Forex loss incurred on loan is deductible if its underlying objective is to save interest cost

Facts

a)    Assessee had, initially availed of various term loans in Indian rupee from banks for acquisition of assets and for expansion of project etc. It had converted these loans into foreign currency loans to take benefit of lower rate of interest on such foreign currency loans vis a vis loans in Indian rupee. However, assessee incurred loss due to fluctuation in rate and claimed it as a business loss.

b)    Assessing Officer disallowed loss claimed by assessee on ground that loans were obtained to acquire capital asset, thus, same could not be allowed as revenue expenditures.

c)    The Commissioner (Appeals) granted partial relief to assessee on account of foreign currency fluctuation loss arising on loans connected to revenue items such as bill discounting, debtors, etc.

d)    Aggrieved assessee filed the instant appeal before the Tribunal.

Indian subsidiary won’t form PE of foreign parent Co even if latter has right to audit subsidiary

Facts:

a) Adobe Systems Incorporated (“assessee”) is a company incorporated outside India having a wholly owned subsidiary in India (Adobe India).

b) Adobe India provides software related Research and Development (R&D) and is paid on cost plus basis in terms of an agreement entered into between the Assessee and Adobe India.

c) Assessee claimed that such income received from Adobe India was not assessable in India as assessee did not have any business operations in India, thus he did not file return in India.

d) Assessing O􀁹icer (AO) issued notice under section 148 on observation that as per the agreement between assessee and Adobe India, it was obliged to audit the facilities of Adobe India for maintenance of the requisite standards. Therefore, it had a Service PE in India in terms of Article 5(2)(l) of the Indo-US DTAA and was liable to file return of income and pay taxes in India.

Disallowance on account of cash payment exceeding Rs. 20,000 would be eligible for sec. 80-IB relief

Where assessee paid cash for certain expenses in excess of limit prescribed under Section 40A(3) and, consequently, it was added back to income of assessee, it would be treated as income from undertaking and, thus, would be eligible for deduction under section 80-IB.

Facts

a)    Assessee, eligible for deduction under section 80-IB, made payment in cash for certain expenses in violation of section 40A(3). Consequently, the Assessing Officer (AO) disallowed said payments.

b)    Assessee filed an unsuccessful appeal before the CIT(A). The contention of the assessee was that, though the expenses were disallowed under Sec. 40A(3) and would be added back to gross total income, deduction under section 80-IB was allowable on same.

c)    Aggrieved by the order of the CIT(A), assessee filed the instant appeal before the tribunal.

Proviso to sec. 2(15) won't apply if management institute is running business to impart practical training to students

Facts

a) The assessee-society was an educational institution running courses of B. Tech, M. Tech and MBA, etc.

b) It was also running a textile division which was engaged in manufacturing of cloth and yarn and was attached to very institution for imparting practical training to students. 

c) Textile division of assessee incurred a huge loss which was adjusted against profits generated from educational institution.

d) The DIT(E) held that the assessee was doing business as well as was engaged in educational activity and, therefore, it was hit by proviso to section 2(15), inserted by the Finance Act, 2008. In view of activities of the assessee, the registration granted to it under section 12AA was withdrawn.

NHAI isn't liable to collect TCS on toll charges retained by developers of national highways

Facts

a)    The National Highway Authority of India (NHAI) granted a project to Oriental Pathways Pvt. Ltd. (OPPL) to develop a National Highway on BOT (Build, Operate and Transfer) basis. As per the agreement, OPPL was required to pay Rs. 1 per year to NHAI during the term of the agreement.

b)    The development cost of highway was to be recovered by OPPL through collection of toll. However, the toll collection was required to be deposited in an escrow account jointly held by both the parties. The purpose of depositing the amount in escrow account was to make a provision, in case NHAI had to recover any amount from OPPL.

c)    Assessing Officer (AO) contended that NHAI was liable to collect TCS from OPPL on toll fee collected by it as per section206C(1C).

d)    The CIT(A) set aside the order of the AO by holding that the OPPL was required to pay only Re. 1 per year to NHAI and not the toll fee. Therefore, provisions of section 206C(IC) could not be applied on this very nominal and insignificant amount.

e)    Aggrieved by the order of CIT(A), revenue filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-

Sec. 54 relief is available even if expenditure is incurred for making new house habitable

Facts

a)  Assessee earned capital gain on sale of his tenancy rights in a residential house property. He invested the sale proceeds to purchase another house property which was in a dilapidated condition.

b)  In order to make the said house fit for residential purpose, assessee incurred certain expenses on repairs and painting work etc. Assessee claimed deduction under section 54 in respect of expenses so incurred to make the new house property habitable.

c)  Assessing Officer (AO) contended that only the cost paid for acquiring new residential house is to be taken for the purposes of granting benefit under section 54 and not cost incurred towards the improvement of the same. Thus, the claim of the assessee towards cost of making a new house property habitable was disallowed.

d)  The CIT(A) confirmed the order of the AO. Aggrieved by the order of the AO, assessee filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-

No denial of sec. 54 relief if house is purchased within 2 years, though occupancy certificate is received later on

Facts

a) Assessee earned capital gain on sale of a residential house property. He claimed exemption under section 54 in respect of investment made for purchase of a flat.

b) Assessing O􀁹icer (AO) disallowed the claim of the assessee on ground that the assessee didn’t get the occupancy certificate of said flat with in the period of 2 years from the date of transfer of residential house property.

c) Appellate authorities allowed exemption to assessee. Aggrieved revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

‘Big B’ in Tax trouble; Apex Court nods to reopening of his tax case of 2001

Facts

a) The CIT passed revisionary order under Section 263 against assessee (Amitabh Bachchan) on ground that requisite enquiries were not made by the Assessing Officer (AO) prior to finalization of the assessment.

b) Consequently, a show cause notice was served on the assessee detailing issues on which the assessment order was proposed to be revised and, thereafter, revisional order was passed under Section 263.

c) Assessee challenged the order of the CIT on ground that additions were made on basis of issues which were not mentioned in show cause notice.

d) The tribunal and the High Court held in favour of assessee. Aggrieved by the order of the High Court, revenue filed the instant appeal before the Supreme Court.

The Supreme Court held in favour of revenue as under-

Land is stock-in-trade for builders; money forfeited on cancellation of agreement to purchase land is revenue loss

Facts

a)  The assessee-company was engaged in the business of construction of residential complexes. It paid advance money to purchase a plot of land. It, however, cancelled the transaction and, consequently, advance money was forfeited by the vendor. The amount so forfeited was treated as revenue loss by assessee.

b)  The Assessing Officer (AO) treated the same as capital loss on the ground that the land in question was treated as capital transaction by the vendor of the land. The CIT(A) confirmed the order of the AO.

c)  Aggrieved by the order of the CIT(A), the assessee filed the instant appeal before the tribunal.

Provisions relating to gift apply only to an Individual or HUF and not to an AOP

Facts

a)    Assessee was a beneficiary trust assessed in status of an AOP. It received a gift of Rs. 1.60 crore from one of its beneficiaries which was not included in total income in terms of section 56(2)(vi).

b)    Assessing Officer (AO) included said amount in income of the trust. The contention of the AO was that Section56(2)(vi) is an exemption provision which provides exemption in respect of gift subject to certain conditions, inter-alia, recipient of such gift should be an Individual or a HUF. However, in the instant case, assessee was assessed as an AOP and not as an Individual or a HUF. Therefore, it was not eligible for exemption under Section 56(2)(vi).

c)    The CIT(A) confirmed the order of the AO. Aggrieved by the order of the CIT(A), the assessee filed the instant appeal before the tribunal