Government may hike Home Loan interest Payment exemption to Rs 2.5 lakh
Jun 16, 2009 Income Tax
The government is considering a proposal to hike income-tax exemption Make these charges part of your budget available for interest payment on home loans to Rs 2.5 lakh a year, to boost demand and rebuild the slowdown-hit housing industry.
The ministry of housing and urban development has urged finance minister Pranab Mukherjee to make an announcement to this effect as part of his Budget presentation in early July, a government official said on condition of anonymity.
At present, taxpayers taking housing loans are eligible for income-tax exemption on interest payment of up to Rs 1.5 lakh every year. Besides this, the repayment of principal amount is part of investments eligible for benefit under Section 80(C) of the Income-Tax Act, which has a ceiling of Rs 1 lakh.
The government has already identified housing as one of its focus areas, a fact highlighted by President Pratibha Patil in her address to both the houses of Parliament.
The existing tax exemption limit is considered inadequate at a time when a two-bedroom house in big cities costs at least Rs 25 lakh.
Considering a person takes a loan of Rs 20 lakh at an interest rate of 9.5%, he would pay Rs 1,88,493 towards interest alone in the first year. His annual interest payment in the first five years would be more than Rs 1.5 lakh.
If the exemption limit is hiked to Rs 2.5 lakh, then a person paying that much home loan interest in a year will save an additional Rs 31,000 in tax every year. This saving of over Rs 2,500 a month would be significant for most borrowers, making home purchases more affordable.
However, as per existing norms, the tax benefits start flowing in only after the construction of the house is completed, which usually takes 2-3 years in case of builder flats.
The housing industry has urged the government to allow for the deduction as soon as loan repayment starts, as it would give substantial relief to home buyers and boost demand.
The Budget documents do not provide an estimate of the revenue forgone on account of this exemption, but it is unlikely to be very significant.
Of the total Rs 38,107-crore tax revenue forgone on account of tax exemptions to individuals in 2007-08, nearly Rs 30,000 crore is on account of Section 80C benefit, one component of which is principal repayment on housing loan.
The housing sector in the country has been hit hard by demand slowdown, following a rise in interest rates. Besides lowering of home loan interest rates, the industry has been continuously pitching for greater tax benefit, as it had the potential of stimulating demand.
Tags: Deduction, Exemption, exemption limit, home loan interest, housing and urban development, housing loans, income tax act, Income Tax Exemption, Interest, interest payment, investments
Quoting of Unique transaction Number (UTN) in ITR and practical issues
Jun 4, 2009 Income Tax
It has been directed that ITR-1 to ITR-8 shall require the quoting of the relevant UTN for every TDS or TCS claim made by an assessee and that the credit for any TDS/TCS claim will be allowed only if the assessee quotes the relevant UTN and the said UTN matches with that in the database of the Department.
In this regard it has also been noted that with a view to enabling the processing of returns relating to Financial Year 2007-08 (Assessment Year 2008-09) and enabling the assessee to receive the UTN for TDS and TCS transactions in the Financial Year 2008-09 (Assessment Year 2009-10), the following procedure will be followed:
(a) National Securities Depository Limited (NSDL) shall assign an UTN for every TDS and TCS transaction record in Financial Year 2007-08 and 2008-09 reported in the quarterly returns received by it.
(b) NSDL will create a facility to e-mail the UTN file to the deductor if the e-mail address of the deductor is available with them. In addition, they will also create a facility for the deductor to download the UTN file.
(c) Upon receipt of the UTN, the deductor will inform the UTN to the deductee. In cases where the UTNs are available to the deductor before the issue of the TDS/TCS certificate to the deductee, the deductor will indicate the UTNs on the certificate. However, if the UTNs are not available to the deductor before the issue of TDS/TCS certificate, the deductor shall, subsequently, send a consolidated statement of all TDS/TCS transactions indicating the UTNs.
(d) NSDL will also create a facility to allow independent viewing of the UTNs by the deductee. As a result, even if the UTNs are not received by the deductee from the deductor, they can be directly obtained from the NSDL database and quoted while making claims of TDS and TCS in the return of income.
In its zeal to implement something innovative, the CBDT seems to have lost sight of several practical implications of the matter as highlighted hereunder:
(i) NSDL will be required to generate UTNs for a very large number of TDS/TCS transactions for two financial years running into several crores. It is highly unpractical that this work can be completed in reasonable time and before the due date of filing the tax returns for A.Y.2009-10, i.e. 31st July, 2009.
(ii) Infact, the TDS/TCS data for the last quarter ended on 31st March, 2009 will come to be filed with the NSDL, only by the due date of filing the last quarterly return for F.Y. 2008-09, i.e. on 15th June, 2009. It is not known whether NSDL has already generated UTNs in respect of the TDS/TCS data already on record with it earlier. The data for the last quarter being substantially more voluminous in comparison to the data for the first three quarters, it would further add burden on NSDL after 15th June.
