Whether when proceedings u/s 153A are initiated, AO is empowered to assess or reassess even 'total income' and no time-limit applies for sending notice u/s 148 - YES: HC

THE assessee is an individual and was carrying on business under the name and style of M/s. A.K. Traders. On 13.12.05, there was a search of the assessee's residence and business premises u/s 132 of the Act. Pursuant to the search, the AO issued notices u/s 153A of the Act and called upon the assessee to file the returns of income for the six years as envisaged in the Section. After considering the explanation and details submitted by the assessee, the AO made several additions to the income returned in respect of the AYs under consideration. Before the Tribunal, the assessee in addition to challenging the addition made by the AO also questioned the validity of the additions made in the assessments framed u/s 153A of the Act. The Tribunal found itself in complete agreement with the submissions made on behalf of the assessee.

Surplus in slump sale is 'capital gain' even if AO treats it as 'goodwill'

In the instant case, the assessee's concern was taken over as going concern by a company for a lump sum consideration. During assessment, the AO opined that substantial amount of consideration represents 'goodwill' in view of meager net worth of assessee's concern at the time of take-over. Accordingly, the AO treated the same as business receipt under section 28 (va)(a) ignoring the claim of assessee treating it as capital receipt. On appeal CIT(A), deleted the addition.

On appeal, the Tribunal held in favour of assessee as under:

1) Amount arrived at by Assessing Officer as goodwill, in fact, represents long term capital gains within the meaning of section 50B i.e. slump sale; and

2) As per agreement what was transferred was right to carry on business and hence, application of main section 28(va)(a) was foreclosed and forbidden by proviso (i) which provides that section 28(va)(a) shall not apply to any sum received on account of transfer of a right to carry on business, which is chargeable as capital gains - ACIT v. SMT. SANGEETA WIJ [2012] 24 taxmann.com 128 (Delhi - Trib.)

Audits of Brokers Found Deficient

By LIZ MOYER

Audits of broker-dealers have "disturbing" deficiencies, including two instances where the firms that conducted the audits didn't adhere to rules requiring independence among auditors, a new report found.

The report, by the Public Company Accounting Oversight Board, set up by Congress to oversee the audits of public companies, reviewed portions of 23 audits of broker-dealers by 10 audit firms.

The board found independence problems in two cases where the auditors prepared, or assisted in preparing, financial statements they were auditing, something allowed under rules by the American Institute of Certified Public Accountants but not under the stricter rules for broker-dealer auditors under the Securities and Exchange Commission.

The board said it wouldn't identify the names of the auditing firms or the broker dealers.

Bloomberg News

James Doty's PCAOB is concerned about broker-dealer audits.

Calling the results "disappointing" and "disturbing" during a conference call to discuss the interim report Monday, representatives of the accounting oversight board said they would continue to push forward with their inspection program.

"The results indicate that in the audits that we inspected, the auditors were not properly fulfilling their responsibilities to provide an independent check on brokers' and dealers' financial reporting and compliance with SEC rules," said Jeanette Franzel, a member of the PCAOB board.

The review program began last year in response to the PCAOB's new oversight authority of broker-dealer audits under changes mandated by the Dodd-Frank law in light of the Bernard Madoff Ponzi scheme.

Since the reviews began, MF Global Holdings Ltd. MFGLQ +15.38% imploded after big bets on shaky European bonds prompted a wave of customer and counterparty defections. Last month, another futures broker, Peregrine Financial Group Inc., foundered after allegations of a long-running accounting fraud.

Its chief executive, who allegedly confessed to the fraud in a note before a failed suicide attempt, pleaded not guilty to 31 charges of fraud last week.

The PCAOB said Monday that its first swipe at reviewing audits was just a small sample of what it will ultimately review.

"While the results of these initial inspections cannot be generalized to all securities broker and dealer audits and represent only a small portion of the inspections planned for the interim program, the nature and extent of the findings are of concern to the board," said James Doty, PCAOB chairman.

Less than 1% of broker-dealers, 30 in total, have net capital requirements of $1 billion or more, representing 80% of the industry's net capital. Some 70% of broker-dealers have net capital under $1 million, less than 1% of industry capital.

The PCAOB's first review looked at firms in the smaller size category. The reviews will be broadened out eventually. This year, the PCAOB will look at 40 auditing firms and 60 broker-dealer audits. By the end of next year, it will have looked at 100 auditing firms and 170 audits.

