by the competent authority, as far as possible.
  • In a case where refund claim has arisen consequent to a Court order, the period for which any such proceedings were pending before any Court of Law shall be ignored while calculating the said period of six years, provided such condonation application is filed within six months from the end of the month in which the Court order was issued or the end of financial year whichever is later.
  • The powers of acceptance/rejection of the application within the monetary limits delegated to the Pr.CCsIT/CCsIT/Pr.CsIT/CsIT in case of such claims will be subject to Following conditions:-
  • At the time of considering the case under Section 119(2)(b), it shall be ensured that the income/loss declared and/or refund claimed is correct and genuine and also that the case is of genuine hardship on merits.
  • The Pr.CCIT/CCIT/Pr.CIT/CIT dealing with the case shall be empowered to direct the jurisdictional assessing officer to make necessary inquiries or scrutinize the case in accordance with the provisions of the Act to ascertain the correctness of the claim.
  • A belated application for supplementary claim of refund (claim of additional amount of refund after completion of assessment for the same year) can be admitted for condonation provided other conditions as referred above are fulfilled. The powers of acceptance/rejection within the monetary limits delegated to the Pr.CCsIT/CCsIT/Pr.CsJT/CsIT in case of returns claiming refund and supplementary claim of refund would be subject to the following further conditions:-

a. The income of the assessee is not assessable in the hands of any other person under any of the provisions of the Act.

b. No interest will be admissible on belated claim of refunds.

c. The refund has arisen as a result of excess tax deducted/collected at source and/or excess advance tax payment and/or excess payment of self-assessment tax as per the provisions of the Act.

  • In the case of an applicant who has made investment in 8% Savings (Taxable) Bonds, 2003 issued by Government of India opting for scheme of cumulative interest on maturity but has accounted interest earned on mercantile basis and the intermediary bank at the time of maturity has deducted tax at source on the entire amount of interest paid without apportioning the accrued interest/TDS, over various financial years involved, the time limit of six years for making such refund claims will not be applicable.
  • This circular will cover all such applications/claims for condonation of delay under section 119(2xb) which are pending as on the date of issue of the Circular.
  • The Board reserves the power to examine any grievance arising out of an order passed or not passed by the authorities mentioned in para 2 above and issue suitable directions to them for proper implementation of this Circular. However, no review of or appeal against the orders of such authorities would be entertained by the Board.

Companies Act Update

  • MCA has issued General Circular No 9 dated 18th June, 2015 containing Clarification on repayment of deposits accepted by the companies before the commencement of the Companies Act, 2013 under section 74 of the said Act.
  • The circular while referring to the Explanation appearing below Rule 19 of the Companies (Acceptance of Deposits) Rules, 2014, clearly establishes the fact that the expressions “deposits accepted prior to 1st April, 2014” or “deposits accepted by the companies before the commencement of the Companies Act, 2013” would mean deposits under the relevant provisions of the Companies Act, 1956 (also referred to as Earlier Deposits) in the said Rule 19.
  • It may be taken note that those companies who have accepted deposits under the Companies Act, 1956 need to repay the same as specified in S 74 of the Act read with Rule 19 of the Chapter V Rules. It is also pertinent to mention that Sec 76A introduced by the Companies Amendment Act, 2015 imposes stringent pecuniary and imprisonment clauses for non compliances, if any relating to the same.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-233 433 33

/ Foreign Exchange Management Act

PURCHASE OF TENANCY RIGHTS GIVING POSSESSION, CONTROL AND TRANSFERABLE RIGHT IN FLAT WOULD PROVIDE SEC. 54F RELIEF:-

PURCHASE OF TENANCY RIGHTS GIVING POSSESSION, CONTROL AND TRANSFERABLE RIGHT IN FLAT WOULD PROVIDE SEC. 54F RELIEF:-

Section 54F, of the Income-tax Act, 1961 – Capital gains – Exemption in case of investment in residential house:-

Where assessee had substantial rights over property which were almost identical to ownership of property, exemption under section 54F was to be allowed[2015] – ITAT MUMBAI -Archana Parasrampuria v. ITO Mumbai.

Facts:-

The assessee earned long-term capital gains on sale of shares. She claimed exemption from tax on the said amount under section 54F on the plea that she had purchased a residential flat.