(iii) Even if NSDL is in a position to complete the generating of UTNs for all assessees, the real problem would be of communicating the same to the deductees through their respective deductors. It is a known fact that Government and Semi-Government Departments and other Public Organizations like Banks, Post Offices etc. are generally lethargic in their communications with deductees and it is apprehended that concerned deductees would find it extremely difficult to get timely information of UTNs for TDS/TCS from their respective deductors, even if the same has been conveyed to them by NSDL.
(iv) Not all deductors have E-mail and sending information of UTNs by NSDL to them through post or courier will be time consuming. Moreover, it may be too much to expect that all deductors immediately communicate to deductees their relevant UTNs. The delays arising in this process will ultimately jeopardize the timely filing of Income-tax Returns by concerned assessees, who do not receive their UTNs in time.
(v) It is very difficult to comprehend as to how NSDL will be able to create a facility for allowing independent viewing of the UTNs as mentioned in the Circular. Even the present facility of viewing credits of taxes paid by an assessee via Form 26AS through the Tax Information Network (TIN) is available, only if an assessee is registered with TIN. The registration facility involves individual authorization through the visit of TIN official and is thus time-consuming. Several practical issues such as maintaining confidentiality of TDS/TCS information, likely misuse of the same, etc. may arise, if the viewing facility is made public and not suitably monitored. It is thus highly unpractical that within the short time available before the due date of return filing, the facility for independent viewing can be effectively put in place.
(vi) It needs to be appreciated that the CBDT guidelines have come to be announced nearly two months after the end of F.Y. 2008-09 and majority of the TDS/TCS Certificates have already been issued to the concerned deductees by the respective deductors. Circular No.3 virtually attempts to introduce denovo procedural provisions with retrospective effect, which is unprecedented in the history of TDS/TCS.
(vii) Assessees are thus most unlikely to get complete information of their UTNs for claiming TDS/TCS credit in reasonable time before 31st July, 2009, being the first due date for filing their tax returns. This is bound to create grave anxiety and concern in the minds of lakhs of affected salaried tax payers, investors and senior citizens and also delay filing of their tax returns and payment of self assessment taxes, at the same time creating issues in relation to levy of penal interest under Sections 234A and 234B. Moreover, non-audit business concerns such as firms and proprietors, seeking to file timely returns with a view to avail of the benefit of claims in regard to carry forward of losses, are also likely to be seriously affected. In short, the timely return filing process for A.Y. 2009-10 is likely to be gravely endangered on account of the proposed retrospective operation of issue of UTNs for TDS/TCS credit claims.
Keeping in view the numerous practical problems and difficulties involved as highlighted hereinabove, the directions for mandatory quoting of UTNs in the Income-tax Returns for A.Y. 2009-10 should be withdrawn forthwith and assessees should be advised to file their tax returns as per the earlier provisions.
Tags: Assessment, benefit, cases, CBDT, consolidated statement, department, e mail address, FORM, Interest, ITR, national securities, nsdl, quarterly returns, Return, tax, tcs, TDS, TIN, transaction record, utn
Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2009
May 31, 2009 FEMA
Notification No. G.S.R. 349(E)
In exercise of the powers conferred by sub-section (1) and clause (a) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in consultation with the Reserve Bank, the Central Government, having considered it necessary in the public interest, hereby makes the following further amendments in the Foreign Exchange Management (Current Account Transactions) Rules, 2000, namely:—
1. Short title and commencement - (1) These rules may be called the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2009
(2) They shall come into force on such date as specified in the provisions of these rules.
2. In the Foreign Exchange Management (Current Account Transactions) Rules, 2000, in Schedule III,-
(1) (i) for item numbers 2 and 3 and the entries relating thereto, the following item numbers and the entries shall be substituted, namely :—
“2. Release of exchange exceeding US$ 10,000 or its equivalent in one financial year for one or more private visits to any country (except Nepal and Bhutan).
3. Gift remittance exceeding US$ 5,000 per financial year per remitter or donor other than resident individual;”
(ii) the amendments made to item numbers 2 and 3 shall be deemed to have come into force on the 20th December, 2006.
(2) for item 4 and the entries relating thereto, the following item number and the entries shall be substituted, namely:—
“4. (i) Donation exceeding US$ 5,000 per financial year per remitter or donor other than resident individual;
(ii) Donations by corporate, exceeding one per cent of their foreign exchange earnings during the previous three financial years or US$ 5,000,000, whichever is less, for,-
(a) creation of Chairs in reputed educational institutes;
(b) to funds (not being an investment fund) promoted by educational institutes; and
(c) to a technical institution or body or association in the field of activity of the donor company.
Explanation : For the purposes of these item numbers 3 and 4, remittance of gift and donation by resident individuals are subsumed under the Liberalised Remittance Scheme.”
(3) for item number 15 and the entries relating thereto, the following item number and the entries shall be substituted, namely :—
“15. Remittances exceeding US$ 10,000,000 per project, for any consultancy services in respect of infrastructure projects and US$ 1,000,000 per project for other consultancy services procured from outside India.