In the initial review of the 10 audit firms, the PCAOB said it found deficiencies throughout. For example, in seven of the 23 audits, inspectors found firms failed to sufficiently test components of minimum net-capital computations. In two of the nine audits of broker-dealers that are required to hold a customer reserve, audit firms failed to verify that the special reserve bank accounts were designated for the exclusive benefit of customers.

Write to Liz Moyer at liz.moyer@dowjones.com

A version of this article appeared August 21, 2012, on page C3 in the U.S. edition of The Wall Street Journal, with the headline: Audits of Brokers Found Def

The death of Bob Diamond's dream for Barclays

By Shawn Tully, senior editor-at-large July 30, 2012: 5:00 AM ET

23
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Caught up in the Libor scandal, the star investment banker and American CEO of the British bank was forced to resign. His departure represents the end of an era for big banks.

Bob Diamond

FORTUNE -- By the time the call came, Bob Diamond knew his tenure as CEO of Barclays was at an end. It was 9:30 p.m. on Monday, July 2, and Diamond had just gotten home from the office when the bank's outgoing chairman, Marcus Agius, and lead director, Sir Michael Rake, phoned to say they were on their way to Diamond's townhouse in the tony London neighborhood of Belgravia. They didn't say what the visit was about, and they didn't need to. Diamond knew that they'd just been in a meeting with Sir Mervyn King, governor of the Bank of England, and that they would tell him he had to resign after just 18 months on the job. In fact, he'd already made that decision for himself. He planned to tell the Barclays board the following morning.

The day had started with a typical burst of Diamond optimism. Despite the Libor scandal raging around him, the 61-year-old CEO reckoned he'd be running Barclays (BCS) -- a 322-year-old institution whose assets of $2.4 trillion rank second in Britain, behind HSBC, and sixth in the world -- for years to come. On Friday he had secured the endorsement of his board and his large shareholders. On Sunday, Agius had decided to step down, partly in an effort to save Diamond. When Diamond arrived in the office that Monday, he got a phone call from Andrew Bailey, chief of the Financial Services Authority's banking unit, and discussed the news about Agius. Diamond told Bailey that his board was behind him and that he had no intention of resigning. Bailey expressed no objections.

But as the day wore on, evidence mounted that the British regulators were about to throw Diamond under the lorry. The biggest clue was Agius's call from George Osborne, the Chancellor of the Exchequer, about a story in that day's Financial Times. The story examined a conversation that Diamond had held with Paul Tucker, deputy governor of the Bank of England, at the height of the financial crisis and whether Tucker had implied that Barclays could rig Libor without fear of punishment -- a suggestion that Tucker has strongly denied. Diamond was soon scheduled to testify before a parliamentary panel investigating Libor abuse. (On, of all dates, July 4 -- his 16th anniversary at Barclays and the perfect day for British lawmakers to give an American his comeuppance.) And Osborne wanted to know what Diamond was going to say about Tucker when he testified. It began to look as if the regulators would force Diamond out before he made them look bad.

Agius and Rake arrived at Diamond's townhouse around 10 p.m., and the three men stood and talked in his kitchen on the mansion's ground floor. The directors informed Diamond that King was effectively demanding his resignation. Though he'd already made his decision, Diamond expressed dismay that the regulators had turned on him so quickly. The two visitors said that while their first impulse was to fight for Diamond, the regulatory authorities were just too powerful. They left after just 10 minutes.

So ended the career of a star banker who spent a short, controversial term as CEO but leaves a legacy as a great franchise builder. "He deserves a place in the pantheon as one of the few to ever build an investment bank virtually from scratch," says Robert Steel, a former Goldman Sachs vice chairman.

Diamond's fall carries far broader significance than the demise of a single talented executive. It may, in fact, signal the death of his dream. That dream is the model of the universal bank -- one that spans the globe, combining an investment bank that sells securities for corporations and trades them for institutions with retail franchises offering everything from credit cards to small-business loans. Diamond, and his similarly surnamed rival, Jamie Dimon of J.P. Morgan Chase (JPM), have been the leading champions and architects of the model on each side of the Atlantic.

But their vision, which dominated the financial world from the repeal of the Glass-Steagall Act in 1999 until the crisis of 2008, is now under siege. The new Basel III global rules are forcing banks to raise their margin of safety by holding far more capital than in the past. That is severely lowering their earnings. The Volcker Rule in the U.S. will eliminate the banks' ability to make speculative investments with their own capital. Europe is pondering a rule that would cap bankers' bonuses at no more than their salaries. And the shock surrounding the $5.8 billion trading loss by Dimon's J.P. Morgan Chase earlier this year is heightening calls for ever tighter regulations -- and is a further blow to the moral authority of big banks.