The Assessing Officer noted from the transfer deed that the assessee had acquired “transferable tenancy rights” and not the “ownership” of the flat. He therefore disallowed the claim under section 54F.

On second appeal to ITAT, It was held that:-

The assessee has purchased rights in one of the flats from the developer, which under the agreement were allotted to him for selling to the intended purchasers. The assessee has paid a sum as consideration/premium to the developer for obtaining the tenancy rights in the flat in question.

Though under the agreement in question, the assessee has been made liable to pay a monthly rent of Rs. 4,000 to the owner, however, in view of the overall facts and circumstances of the case and the amount of rent being a meager amount when compared to the amount of rent otherwise payable on such a property in the area, it is apparent that the assessee is not the mere tenant in the house.

She has purchased substantial rights in the flat in question. A perusal of clause-7 of the agreement reveals that the assessee is entitled to carry out repairs and renovation in the said flat except the changes which could be detrimental to the basic structure of the building.

The owner is not entitled to terminate the tenancy of the assessee in the said flat on any ground, whatsoever, except for non-payment of rent. In the event of destruction of the said building or construction of a new building, the assessee/tenant is entitled to obtain tenancy in respect of the new flat having the same carpet area on the same floor without any payment or consideration or premium to the owner under the agreement.

The assessee has absolute rights to transfer or assign the tenancy rights in respect of the said flat in favour of any person of her choice and to charge such consideration/premium for such transfer/assignment and the tenant/assessee will not be required to obtain any permission from the owner and will not be required to pay any premium for consideration to the owner for such transfer/assignment of the tenancy rights.

The tenant is also entitled to create mortgage in respect of the tenancy rights in the said flat and also bequeath the tenancy rights in respect of any person.

The rights of the assessee in the flat are not the mere tenancy rights but are substantial rights giving the assessee dominion, possession and control over the property in question with transferable rights, which are almost identical to that of an owner of the property. There is no denial that the assessee has purchased the rights in the said flat for residential purposes. Continue reading “PURCHASE OF TENANCY RIGHTS GIVING POSSESSION, CONTROL AND TRANSFERABLE RIGHT IN FLAT WOULD PROVIDE SEC. 54F RELIEF:-“ →

/ INCOME TAX

ITR Forms for FY 2022-23 -Types & Applicability

Kind of Tax returns

NEW ITR FORMS FOR FY 2022-23 – TYPES & APPLICABILITY

BRIEF INTRODUCTION

Where offline ITRs were filed, greater importance be given on the type of ITR form applicable based on the source and quantum of the income of the taxpayer. However, with the advancement of technology, all these manual works is now done with the help of software’s and thus, would not require application of knowledge.

Even though everything is online, the taxpayer is required to have a basic knowledge of all the ITR forms, in order to proceed with their ITR filing.

INCOME TAX RETURN

Income Tax Return is a statement, forming the structure of a taxpayer’s income. It basically describes the quantum of income and their sources, and the said information is furnished with the government, so that they can easily gather the details of income of all the taxpayers and can collect taxes accordingly.

ITR FORMS

Where a taxpayer is required to file their ITR, the same can be done by filing the ITR forms, made available on the IT portal. Specific forms have been prescribed, based on the source and quantum of income. The taxpayer is required to identify the applicable form and furnish the information in the said identified form.

TYPES OF ITR AND THEIR APPLICABILITY

  1. ITR 1

This form is applicable to individuals who are residents and have total income of up to Rs 50 lakh constituting of Income from Salary, one house property, income from other sources (including family pension and interest income), and income from agricultural activities maximum up to Rs 5000. This ITR form does not apply to a Director in a company or made investment in unlisted equity shares or even in cases where TDS got subtracted as per section 194N where the ESOP taxation aspect has been deferred under new relaxation.

ITR -1

  1. ITR 2

It is applicable to Individuals and HUFs having income from different sources except from business or professional income. Thus, an individual or HUF, not eligible to file Sahaj ITR 1, can file ITR-2. Therefore, any director of a company, as well as anyone who owns unlisted equity shares of a company, will be required to file ITR-2 returns. Also, individuals having more than one house property should also file an ITR-2 income tax return.