Explanation : For the purposes of this item number ‘infrastructure project’ is those related to -
(i) Power,
(ii) Telecommunication,
(iii) Railways,
(iv) Roads including bridges,
(v) Sea port and airport,
(vi) Industrial parks, and
(vii) Urban infrastructure (water supply, sanitation and sewage)”.
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Tags: amendments, central, central government, corporate, current account, Donation, earnings, educational institutes, exchange, foreign exchange management, Gift, infrastructure, institutions, Interest, investment fund, investments, management act, notifications, private visits, Promoters, remittance, remittances, remitter, reserve
Determination of residential status of Assessee not resident in India in 9 out of 10 previous years
May 24, 2009 Income Tax Case Laws
SUMMARY OF CASE LAW
Where the individual is resident in the previous year, but was not a resident in India in 9 out of 10 previous years preceding the year or was in India for a total period of 730 days or more in seven previous years then his residential status will be that of resident but not ordinarily resident.
CASE LAW DETAILS
Decided by: ITAT, H-BENCH, MUMBAI, In The case of: Satish Dattatray Dhawade v. ITO,Appeal No. : ITA Nos. 2204, 2205 & 2247/Mum/2005, Decided on: April 24, 2008
RELEVENT PARAGRAPH
15.2 On a careful reading of section 6(1) alongwith the circular cited above we are of the considered opinion that where the individual is resident in the previous year, but was not a resident in India in 9 out of 10 previous years preceding the year or was in India for a total period of 730 days or more in seven previous years then his residential status will be that of resident but not ordinarily resident. A similar view was considered by the H-Bench of this Tribunal in the case of Shri Jayram Rajgopal Poduval vs ACIT. Cir.272) in ITA No.7072/Mum/ 2004 for the assessment year 2001-02 vide order dated 18th January, 2008 We reproduce the following paragraphs of this order for.ready reference;
“8. At this juncture it would be apt to note down the material part of clause (6). Section 6 prior to its substitution by the finance Act, 2003, w.e.f. 01.04.2004 which is as under-
“(6) A person is said to be “not ordinarily resident” in India in any previous year if such person is -
(a) an individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to. seven hundred and thirty days or more”
It is equally important to consider Section 6(1) which runs as follows: -
“6. For the purposes of this Act,-
(1) An individual is said to be resident in India in any previous year, if he -
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
(b) [omitted w.e.f. 01 04 1983)
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.”
On a careful and conjoined reading of the above sub sections, it becomes clear that an individual is resident in India in any previous year if he satisfies the conditions of Section 6(1). Thus if an individual is in India for a total period of 182 days or more in the previous year, he would be treated as Resident in India. If, however, conditions as per either of the two clauses, i.e. (a) or (c) of Section 6(1) are not satisfied, i.e. the individual is neither in India for a total period of 182 days or more or in previous year nor he had been in India for a total period of 60 days or more in previous year together with 365 days or more in 4 years preceding that year, he will acquire the status of non-resident. The essence of Section 6(6) is that where the individuaJ is resident in the precious year, but was not resident in India in 9 out of 10 previous years preceding that year or was not in India for total period of 730 days or more in seven years preceding that year, then his residential status will become RNOR. Thus in order to acquire the status of RNOR, it is sine qua non that on the other hand he should firstly be resident in that year and thus should fulfill either of the conditions of Section 6(6). That is, he should meet either of the conditions of Section 6(1), say, be in India for 182 days or more in the previous year and thereafter either of the conditions enshrined in Section 6(6) be fulfilled, say, be in India for 182 days or more in the previous year and thereafter either of the conditions enshrined in Section 6(6) be fulfilled, say, he should not be the resident in India in 9 out of 10 previous years preceding that year.
9. Adverting to the facts of the case as borne out from the assessment order we note that the assessee was residing in India from 01.04.1995 to 31.03.2001 and during that period he was out of India only for 6 days, i.e. from 8lh June 1997 to 14th June 1997. The proposition which therefore emerges is that in the previous year (i.e. from 01.04.2000 to 31.03.2001) he was in India for 365 days, thereby successfully satisfying the test of Section 6(1) and was also not resident in two years, i.e. Assessment Years 1994-95 and 1995-96 in 10 years preceding the previous year (i.e. 01.04.1990 to 31.03.2000) thereby fulfilling the criteria as per section 6(6), being not resident in India in 9 out of 10 previous years preceding that year.
10. Now we will focus on the view point canvassed by the learned CIT(A) in the penultimate para of the impugned order that in order to claim residential status of RNOR both the conditions set out in Section 6(6)(a) be cumulatively fulfilled, that is the assessee should not be resident in India in 9 out of 10 previous years preceding that year and also should not be in India for 730 days or more in 7 years preceding that year. From the factual position noted supra, we note that the assessee is satisfying the first condition of Section 6(6)(a) and not the second.