Nowhere is the weight of new regulation heavier, or the public view of banking more hostile, than in Britain. The government of Prime Minister David Cameron is endorsing a proposal to separate, or "ring-fence," the retail from the investment banks. Under ring fencing, each franchise would have separate balance sheets -- meaning it would need to fund its investment and retail banks separately. The rationale is to protect taxpayers by ensuring that the government, which insures deposits, wouldn't have to pay if the investment bank encounters problems. The regulation would still allow investment and retail banks to remain under the same corporate umbrella.

Still, ring fencing would dramatically raise the cost of funding for the riskier side, the investment bank. "The government's view now is that investment banking is not a place where banks should expand, that it is not socially useful or vital to the economy," says Simon Adamson, an analyst with CreditSights.

The reason for the incredibly harsh climate in Britain is basic: The U.K. suffered a banking cataclysm even more wrenching than the crisis in the U.S. In 2007 and 2008, most of its national banks failed. Britain effectively nationalized two of its biggest lenders, Royal Bank of Scotland and Lloyds TSB, at a cost of $100 billion. The Cameron government is asking British citizens to accept a painful regime of austerity that includes cuts to education, health care, and pensions. In such a period of sacrifice, stories about bankers continuing to pocket millions of pounds have made executives targets for the outrage of politicians and, increasingly, regulators. And to many in England, Bob Diamond became a symbol of excess.

In early June this writer started working on a story about the challenges Diamond faced as an American running a universal bank based in Britain. By late June it was overtaken by the Libor scandal. Before the scandal broke I had interviews with Diamond and other Barclays executives. After the Libor revelations I spoke with a number of people familiar with the events leading to Diamond's resignation, none of whom would speak for attribution. The picture that emerges is that of an executive who believed that he could rally wary regulators and an angry public to his side, but who misjudged the brewing political storm.

Barclays is hardly the only big bank to be caught up in the Libor scandal. The three agencies that brought the actions against Barclays -- the U.S. Commodity Futures Trading Commission, the U.S. Justice Department, and the FSA -- resulting in fines of $453 million, have stated that they are now investigating several large institutions for the same alleged offenses, including universal banks such as J.P. Morgan, Citigroup (C), and Deutsche Bank (DB). (None of the three agencies implicated Diamond in their investigations.) Murky legal issues make it hard to forecast the size of future damages for the banks. What's certain is that the Libor affair is the worst blemish on the image of the world's big banks since the financial crisis.

Libor stands for "London interbank offered rate." It's an estimate of the rates at which many of the world's largest banks lend to one another. Here's how it's calculated. Each morning the British Bankers Association -- an industry trade group -- asks the banks to submit an estimate of their borrowing costs on money-market instruments in more than a dozen currencies. After eliminating the highest and lowest numbers, the BBA calculates the average for each security and posts it publicly.

Libor is one of the most crucial numbers for the world's borrowers. It serves as a benchmark for $10 trillion in mortgage, credit card, and corporate loans, and an additional $350 trillion in interest rate swaps and other derivatives.

Diamond leaving Parliament after testifying about the Libor scandal on July 4, the day after he announced his resignation

In the settlement documents Barclays acknowledged two types of abuses of Libor. First, its traders tried to swell their profits and bonuses by asking "submitters" on their desk who filed the daily Libor estimates to fudge the numbers, and the submitters regularly complied. The e-mails disclosed in the settlement even show collusion: Traders at rival banks successfully pressured friends at Barclays to rig the Barclays numbers so they'd book bigger gains on their own securities. "Dude, I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger!" exulted an outside trader who'd just gotten Barclays to cook a Libor estimate. U.S. and British regulators are expected to bring indictments against certain individual traders.

Second, during the strife of 2007 and 2008, regulators closely examined the Libor rates that banks were submitting to judge their financial health. If a bank's rates were far out of line with the averages, agencies from the FSA to the Fed would have pounced. The settlements state that banks submitted rigged rates to make themselves look good. E-mails show Barclays traders advising "to keep our heads below the parapet" on its estimates.

But Barclays was far from the worst offender. The bank generally entered estimates higher than the average, and regularly complained to regulators that since virtually everyone else was cheating, it was getting penalized by trying to be honest. The New York Fed, led at the time by U.S. Treasury Secretary Timothy Geithner, alerted British officials to the abuses in 2008. Today the heated finger-pointing centers on whether the FSA and Bank of England actually knew the fudging was widespread and ignored it -- even, perhaps, providing a knowing wink.