ITR 2

  1. ITR 3

It is to be filed by persons having income from a business or profession. Thus, the eligible source of income for ITR 3 are –

    • Running a business or profession whether subject to audit or not.
    • Income from all other sources like salary, house property, capital gain and other sources, be also included.

ITR 3

  1. ITR 4

It is applied to Individuals, HUFs, and Firms, excluding LLPs, who are residents and have total income up to Rs.50 lakh. Such income constitutes income from business and profession, subject to computation under sections 44AD, 44ADA, or 44AE. Apart from business or profession, it includes income from one house property with single ownership, interest Income, Family Pension, and agricultural income up to Rs.5,000.

ITR -4

  1. ITR 5

This form is to be filed by Firms, LLPs, Association of Persons, Body of Individuals, Artificial Juridical Person, legal heirs of deceased and insolvent person, trust and investment-based funds.

  1. ITR 6

Such form is required to be filed by companies not eligible for an exemption under Section 11. It is to be noted that exemption under section 11 is provided to companies that receive income from property held for charitable or religious purposes. Such a return be filed electronically and authorized with the assigned digital signature.

  1. ITR 7

It is to be filed by trusts, political parties, charitable institutions etc. receiving exempt income under the Act. Also, where the individuals and companies, fall under section 139(4A), section 139 (4B), section 139 (4C), or section 139 4D, they can also file ITR-7 form. One of the required aspects of this form is that, the taxes deducted, collected, or paid by or on their behalf, must match with their Tax Credit Statement Form 26AS. This form is divided into two parts with a total of 23 schedules.

/ Company Law Compliances

TYPES OF LOANS AVAILABLE IN INDIAN MARKET

common financial terms

TYPES OF LOANS AVAILABLE IN INDIAN MARKET

PERSONAL LOAN:

We offered our services in providing personal loans for any purpose. Our wide expertise in this area allows us to offer you the helping hand with immediate effect right from your request. Our personal loans are meant for business as well as for personal purpose. Our personal loans are available for a range of different amounts and have different repayment terms. The repayment period depends on the amount and the purpose of loan. We offer personal loans starting from 2,00,000 or more. The maximum amount one can avail depends from one lender to other.

 ELIGIBILITY CRITERIA

  • Minimum age of Applicant: 21 years
  • Maximum age of Applicant at loan maturity: 60 years
  • Minimum employment: Minimum 2 years in employment and minimum 1 year in the current organization
  • Minimum Net Monthly Income: Rs. 10,000 per month (Rs. 15,000 in Mumbai, Delhi, Bangalore, Chennai and Hyderabad & Rs. 12,000 in Calcutta, Ahmadabad and Cochin)

 DOCUMENTS REQUIRED:

  • Identity Proof: Proof of Identity (Passport Copy/ Voters ID card/ Driving License)
  • Address Proof: (Ration card Tel/Elect. Bill/ Rental agreement / Passport copy/Trade license /Est./Sales Tax certificate)
  • Bank Statements: (latest 3 months bank statement / 6 months bank passbook)
  • Salary Slip: Latest salary slip or current dated salary certificate with latest Form 16

BUSINESS LOAN:

An individual always need appropriate money in pocket or bank account to nurture and enrich his/her business. Business goals cannot be accomplished without proper funding. At loan inn, we are helping people to choose the right loan for commercial purpose. Hence, these finances are also known as commercial loans. Business loan Delhi helps Delhi-based entrepreneurs to make their popular and successful. We also have loan options for those businessmen who are living in other parts, like Noida, Gurgaon, etc. Whether you are seeking for immediate loan amount to increase the size of your business or want to meet your working capital, this loan always helps you in every condition.

SELF EMPLOYED (PROFESSIONALS) INCLUDE SELF – EMPLOYED DOCTORS, CHARTERED ACCOUNTANTS, ENGINEERS, MBA CONSULTANTS, ARCHITECTS, COMPANY SECRETARIES.

 ELIGIBILITY CRITERIA

  • Minimum age of Applicant: 25 years
  • Maximum age of Applicant at loan maturity: 65 years
  • Years in business: 4 to 7 years depending on profession
  • Minimum Annual Income: Rs. 100000 p.a.