11. Here we are reminded of the well settled literal rule of interpretation as per which the language of the section should be construed as it exists. The intention of the legislature is to be gathered from the words used and should not be needlessly inferred, it has been held by the Hon’ble Supreme court in numerous judgment including the case of Federation of Andhra Pradesh Chambers of Commerce & Industries & Ors. Etc. Etc. vs State of Andhra Pradesh & Ors. Etc. Etc. (2001) 165 ITR (SC) 672; (2001) 247 ITR 36 (SC) that taxing statute has to be strictly construed and nothing can be read in it. Similar view has been taken in the case of Padmasundara Rao (Deed) & Ors vs State of Tamil Nadu & Ors. (2002) 176 CTR (SC) 104; (2002) 255 ITR 147 (SC) in which it was held that “while interpreting a statute legislative intention must be found in the words used by the legislature” . Similar view has been reiterated in the case of CAIT vs Plantation Corporation of Kerala Ltd (2000) 164 CTR (SC) 502; (2001) 247 ITR 155 (SC) providing that “So long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislature intent becomes impermissible” .
12. Coming back to the language of Section 6(6)(a) we find that the word ‘or’ has been used between the lines ” who has not been resident in India in nine out of ten previous years preceding that year” and “has not during the seven years preceding that year been in India for a period of, or periods amounting in all to: seven hundred and thirty days or more”. It is beyond our comprehension as to how the learned CIT(A) could substitute the word ‘and’ for the word ‘or’ used in the section. The intendment of the legislature is manifest that either of the two conditions of Section 6(6)(a) and not both be complied with for acquiring the residential status of RNOR. As in the facts and circumstances of the present case, the assessee has satisfied the first condition and not the second, we are of the considered opinion that the learned CIT(A) erred, in holding that the residential status of the assessee was ROR
13. Now we will refer to the legal position arising out of the judicial precedents on the issue; which seems to be no more res integra in view of the judgment of the Hon’ble Apex Court in the case of CIT and Another vs Morgenstern Werner (2003) 259 ITR 486 (SC) in which the judgment of the Hon’ble Allahabad High Court in Moregenstern Werner vs CIT (1998) 233 ITR 531 (All) was affirmed. The facts of the case as recorded by the Hon’ble High court are that the petitioner worked with the Kraft Work Union (Siemens), Germany and drawing his salary of DM 3882 per month in Germany. BHEL sought the services of a technical liaison officer. The Ministry of Industries, government of India informed the BHEL about the approval of the government for engaging his services in that case for a period of 1.5 years in India on terms of payment of daily allowance or Rs.500/- per day in India. On the basis of the said approval the petitioner came to India for rendering the service to BHEL on deputation basis. The petitioner in that case by way of revision application under Section 264 claimed that the salary was not received in India and hence he was not liable to pay any tax in India. When the controversy reached the High court, it held in para 6 as under:-
“Considering the aforesaid provisions of law, I find that a person is “not ordinarily resident” in India if in nine out of the ten preceding years he had stayed outside India. Admittedly, it is nobody’s case that the petitioner had stayed in India during the preceding nine years. In that view of the matter, I have no doubt in my mind that the petition is “not ordinarily resident” in India and will be governed by the proviso to s. 5(1 )(c) of the Act.”
The Hon’ble supreme court affirmed the view of the Hn’ble High Court holding that the assessee was a person “not ordinarily resident” in India as the High court found that the assessee had not stayed in India during the preceding 9 years and hence he was “not ordinarily resident in India”. From the above judgment of the Hon’ble Supreme court it becomes crystal clear that the opinion of the learned first appellate authority for fulfilling both the conditions of Section 6(6) simultaneously is no more correct. When one of these two conditions as laid down in Section 6(6)(a) is fulfilled, the status of resident gets converted into RNOR. All the judgments and orders inconsistent with the view of the Hon’ble summit Court stand impliedly overruled. We. therefore, hold that as the assessee had not been resident in India in 9 out of 10 previous years . preceding that year, his claim for status of RNOR cannot be negatived.
14. Before parting with this appeal and to provide completeness to this order we would like to mention that Section 6(6) has been substituted by the finance Act, 2003 w.e.f. 01.04.2004. In the present appeal we are concerned with the pre-amendment era as the assessment year involved is 2001-02. The substituted subsection (6) of section 6 is prospective as has been laid down by the Lucknow Bench of the Tribunal in the case of Abhay Pratap Singh Sengar vs ITO (2007) 108 ITD 8 (Lucknow) and hence can have no retrospective application to the year in question.
15. To sum up, we bhold that the residential status of the assessee is “resident but not ordinarily resident” and the claim of exemption under Section 10(15)(iv)(fa) for interest amounting to rs.1,97,450/ – is as per law. The consequential charging of interest under Section 234B would also be brought to naught. We, therefore, set aside the impugned order and accept the assessee’s contention.”
We respectfully follow the decision of the co-ordinate bench on this issue.