Diamond's 18-month tenure as CEO is too short a period to judge him as a leader. Barclays' share price fared even more poorly than that of most banks in that span, dropping 36%, to less than $11 a share. Still, Barclays' board had good reason to believe in him based on his ability to build a world-class investment bank, a franchise that now ranks fourth in the world in revenue behind J.P. Morgan, Citigroup, and Deutsche Bank.

Diamond succeeded by making highly contrarian bets. He's also, friends and colleagues agree, an energetic and inspiring leader. As New York Mayor Michael Bloomberg says, "He's a guy who's always 'up,' who never gets depressed and makes things work. Look at Lehman: All the potential acquirers thought about it, and he did it."

It's a fair question whether Diamond's charm -- his success in persuading people, one on one, to make deals, his ability to coax assurances from regulators in private -- may have led him to severely underestimate the speed and power at which the political tide was turning against him.

Diamond grew up a world apart from the City of London, in western Massachusetts, the second of nine children. His parents were both high school teachers; his father later rose to become principal of Nantucket High School on the island off the coast of Massachusetts. Today Diamond has a home there. In high school Diamond volunteered for two unpopular positions on the sports teams, catcher and pulling guard. "Not everybody wanted to be catcher, and the line for quarterbacks was long," says Diamond. "My goal was always to make the team."

After graduating in 1974 from Colby College in Maine, Diamond earned an MBA from the University of Connecticut, then joined a medical supplies company in the IT department. When his boss took a job at Morgan Stanley (MS) installing a new trading system, Diamond followed and quickly became enraptured by trading itself. He took a pay cut to start as a lowly trader on the money-market desk.

Diamond first went to London with Morgan Stanley, rising to head the bond trading desk for Europe and Asia. In 1992 he departed for Credit Suisse (CS), and four years later, at age 40, moved to New York as chief of global fixed income. His next move was typically unconventional. Instead of jumping to, say, Goldman Sachs (GS), Diamond chose to join the tweediest of old-line British banks -- Barclays. Within a year, Barclays had sold its second-tier equities business, and Diamond was promoted to run the entire investment bank, which consisted solely of a fixed-income franchise that operated almost exclusively in the U.K.

Diamond, however, reckoned that combining a strong commercial lender with a top-tier investment bank would form the model of the future -- the universal bank. What he needed was a way to grow Barclays' small, provincial investment bank. Most banks focused mainly on the glamorous fields of equities and M&A. Not Diamond. "My strategy was to create a major bank as a fixed-income specialist," he recalls. "No one thought it could be done." At the time, most European companies relied on bank borrowing. The bond markets were mainly small and fragmented, since each country had a different currency. Diamond predicted correctly that the introduction of the euro in 1999 would create an enormous liquid bond market in the single currency that would rival the reigning dollar market.

Barclays former chairman, Marcus Agius

In 2002, Barclays gave Diamond a second job as head of asset manager BGI, an indexing specialist that pioneered ETFs under the brand name iShares. Its CEO, Patricia Dunn -- later chair of Hewlett-Packard (HPQ) -- was pressing Barclays to sell BGI to a private equity firm. But Diamond and the board recognized potential. Barclays forced Dunn to step down, and Diamond replaced her. By 2009, BGI's earnings had soared 15-fold, to $1.5 billion. In 2009, Barclays sold BGI to BlackRock for $15.2 billion, a crucial step toward bolstering its depleted capital.

From 2000 to 2007, Barclays' investment bank expanded revenues and earnings at 23% a year, making it the fastest-growing franchise in the world. Diamond's pay matched the best of Wall Street at around $20 million a year and attracted derision from the London tabloids, which branded him "Diamond Bob" and the "P.T. Barnum of British banking." But with the banks thriving, the mockery did little damage. It was only later that Diamond's pay would become a political flash point. After his resignation he announced he would forgo severance worth as much as $31 million.

Diamond wanted to expand into equities, but only at a bargain price. In April 2008, Steel, then a Treasury official, called Diamond. "I said, 'Bob, if there were a time when people focused on Lehman, I would suggest you think about it,' " recalls Steel. Diamond began studying Lehman's businesses. "We concluded they had a great equities business, but it only made sense if we bought it in great distress, in the single-digit billions," says Diamond.