 DOCUMENTS REQUIRED:

  • Proof of Identity: Passport Copy/ Voters ID card/ Driving License.
  • Address Proof: Ration card Tel/elect. Bill/ Rental agr. / Passport copy/Trade license /Est./Sales Tax certificate.
  • Bank Statements: latest 6 months bank statement /passbook
  • Latest ITR along with computation of income, B/S & P&L a/c for the last 2 yrs. certified by a CA
  • Qualification proof of the highest professional degree

LOAN AGAINST PROPERTY:

Loan against property is a loan provided to individuals against his own residential or commercial property and the best part of this scheme is that the money received from the bank can be utilized the way owner likes. As such this is the most popular loan scheme for investment in business or buying any other property. This scheme is so popular among the public that all the banks and NBFC’s are offering loans to consumers at very competitive price for expansion of their business or any other purpose. Hence you are always assured that you will get a profitable, affordable and cheap loan deal.

 HOME LOAN:

Now a day’s banks are very aggressive to provide home loans for the prospective buyers but some time it appears to be a tough job to get a housing loan sanctioned in time. You will get complete solution to all the problems. Even we can help you to get your loan sanctioned without finalizing the property so that you can have a lucrative deal to be executed well in time. Having a home can be a dream job for any individual and we are committed to stand by you. If you are also planning to build a sweet home in Delhi or NCR, then one visit  will save your lot of money and energy. We are always here to help you in cherishing your dream of sweet home. Continue reading “TYPES OF LOANS AVAILABLE IN INDIAN MARKET” →

/ Audit

Book adjustment can’t be deemed as contravention 269SS/269T

269T

Mere book adjustment can’t be deemed as contravention of Sec. 269SS/269T

Section 271D, read with sections 271E, 269SS and 269T, of the Income-tax Act, 1961 – Penalty – For failure to comply with section 269SS (Book adjustment)

Making book adjustment of funds by assessee firm with sister concern without making payment of cash, could not be said to be violation or contravention of section 269SS and section 269T  [2015] -HIGH COURT OF ANDHRA PRADESH AND TELANGANA -Gururaj Mini Roller Flour Mills -v. ACIT

A notice was issued to assessee-firm proposing to levy penalty on ground that certain receipts/payments exceeding ceiling limit were made in cash to/from sister concern and to one ‘S’

Assessee submitted that there were only book adjustments of funds with sister concern and no cash was paid

As regard payment to ‘S’, it was stated that same was paid to ‘S’ on death of her husband who was legal advisor of company.

No revision by CIT alleging discrepancy in stock if AO had verified actual quantity of stock during assessment Section 145, read with section 263, of the Income-tax Act, 1961 – Method of accounting – Valuation of stock.

Where Assessing Officer found that assessee maintained correct and proper books of account and assessment order was passed after considering actual quantity of stock from books as well as that physically available, revision was not justified[2015] – ITAT PANAJI -K.N. Ramchandra Naidu -v. CIT

Commissioner passed order for revision on ground that there was a difference in declaration of stock by assessee and stock available in books

However, it was found that assessee maintained correct and complete books of account, which was accepted by Assessing Officer and assessment order was passed after considering actual quantity of stock from books as well as physically available

It was held that no fault could be found with said assessment and same could not be termed as erroneous

Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiinia.com or call at 9555 555 480

/ Accounting Services

Summary of changes made in Passed Finance Bill, 2015

Summary of changes made in Passed Finance Bill, 2015.

On April 30, 2015, the Lok Sabha passed the Finance Bill. The Bill which was presented originally in the Lok Sabha on February 28, 2015 is not passed in its original shape. Various changes have been made in the Bill. New amendments are proposed, some proposed amendments are removed, so on and so forth. A gist of all changes made in the Finance Bill, 2015 as passed by the Lok Sabha viz-a-viz the Finance Bill, 2015 as presented in the Lok Sabha are presented here.

MAT exemption extended to foreign companies.

The Finance Bill, 2015 presented originally proposed that long-term capital gains and short-term capital gains (on which STT is paid) arising to FIIs would be excluded from the chargeability of MAT. Further, expenditures, if any, debited to the profit and loss account, corresponding to such income would also be added back to the book profit for the purpose of computation of MAT.