Tags: 9 out of 10, APPEAL, Assessment, authorities, cases, circulars, CIT, DEEDS, Exemption, Finance, Interest, itat, ITR, judgment, judgments, non-resident, not resident, paragraph, precedents, previous years, residential status, tax, tribunal
Interest to Partners is allowable even if there is no book profit
May 24, 2009 Income Tax Case Laws
SUMMARY OF CASE LAW
If the rate of interest payable to partners to their capital balances is within the prescribed percentage, then such amount of interest is allowable as deduction from the computation of business income; thus, there is no requirement of having any book profit as a pre-condition for granting deduction in respect of interest paid to the partners, which is required for allowing remuneration to partners beyond the specified sum; therefore, the interest to partners is an allowable deduction under the head `Profits and gains of business or profession’ even if there is loss under this head.
CASE LAW DETAILS
Decided by: ITAT MUMBAI BENCHES `B’, MUMBAI, In The case of: ITO v. M. M. Textiles, Appeal No. : ITA Nos. 2574 & 7418/Mum/2007, Decided on: April 16, 2009
RELEVENT PARAGRAPH
10. The core of controversy in this appeal is against the deductibility or otherwise of an interest of Rs. 6,50,236 allowed to the partners which was claimed as deduction. The case of the Assessing Officer is that no deduction on account of interest to partners can be allowed. The learned D. R. submitted that the rental income of Rs. 16.70 lakhs was rightly held to be taxable under the head `Income from other sources’ and hence only deduction as allowable u/s. 57 could be granted. He submitted that the expenses incurred wholly and exclusively for the purpose of earning rental income were eligible for deduction. Since the interest paid to partners was not incurred wholly and exclusively for the purpose of earning the lease rent, the same was stated to be not eligible for deduction from the rental income. We are fully convinced with the submissions made on behalf of the Revenue that the interest allowed to the partners is not deductible under the head Income from other sources’. Even the Id. CIT(A) has not held that the assessee was entitled to claim deduction on account of interest to partners from the income under the head ‘Income from other sources’. In our considered opinion the controversy is not in allowing deduction of interest to partners against the rental income but to allow deduction of such interest under the head “Profits and gains of business or profession’. Section 40(b) was substituted by the Finance Act, 1992 with effect from 1.4.1993 which deals with the amount not deductible in the case of firm assessable as such. Clauses (i) to (v) of section 40(b) restrict the deductible amount of remuneration paid to the working partners. Clause (ii) to (iv) of section 40(b) also place restriction on the deductible amount of interest paid to the partners. Whereas remuneration to the partners is deductible subject to certain conditions to the extent of the availability of the book profits, the interest to partners, which is otherwise authorized by and in accordance with the terms of the partnership deed and relates to any period falling after the date of such partnership deed, is not deductible if it is in excess of the amount calculated at the rate of 12% simple interest with effect from 1.6.2002. In other words if the rate of interest payable to partners to their capital balances is within the prescribed percentage, then such amount of interest is allowable as deduction from the computation of business income; thus, there is no requirement of having any book profit as a precondition for granting deduction in respect of interest paid to the partners, which is required for allowing remuneration to partners beyond the specified sum; therefore, the interest to partners is an allowable deduction under the head “Profits and gains of business or profession’ even if there is loss under this head. Adverting to the facts of the instant case we find that the learned CIT(A) has recorded a categorical finding that the business was continuing though temporarily suspended which implies that the business was carried on by the assessee and income under the head “profits and gains of business or profession” was calculatable. Moreover the Revenue is aggrieved only against the granting of deduction on account of interest to partners and it has accepted the granting of deduction of other expenses including the administrative expenses, which has been obviously granted under the head ‘Business income. Thus we do not find any reason for which the interest to partners cannot be allowed as deduction under the head “Profits and gains of business or profession”. By allowing this deduction it would mean that the loss under the head ‘Business income’ would swell by the amount of interest to the partners to the tune of Rs.6,50,236. From the ground of appeal, extracted above, we find that reference has been made to the capital of Rs.44.44 lakhs contributed by the partners vis-a-vis that diverted by way of loan to the parties not related to its business amounting to Rs.73.6 lakhs. There is no discussion on this aspect of the matter either in the assessment order or the remand report. What to talk of discussion on the question of diversion of capital for non-business purpose, there is no whisper, much less the finding of the XO on this issue. Even the Id. DR could not point out that where from these figures have come up. We are, therefore, not taking cognizance of such facts which are not borne out from the record, in reaching our conclusion.