Waiting for distress proved sage. In September 2008, Barclays famously bought Lehman out of bankruptcy for a bargain $1.75 billion. It was the only bidder. The deal included only Lehman's jewels, its equities and M&A franchises. The integration went smoothly: Barclays kept 80% of the 10,000 employees it inherited, and most of its senior executives remained, including the chief of investment banking, Skip McGee. Lehman also kept its clients. Today it's the fourth-ranking equities business in the U.S. But the past lingered: The 31st-floor offices of former CEO Dick Fuld and his lieutenants, the notorious "Club 31," remained mothballed, the furniture covered with plastic, for four years. The space was recently renovated.

Diamond sprang into action again in October of that year. "The British regulators told us that the game had changed, that we'd need far more capital," says Diamond. So he immediately flew to Qatar to negotiate a big capital infusion from Sheikh Hamad Bin Jassim, chief of the Qatar Investment Authority, and other UAE investors. He managed to raise $10 billion -- at an extremely expensive 13% interest rate. "Sure, it was expensive," says Diamond, "but it was just about the only capital raised by any bank for the next year." He received a box of Sheikh Hamad's personal brand of Cuban cigars as a memento. Diamond used to offer them with pride to visitors.

Sir Mervyn King, governor of the Bank of England

Given the shocking arrogance of Barclays' traders in trying to rig a once-trusted benchmark that sets home and school loan payments for millions, Diamond's only real choice was to step down. He set his reputation on building a new culture of investment banking. The incendiary boasts in the traders' e-mails show that he fell short. Still, Diamond argues with some justification that regulators who praised his leadership to his face abandoned him when the political storm engulfed Barclays.

Diamond has expressed frustration that Adair Turner, chairman of the FSA, now alleges that Barclays was contentious and uncooperative on regulatory issues. Turner claims that Barclays clashed with the FSA over the FSA's order earlier this year that it raise capital faster than previously required. But Diamond actually resolved the issue quickly, and far before the deadline, by selling Barclays' 19.9% stake in BlackRock, a move he would have preferred not to make.

It's one of the untold chapters of the Diamond drama that before deciding to take the CEO job, he held in-depth talks with King, of the Bank of England, and Osborne, of the Exchequer, about the future of British banking. Diamond wanted to know if they really wanted a global bank based in the U.K., since they had often praised small banks and vilified big ones. The regulators reassured Diamond that, indeed, they valued the contribution of Barclays and the model it represented. Suddenly, Diamond is gone, and the vision he championed is dying.

Professor Billionaire: The Stanford Academic Who Wrote Google Its First Check

David Cheriton wrote a $100,000 check to Larry Page and Sergey Brin in 1998. Today that check is now worth more than $1 billion in Google shares. (Martin Klimek / Getty Images)

This story appears in the August 20, 2012 issue of Forbes Magazine.

It's dusk on a crisp January day at Stanford University, and David Cheriton is in his corner office waiting for his weekly research meeting to begin. The last slivers of sunlight filter through the windows, illuminating the pages of Superyacht Living & Style, a glossy magazine Cheriton is browsing through with only the mildest of interest.

"I once read that a boat is a hole in the water where you pour in a bunch of money," says Cheriton. He flips through a few more pages and disdainfully tosses it to the floor alongside a pile of keyboards, cables and cords. "I don't know why they keep sending me these things."

Burgess, the yacht magazine publisher, knows exactly why: Cheriton is rich. Rich enough to afford the April Fool, 200 feet of steel-hulled elegance listed at $60 million, or New Zealand billionaire Graeme Hart's Ulysses, priced at $49 million. Or both.

With a net worth of $1.3 billion, Cheriton is likely the wealthiest full-time academic in the world. But yachts are not his thing. The Stanford computer science professor calls himself "spoiled" for taking the occasional windsurfing vacation to Maui. When pressed to recall his latest splurge, the best he can come up with is a 2012 Honda Odyssey ("for the kids"). His act of thinking is often punctuated by the clicks of three different-colored ballpoint pens that he rotates through his fingers.

The one expensive passion he does pursue? "Startup companies," he says, as he continues to shuffle his pens. Blue. Click. Red. Click. Black. Click.

When Cheriton uses one of those pens to write a check to a startup, he usually ends up more in the black than in the red. Far more in the black. The first two companies he founded were sold to Cisco Systems and Sun Microsystems, respectively, for hundreds of millions. In all he's spent more than $50 million out of his own pocket, investing in 17 different firms, which range from VMware to his latest, Arista Networks. But the topper was a $100,000 check he wrote in 1998 to a pair of Stanford Ph.D. students named Larry and Sergey. That check alone is now worth more than $1 billion in Google shares. "I feel like I've been very fortunate in investing, but I still have the brain of a scrounger in terms of spending money," he says.