Thus, the Finance Bill, 2015 proposed to provide relief from MAT only to FIIs without extending such relief to foreign companies. The foreign company would be liable to pay MAT on capital gains arising from transfer of securities and income arising from royalty, interest or FTS even if such income would not be chargeable to tax or taxable at lower rate in India by virtue of applicable double taxation avoidance agreements (‘DTAA’)or any provision of the Income-Tax Act.

The impact of such proposal would be that foreign companies would be liable to pay MAT even on that income which was exempt from tax by virtue of DTAAs or Income-tax Act.

Therefore, the Finance Bill, 2015 as passed by Lok Sabha proposes to provide relief from MAT to foreign companies as well.

Capital gains from transfer of securities, interest, royalty and FTS accruing or arising to foreign company has been proposed to be excluded from chargeability of MAT if tax payable on such income is less than 18.5%. Further, expenditures, if any, debited to the profit loss account, corresponding to such income shall also be added back to the book profit for the purpose of computation of MAT.

MAT exemption on notional gain arising on transfer of share of SPV.

The Finance (No. 2) Act, 2014 inserted clause (xvii) in Section 47 to provide that transfer of share of special purposes vehicle (‘SPV’) to a business trust in exchange of units allotted by that trust to the transferor shall not be regarded as transfer, thus, no capital gain would arise on such transaction.

The Finance Bill, 2015 as passed by Lok Sabha proposes to exclude the following from the chargeability of MAT:

  • Notional gain resulting from transfer of shares of SPV to a business trust in exchange of units allotted by that trust;
  • Notional gain resulting from any change in carrying amount of said units; and
  • Actual gains from transfer of said units.

A new clause is proposed to be inserted to re-compute the gains from transfer of said units (as referred to in point (c) above) which shall be added back for computation of MAT. It is proposed that the amount of gain from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.

Accordingly, notional loss arising from transfer of asset or notional loss arising from change in carrying amount of said units and actual loss from transfer of said units shall be added back to the book profit for the purpose of computation of MAT.

A new clause is proposed to be inserted to re-compute the loss from transfer of said units which shall be reduced from the book profit. It is proposed that the amount of loss from transfer of said units shall be computed by taking into account the cost of shares exchanged with units or the carrying amount of the shares at time of exchange where such shares are carried at a value other than the cost through profit & loss account.

Deduction under Section 80D in case of individual.

The Finance Bill, 2015 as presented originally omitted to propose amendment to clause (a) and clause (b) of sub-section (2) of Section 80D to enable assessee to claim deduction of Rs. 25,000 instead of Rs. 15,000. However, sub-section (4) of Section 80D was amended to allow deduction of Rs. 30,000 instead of Rs. 25,000 if individual or his family member or any of his parent is a senior citizen or very senior citizen.

Accordingly, it is proposed in the Finance Bill, 2015 as passed by the Lok Sabha that the existing deduction of Rs. 15,000 shall be substituted with Rs. 25,000. The following table highlights the deduction available to an Individual under Section 80D:

Deduction in respect of Individual and his family(none of them is a senior citizen) Parents of Individual(none of them is a senior citizen) Individual and his family(if senior citizen or very senior citizen) Parents of Individual(if senior citizen or very senior citizen)
(a) (b) (c) (d)
  ■  Health Insurance 25,000 25,000 30,000 30,000
  ■ Contribution to CGHS 25,000 – 25,000 –
 ■  Preventive health check-up 5,000 5,000 5,000 5,000
  ■  Medical expenditure if no amount is paid in respect of health insurance – – 30,000(only in case of very senior citizen) 30,000(only in case of very senior citizen)
Maximum Deduction 25,000 25,000 30,000 30,000

Note: Deduction for preventive health check-up of assessee, spouse, dependent children and parents shall not exceed in aggregate Rs 5,000.

  • Maximum deduction, if individual or any member of his family or any of his parent is not senior or very senior citizen: Rs. 50,000 [(a) + (b)]
  • Maximum deduction if individual or any member of his family is not senior citizen but any of his parent is a senior citizen or very senior citizen: Rs. 55,000 [(a) + (d)]

Maximum deduction if individual or any member of his family and any of his parent is senior citizen or very senior citizen: Rs. 60,000 [ (c) + (d)]

Residential Status of a Company.