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Tags: APPEAL, Book Profit, Computer, Finance, gain, Interest, Interest to Partners, itat, profits, remuneration
Merely because agreement named as license agreement is not enough to attract section 194-I
May 23, 2009 Income Tax Case Laws
CASE LAW DETAILS
Decided by: ITAT, INDORE BENCH, INDORE, In The case of: J. C. Bansal v. TRO, Appeal No. : ITA Nos. 115 to 117/Ind/2005, Decided on: May 23, 2008
RELEVENT PARAGRAPH
20. On examination of the license agreement and schedule attached with the same, we find that entire factory building along with plant & machinery have been given under the agreement by M/s. Ramco Ind. Ltd. to the assessee for taking over the production facilities. The agreement as a whole has to be considered. As per the agreement between licensee and licensor, there was a definite obligation of the assessee to make minimum licence fees of Rsy40 lakh and the rest was dependant on the production respectively for permitting the licensee to utilize all production facilities provided in the premises of the licensor including use of all facilities, utility, machine, factory, office premises, spare parts, tools and equipments, essential for efficient running of the said unit along with residential quarter also. The assessee is entitled to sub-let or under-let the whole or part of the factory building or plant ft machinery. It would therefore, clearly prove that entire factory building including plant ft machinery for manufacturing facilities have been given through the agreement to the assessee and the minimum payment was definitely a consideration for use of entire facility including land and building including factory building and furniture and fittings and plant ft machinery. The agreement in question is therefore, composite agreement for the whole factory building including plant & machinery and residential quarters and the consideration paid is for the entire factory building including plant ft machinery. The assessee has not clarified as to how it can b use effectively the plant & machinery without using the factory building. The details of gross block of fixed assets on 31.3.2003 as filed at PB-A/13 shows that the total gross value of land, building and plant & machinery was Rs.9,35,08,298/ – out of which, the value of plant & machinery is Rs.6,94,04,216/ . It would therefore, prove that the value of land and building, furniture fittings, factory building was also having substantial value which cannot be given to be assessee without any consideration for use and occupation. Schedule A (PB-13) attached with the agreement also prescribed that entire factory building of pipe plant excluding warehouse have been handed over by M/s. RIL to M/s. KSGML This would also support the findings of the authorities below that the agreement in question is a composite agreement to give entire factory building including plant ft machinery to the assessee subject to consideration. Since entire factory building is given to the assessee and the licensor had no control over the factory building, therefore, ft cannot be believed that it was a case of licence agreement. In the case of (ease, the creation of interest in the rented property is there, which we find in this case because the right to enjoyment in the entire property has been created in favour of the assessee : therefore, it falls within a definition of rent as prescribed in Explanation (i) of sec. 194-1 of the IT Act. The assessee has not made out any case that it was getting the goods manufactured from the licensor on job basis. The Id. counsel for assessee submitted that the words plant & machinery have been included in the definition of rent in sec. 194-f after the amendment w.e.f. 13.7.2006. However, this would not prove contention of Id. Counsel for assessee because Id. Counsel for assessee himself referred to circular no. 715 (supra) in which, in answer to question no.24, it was clarified that if the composite agreement is in essence, the agreement for taking the premises on rent, the tax will be deducted u/s 194-1 from payment thereof. This would put the assessee under liability to deduct the tax at source. Ld. CIT(A) relied upon decision of Calcutta High Court in the case of Smt. Visakha Sarkar (supra) in which, Hon’ble High Court examined the scope word “rent” for the purpose of sec. 194-1 and it was held “the definition for the purpose of this act of the nomenclature rent as expounded in the explanation column of this sec. itself, amply reveals that the same is projected as the generic turn which includes within its ambit payment made on any account whatsoever for occupation of a tenanted portion. It appears to be a composite concept. Once the rent is comprehended as a composite concept then it is not capable of being fragmented.” Ld. CIT(A) also referred to the decision of Hon’ble AP High Court in the case of Krishna Oberai and others (supra) in which, the word “rent” in context of sec. 194-1 has been examined and it was held that the rent has been defined in a wider sense to include not only consideration paid under a lease or sub-lease or tenancy but also the consideration paid under any other agreement or arrangement for the use of any (and or building etc; was further held that the assessee was engaged fn running^ of five star hotel and customers are provided -furnished rooms and other facilities for consideration which is known as room charges. However, certain cos. entered into agreement to utilize hotel services for accommodating their officials and lesser amount is charged, in that context, the petitioner approached the corporate customers requesting them not to deduct TDS u/s 194-1. It was therefore, held that the charges paid to the petitioner by its customers for use and occupation of hotel rooms should be regarded as rent within the meaning of sec. 194-I. Ld. CIT(A) also noted that after this decision the Board clarified that so long as the accommodation has been taken on regular basis in a hotel, the same would be subjected to TOS. The findings of Id. CIT(A) based upon on these decisions have not been contradicted through any material on record. The same would therefore, support the findings of the AO.
21. Ld. counsel for assessee relied upon order in the case of National Panasonic India P. Ltd. (supra) in which, the payment to C ft F agents was not a rent u/s 194-1 because the C&F agent has to store the goods during inventing period and then the C&F agent sold the goods in the interregnum. The distribution agreement between the manufacturer and the C&F agent was not found to be converted into an agreement as may be obtaining between a landlord and tenant. Ld. counsel for assessee also relied upon order fn the case of Kamat Hotels (I) Ltd. (supra). In this case, in effect the agreement was not for renting out the premises but for managing and conducting the restaurant/food outlet on payment of royalty/commission on which, the owner had complete control- In the case of Ganesh Aloo Bhandar (supra), the payment made for use of old storage was held to be not subjected to deduction u/s 194-1. These decisions are clearly distinguishable on facts of the present case.