Cheriton, 61, maintains a low profile. Google searches of his name turn up primitive Web pages in Times New Roman, not the LinkedIn and Facebook profiles that have become Silicon Valley standards. (He doesn't even tweet.) When I asked random Stanford students about him, several paused to think, then asked if his last name is spelled the same way as the Sheraton hotel chain.

That's the way Cheriton prefers it. He still drives the same 1986 Volkswagen Vanagon he had before he made his money, lives in the same Palo Alto home he's owned for the last 30 years and employs the same barber—himself. "It's not that I can't fathom a haircut," says Cheriton. "It's just easy to do myself, and it takes less time."

For a man who works 10 to 12 hours a day, Cheriton understands that time is everything. His investment in Google allowed college freshmen cramming for exams to cut through the junk that had flooded search engines like AltaVista. His newest company, Arista Networks, makes a data switch that cuts down the delays between servers, allowing bits to be transferred in less than 500 nanoseconds, nearly twice as fast as Cisco's fastest switch and Juniper Networks' best. That gives traders on Wall Street the ability to submit their trades nanoseconds before their competitors and gives doctors the capacity to sequence a patient's genome in real time. Cheriton has been working on the guts of its operating system since 2004, when the company was founded. Arista, based in Santa Clara, Calif., is adding at least a customer a day. The company says it is operating at an annual revenue run rate of $200 million. "Imagine if cars going 50mph speed up by a factor of ten," says Cheriton. "It qualitatively changes what you can do." Arista is that vehicle.

The third of six children of two Canadian engineers who grew up during the Great Depression, Cheriton was always encouraged to pursue his own path, says his father, Ross. The elder Cheriton recalls an independent, "self-sufficient" boy who didn't indulge in team sports and built his own timber fort in the family's yard away from the other children. His father also remembers a gifted son who decided to stay out of Edmonton's Eastglen High School for the 11th grade because he felt the curriculum was too slow. "He went his own way," his father says. "We didn't channel him."

America's Top Colleges Our list of the 650 best undergraduate institutions in America.

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Goo Toor 2 weeks ago

WOW. Midas Touch.

Reply
Evary 2 weeks ago

Just wanted to say what a pleasant surprise it was to read that Dr. Cheriton is from my home town of Edmonton, Alberta. Thanks for the inspiring story of this fellow Albertan.
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Egg Man 2 weeks ago

French-Canadian by birth? Jewish? Cheriton could be either kind of name. Just curious.

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Shell RS 2 weeks ago

A very good inspirational story on Dr. Cheriton. It's not only Google but the series of good investments put him apart. I wish every University should have at least one such professor. I also like his down to earth approach.
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SchoolandUniversity.com 5 days ago

WOW.. midas.. I like this approach too!

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pinosello 2 weeks ago

hmm.. i do not know which one is truthful this article or marissa mayer's story, but i think marissa mayer's story on google sponsored links is more likely and i doubt sergey and larry had any idea as to how to monetize google search when they had pagerank and were about pitching it Cheriton or to inktomi, yahoo, excite, et al..

http://giveupinternet.com/2009/08/01/the-origin-of-googles-sponsored-links-by-marissa-ann-mayer-video/

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rocky2345 2 weeks ago

The US secret weapon: the ability of the country to attract the best and the brightest from around the world. Sergie Brin was born in Russia. Jeffrey Skoll was born in Canada also.
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Ryan Mac , Forbes Staff 1 week ago

Andy Bechtolsheim is from Germany as well…
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Mfonobong Nsehe , Contributor 10 hours ago

Inspiring story!
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Aderoju 58 minutes ago

Well, to me I think Cheriton should b called 'startup machine'. If not for him; Larry Page & Sergy Brim might have given up that Google dream, which would have paved way to other ideas to pioneer the search engine world. Anyway! Kudos to him and his like who don't allow great dreams & ideas to die. Tombs up!

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Professor Billionaire: The Stanford Academic Who Wrote Google Its First Check

David Cheriton wrote a $100,000 check to Larry Page and Sergey Brin in 1998. Today that check is now worth more than $1 billion in Google shares. (Martin Klimek / Getty Images)

This story appears in the August 20, 2012 issue of Forbes Magazine.

The one expensive passion he does pursue? "Startup companies," he says, as he continues to shuffle his pens. Blue. Click. Red. Click. Black. Click.

America's Top Colleges Our list of the 650 best undergraduate institutions in America.