The Finance Bill, 2015 as presented earlier proposed to amend Section 6 to provide that a company shall be said to be resident in India if its place of effective management, at any time in that year, is in India. In other words, the concept of Control or Management (wholly in India) is replaced with Place of Effective Management (at any time in India).

The amendment proposed in the original Finance Bill, 2015 might have caused difficulty in establishing the place of effective management as a company might have place of effective management in more than one country at any point of time during the year.

Thus, the Finance Bill, 2015 as passed by the Lok Sabha has proposed to omit the words ‘at any time’ which shall have effect that a company shall be deemed to be resident in India if its place of effective management is in India

Filing of return is mandatory if assessee has foreign assets.

The Finance Bill, 2015 as passed by the Lok Sabha has proposed mandatory filing of return by a person, being a resident other than not ordinarily resident in India, who at any time during the previous year:

  • Holds, as a beneficial owner or otherwise, any asset (including financial interest in any entity) located outside India or has signing authority in any account located outside India; or
  • Is a beneficiary of any asset (including any financial interest in any entity) located outside India.

However, filing of return shall not be mandatory under this proviso for an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India, if income arising from such an asset is includible in the income of the person who is beneficial owner of such an asset. Continue reading “Summary of changes made in Passed Finance Bill, 2015” →

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/ Company Law Compliances

Mere liquidation of shares in short span of time doesn’t mean that assessee was doing business in shares

Mere liquidation of shares in short span of time doesn’t mean that assessee was doing business in shares

Section 45, read with section 28(i), of the Income-tax Act, 1961 – Capital gains- Chargeable as – Business income vs Capital gains – Shares dealings

Circulars and Notifications: Circular No. 4/2007, dated 15-6-2007.

Where assessee made investment in shares with intention to earn dividend income, merely because she liquidated its investment within a short span of time which had given better overall earning to her, it could not be concluded that assessee was doing business in shares and profit arising from sale of shares was taxable as business income  [2015] – ITAT MUMBAI -Smt. Sujata Kapadia v. JCIT

FACTS

During relevant year, the assessee sold shares of ‘T’ Ltd. to foreign company. The income arising from sale of shares was declared as short term capital gain. The Assessing Officer opined that profit earned by assessee was taxable as business income.

The Commissioner (Appeals) confirmed the order of the Assessing Officer. On second appeal:

HELD

From the record, it was found that assessee was investing in shares as investor. In the earlier assessment years 2006-07 and 2007-08, the short term capital gain offered by the assessee was accepted by the Assessing Officer while making scrutiny assessment under section 143(3). Furthermore, in the immediately subsequent assessment year i.e. 2009-10, the Assessing Officer has also accepted assessee’s claim of short term capital gain after aking detailed enquiry. Thus, there is no change in the facts and circumstances during the year under consideration.

Even though principle of res judicata is not applicable to Income-tax proceedings but at the very same time, the rule of consistency still applies when there is no change in the facts and circumstances. It is pertinent to mention that assessee’s treatment of shares as investment and thereby declaring short term capital gains have been accepted by the Assessing Officer. It was also found that assessee had entered into transaction only for 23 days when the market was at peak, accordingly, assessee took the benefit of peak market and sold its investment. it was also found that these shares were accepted as investment by department as on 31-3-2007, which was carried as opening investment as on 1-4-2007 and the same was sold during the year.

Merely because the assessee liquidates its investment within a short span of time, which had given better overall earning to the assessee, would not lead to the conclusion that the assessee had no intention to keep on the funds as investor in equity shares, but was actually intended to trade in shares.

It is also noted that the CBDT vide its Circular no.4 of 2007, dated 15-6-2007 has also recognized possibility of two portfolios, i.e. one ‘Investment portfolio’ comprising of securities which are to be treated as capital assets and the other ‘Trading portfolio’ comprising of stock in trade which are to be treated as trading assets. In view of these facts, profit arose on shares in respect of delivery based transaction are liable to be taxed as capital gain and not as business income.

In the instant case, it was noted that the assessee made investment in shares with intention to earn dividend income on appreciation of price of shares. Therefore, it cannot be said that the assessee was doing business.

In view of the above, there was no merit in the action of the Assessing Officer for treating the short term capital gain as business income.

In the result, appeal of the assessee is allowed.

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