22 Considering the facts and circumstances noted above, we are of the view that the agreement in question is a composite agreement for renting out the entire factory building including plant h machinery, tools, and residential quarters subject to minimum payment of Rs.40 lakh. Merely, because the name of agreement is given as licence agreement is not enough to thwart the provisions of sec. 194-1 of the IT Act. In this view of the matter, we do not find’ any infirmity in the orders of authorities below. Provisions of sec. 194-1 are applicable to this case. We therefore, confirm the orders of authorities below and dismiss ground no. 1 in all the appeals of the assessee.
Tags: accommodation, accountants, agent, AGREEMENTS, amendments, APPEAL, assets, authorities, bench, benches, circulars, COMMISSION, contention, converter, corporates, customs, Deduction, Examination, Examinations, india, Interest, itat, job, jobs, landlord, liabilities, obligation, office, premises, provision, quarters, Royalty, storage, tax, TDS, wordings
Securities and Exchange Board of India (Investor Protection and Education Fund) Regulations, 2009
May 22, 2009 SEBI
Notification of SEBI (Investor Protection and Education Fund) Regulations, 2009
SEBI has notified the SEBI (Investor Protection and Education Fund) Regulations, 2009, on May 19, 2009, with a view to strengthening its activities for investor protection.
The salient features of these regulations are as follows:
- The Fund shall be used for the protection of investors and promotion of investor education and awareness, in ways like:-
(a) educational activities including seminars, training, research and publications, aimed at investors;
(b) awareness programmes through media – print, electronic, aimed at investors;
(c) funding investor education and awareness activities of investors’ associations recognized by the Board;
(d) aiding investors’ associations recognized by the Board to undertake legal proceedings in the interest of investors in securities that are listed or proposed to be listed.
- The Board shall constitute a seven-member advisory committee for recommending investor education and protection activities as mentioned above, to the Board. This Committee would comprise of both SEBI officials and outside experts.
- These regulations also provide for suitable amendment to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997, to provide for one of the sources of income for the IPEF.
The entire text of these regulations is as follows:-
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Tags: Accounting, advisory committee, awareness activities, Deduction, Donation, education fund, educational activities, establishments, exchange board, expenditures, Interest, investments, investor education, investor protection, Investor Protection and Education Fund, ipef, legal proceedings, notifications, receipt, Refund, regulators, retirement, salaries, salary, SEBI, securities and exchange, securities and exchange board of india, Share, shareholder, Shares, Statement, Takeover, takeovers, tribunal
Download E-Filing ITR 1, ITR 2, ITR-3 & ITR-4 for A.Y. 2009-10 Released by Income Tax Department
May 18, 2009 Income Tax
Individuals, HUF
Filing of Income Tax returns is a legal obligation of every Individual/HUF whose total income for the previous year has exceeded the maximum amount that is not chargeable for income tax under the provisions of the I.T Act, 1961. Income Tax Department has introduced a convenient way to file these returns online using the Internet.
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Tags: acknowledgement, business profession, department, e filing, FORM, forms, gains, generality, HUF, income, Income tax department, income tax returns, Interest, Internet, investments, ITR, itr 1, itr 2, ITR 3, ITR 4, itr form, ITR in Excel Format, ITR in Excel Format for A.Y. 2009-10, itrs, losses, new release, obligation, Others, partnership firm, preparation software, profession, professions, proprietary business, provision, provisions, receipt, registrations, Return, salaries, salary, Software, software tools, tax, xml format
Concessional ticket to travel Agents cannot be termed as commission
May 17, 2009 Income Tax Case Laws
SUMMARY OF CASE LAW
The relationship between the assessee-airlines and the travel agent is one of principal and agent; the supplementary commission which is the amount retained by the travel agent is commission within the meaning of section 194H read with Explanation (i) to the said section; the difference between the full value of the ticket and the concessional ticket cannot be termed as `commission’ because the concessional ticket may have been given to the travel agent for carrying out his function as an agent; however, the transaction between the two is that of principal to principal.
CASE LAW DETAILS
Decided by: HIGH COURT OF DELHI, In The case of: CIT v. Singapore Airlines Ltd. , Appeal No. : ITA Nos. 306/2005 & 123/2006, Decided on: April 13, 2009
RELEVENT PARAGRAPH
1. In these batch of appeals, which have been preferred by the Revenue, there are three issues which require consideration of this Court.
12. In order to come to a definite conclusion whether section 194H of the Act would be applicable to the assessee-airline in respect of transaction, in issue, we propose to first look at the scope and ambit of section 194H of the Act and then analyse the transaction as to whether it falls within the purview of the said Section. In this context, it would be necessary to extract the relevant portions of Section 194H of the Act.