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Rule 19 applied for dismissing in the absence of prosecution of appeal

Posted on 21 August 2012 by Apurba Ghosh

Court

INCOME TAX APPELLATE TRIBUNAL

Brief

The notice was given to assessee fixing the date of hearing on 01.08.2012 through notice board. But no one appeared on behalf of the assessee. Nor there is any application for adjournment. In view of above, it appears that assessee is not interested in prosecuting this appeal. Hence this appeal of the assessee is liable to be dismissed for non-prosecution. In this regard, we are supported by the decision in the case of CIT Vs B.N. Bhattachargee and another, reported in 118 ITR 460 (relevant pages 477 & 478) wherein their Lordships have held that: "The appeal does not mean merely filing of the appeal but effectively pursuing it."

Citation

M/s. Idea International Pvt. Ltd., 36/40, Mahalaxmi Bridge Arcade, Mahalaxmi, Mumbai-400 034 PAN-AABCI 1527J Vs. The ACIT, Circle 6(1), Mumbai (Appellant) (Respondent)

Judgement

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCH 'I' MUMBAI

BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

ITA No.2597/Mum/2011

Assessment Year- 2006-07

M/s. Idea International Pvt. Ltd.,

36/40, Mahalaxmi Bridge Arcade,

Mahalaxmi,

Mumbai-400 034

PAN-AABCI 1527J

Vs.

The ACIT, Circle 6(1),

Mumbai

(Appellant) (Respondent)

Appellant by: None

Respondent by: Shri K.G. Kutty

Date of Hearing: 01.08.2012

Date of pronouncement:01.08.2012

O R D E R

PER N.K. BILLAIYA (AM):

The assessee has filed this appeal for assessment year 2006-07 against the order of Ld. CIT(A) dt. 4.1.2011 .

2. The notice was given to assessee fixing the date of hearing on 01.08.2012 through notice board. But no one appeared on behalf of the assessee. Nor there is any application for adjournment. In view of above, it appears that assessee is not interested in prosecuting this appeal. Hence this appeal of the assessee is liable to be dismissed for non-prosecution. In this regard, we are supported by the decision in the case of CIT Vs B.N. Bhattachargee and another, reported in 118 ITR 460 (relevant pages 477 & 478) wherein their Lordships have held that:

"The appeal does not mean merely filing of the appeal but effectively pursuing it."

4. In this regard we are also supported by the decision in the case of CIT Vs. Multiplan India (P) Ltd. 38 ITD 320 (Del).

5. In view of the above and also considering the provisions of Rule 19 of the Appellate Tribunal Rules, 1963, appeal of the assessee is dismissed.

6. In the result, appeal of the assessee is dismissed for non-prosecution.

Order pronounced in the Open Court at the time of hearing i.e. on 1^st August, 2012.

Sd/- Sd/-

(VIJAY PAL RAO) (N.K. BILLAIYA)

Judicial Member Accountant Member

Mumbai, Dated 1st August, 2012

Copy to:

1. The Appellant

2. The Respondent

3. The CIT-concerned

4. The CIT(A)-concerned

5. The DR 'I' Bench

True Copy

By Order

Asstt. Registrar, I.T.A.T, Mumbai

Disallowance under sec 14A cannot exceed dividend income and rebate can be allowed only when there is some liability to income tax

Posted on 21 August 2012 by Apurba Ghosh

Court

INCOME TAX APPELLATE TRIBUNAL

Brief

During the assessment proceeding the AO found that the assessee had shown dividend income of Rs.5,60,809/- which was claimed as exempt. AO found that the assessee had not allocated any expenditure incurred by him towards earning of the tax-exempt-dividend-income. After obtaining explanation from the assessee AO made an addition amounting to Rs.19.34 lakhs u/s.14A r.w.s. 8-D. The assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submissions of the assessee he held that the assessee had not maintained separate accounts of expenses incurred for earning of exempt income, that the assessee had not maintained separate accounts of expenses incurred for earning of exempt income, that assessee had also not maintained any separate records on account of expenditure having been incurred for earning of dividend income, that the appellant had failed to produce any cash flow statement or any other material which could establish that borrowed fund had not been utilised for earning of exempt income, that merely on the basis of balance of own fund and borrowed fund as on the date of the balance sheet it could not be presumed that borrowed fund had not been utilized for earning of exempt income, that the appellant's contention that no expenditure had been incurred to earn exempt income was not acceptable, that the assessee being a share trade undertook transactions of share which subsequently yielded dividend of capital gain and same was exempt, that the expenses including interest and administrative expenses debited to Profit and Loss Account included expenditure incurred for undertaking transactions of shares which yielded exempt income. FAA partly allowed the appeal filed by the assessee. It is simple and plain that rebate can be allowed only when there is some liability to income tax. If there is no such liability, according to the relevant provisions, the otherwise eligible rebate becomes unavailable. This position can be viewed from another angle also. Section 88,which also falls under part A of the same chapter provides for rebate on life insurance premium and contribution to provident fund etc. Under this section an assessee is entitled to deduction of an amount equal to 20% of the payment of eligible sums subject to Rs. 1 lakh. This rebate is allowable against the amount of income tax on the total income of the assessee. This provision is similar to section 88E, to the extent of providing rebate against the amount of income tax. Take a situation in which albeit the assessee has paid life insurance premium etc., which otherwise entitle him to rebate under section 88E,but there is no income chargeable to tax. In such a case, there is no possibility to allow any rebate notwithstanding the fact that life insurance premium was paid by the assessee on which rebate is otherwise available under section 88E of the income tax act