The said provision reads as under:-
“194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft of by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten percent:
Provided xxxx
Provided xxxx
Provided xxxx
Explanation. – For the purposes of this section, -
(i) “Commission or Brokerage ” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of nother person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities;
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Tags: account, accountability, accountants, Accounting, act, AGREEMENTS, ahmedabad, AIR, airlines, ambit, APPEAL, appointment, Assessment, assets, Audit, audits, authorities, Aviation, benefit, brokerage, cases, cheques, CIT, clauses, collections, commencement, COMMISSION, consequences, contention, convenience, customs, damages, Deduction, department, dgca, DISCOUNT, discretion, distinction, donee, establishments, evidences, Examination, Examinations, expression, failure, FORM, formality, forms, gain, gains, generality, hindu, HUF, income, incorporation, india, insurance, Interest, issuance, ita, itrs, judgment, judgments, liabilities, losses, money, negligence, obligation, office, or, ors, Others, paragraph, particulars, perusal, pledge, profits, proposals, provision, provisions, purview, Refund, remuneration, Results, Return, scope, stamps, Statement, submission, submissions, supra, tax, transferor, tribunal, Trust, trusts, validation, validity, virtue, WILL, withdrawals, wordings
Interest income from banks on fixed deposits not necessarily Income from Other Sources
May 16, 2009 Income Tax Case Laws
SUMMARY OF CASE LAW
Normally, on the placing of funds in banks on short-term or long-term deposits, the interest income derived from those sources would be “income from other sources”; but it is not so easy to decide that interest income is always assessable under the head “income from other sources”; each case has got to be decided on the facts arising in that case because interest income can be a capital receipt; it can be “income from business” and “income from other sources”
CASE LAW DETAILS
Decided by: ITAT, MUMBAI BENCH “B-1″: MUMBAI, In The case of: ACIT v. Niru Impex, Appeal No. : ITA No. 8258/M/04 & C. O. No. 40/M/07, Decided on: February 11, 2009
RELEVENT PARAGRAPH
6.1 The main question before us for decision is whether the interest income could be treated as “business income” or “income from other sources”. The answer to this question has to depend on how the interest income derived by the assessee. No doubt, normally, on the placing of funds in banks on short-term or long-term deposits the interest income derived from those sources would be “income from other sources”. But it is not so easy to decide that interest income is always assessable under head “income from other sources”. It depends upon the facts of the each case. For appreciating facts of each case we would like to refer some of judgments which are as under
6.8 From above discussions we noticed that each case has got to be decided on the facts arising in that case because interest income can be a capital receipt; it can be “income from business” and “income from other sources”.. The different treatment of interest income is also to be given while considering deduction under chapter VI-A of the Act. Business profit in section 80HHC is different than normal business profit .Explanation (baa) to section 80HHC provides that profits of the business means the profits of the business as computed under the head “profits and gains of business or profession” as reduced by……. Thus for the purpose of calculation of deduction under section 80HHC, first it is to see whether interest is assessable under the head “profits and gains of business or profession” or it is assessable under the head ‘income from other sources’. Interest assessable under the head “income from other sources”, is not at all relevant in calculation of deduction under section 80HHC. As stated above that, normally, on the placing of funds in banks on short-term or long-term deposits the interest income derived from those sources would be “income from other sources”, but there have been cases in which such income has been treated as “income from business”, notwithstanding the fact that it is interest income .if the deposit made by the assessee in the bank is capital employed, that would become part of the capital of the undertaking. Any income earned by the capital employed would automatically become the business income of the assessee and it cannot be treated as income earned from “other sources” .the investing of the moneys in term deposits was indisputably interconnected and are inextricably with the carrying on of the assessee’s business and that it is very difficult to see its activity as a separate and distinct activity. In the course of the assessee’s business, the assessee received money on several counts the earning of an interest which would reduce the cost of borrowing. This interest could be linked to the interest that the assessee charges from its customers on overdue payments, which would also be regarded as business income and never, treated as income from “other sources”.
6.9 On an analysis of section 56 of the Income-tax Act, 1961, which alone permits taxation of income from “other sources”, that the language used in that section also supports the view that the income earned by the assessee from business deposits could only be taxed as income from “business”, because the deposits sprang directly from the carrying on of the business and not de hors it and it was good management of cash to produce the income. It is obviously attributable and incidental to the business carried on by him. It would not be correct, to say that this interest is totally de hors the business carried on by the assessee. It is well settled that interest can be assessed under the head “Income from other sources” only if it cannot be brought within one or the other of the specific heads of charge. We find it difficult to comprehend that the interest receipts on capital employed by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the business: It cannot be separated from the business receipts and treated as “income from other sources”.
Tags: act business, Assessment, banks, bench, borrowers, business income, business profit, capital receipt, case law, customs, Deduction, derivatives, Interest, Interest Income, investments, judgments, mumbai, profession, profits, taxation, term deposits