Citation

Shri Manish D. Innani C-803, Avon Majesty, Datta Pada Road, Opp. Tata SSL, Borivali (East ), Mumbai -400 066 PAN No. AABPI 4219 C (Appellant) Vs. ACIT, Range 4(1), 640, 6t h f loor, Aayakar Bhavan, M. K. Road, Mumbai -400 020 (Respondent)

Judgement

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCHES "B" MUMBAI

BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER

AND

SHRI RAJENDRA, ACCOUNTANT MEMBER

ITA No. 861/Mum/2012

Assessment Year 2008-09

Shri Manish D. Innani

C-803, Avon Majesty,

Datta Pada Road,

Opp. Tata SSL,

Borivali (East ),

Mumbai -400 066

PAN No. AABPI 4219 C

(Appellant)

Vs.

ACIT, Range 4(1),

640, 6t h f loor,

Aayakar Bhavan,

M. K. Road,

Mumbai -400 020

(Respondent)

Assessee by: Shri Sanjiv M. Shah

Revenue by: Shri P. C. Maurya

Date of hearing: 26-06-2012

Date of pronouncement: 01-08-2012

ORDER

PER RAJENDRA, A.M.

Following Grounds of Appeal were filed by the assessee challenging the order dtd.12.12.2011 of the CIT(A)-8, Mumbai.

"(1)The learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in substantially confirming the disallowance under Section 14A of the Income Tax Act, 1961 [Act] read with Rule 8D of the Income Tax Rules, 1961 [Rules] (2)The CIT(A) further erred in this connection in relying on decisions reported as Godrej and Boyce mfg co v. DCIT 328 ITR 81 (Bom) and ITO v. Daga Capital Management 26 SOT 603 (Mum) (SB)

(3) The CIT(A) further erred in this connection in holding that:

a)the Appellant has not maintained separate records for expenses incurred for earning exempt income;

b) the burden is not on the Assessing Officer [AO] to establish nexus of the expenditure with exempt income;

c) the Appellant's contention that Section 14A does not provide for apportionment of expenses is not sustainable;

d ) the Appellant has failed to produce any cash flow statement to show that borrowed fund has not been utilized for making investment; and

e) the Appellant's contention that it has incurred no expenditure to earn the exempt income is not acceptable.

(4) The CIT(A) erred in sustaining the computation of the rebate by the AO under Section 88E at Rs.75,07,274/- as against Rs.1,01,87,300/- claimed by the Appellant.

(5) The CIT(A) erred in not disposing ground concerning levy of interest under Sections 234B and 234C.

(6) The Appellant craves leave to add to and/or amend and/or delete and/or modify and/or alter the aforesaid grounds of appeal as and when the occasion demands.

(7) All the aforesaid grounds of appeal are independent, in the alternative and without prejudice to one another."

The assessee, an individual, engaged in the business of trading in derivatives and mutual funds, filed his return of income declaring total income of Rs.5.94 Crores.

2. During the assessment proceeding the AO found that the assessee had shown dividend income of Rs.5,60,809/- which was claimed as exempt. AO found that the assessee had not allocated any expenditure incurred by him towards earning of the tax-exempt-dividend-income. After obtaining explanation from the assessee AO made an addition amounting to Rs.19.34 lakhs u/s.14A r.w.s. 8-D. The assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submissions of the assessee he held that the assessee had not maintained separate accounts of expenses incurred for earning of exempt income, that the assessee had not maintained separate accounts of expenses incurred for earning of exempt income, that assessee had also not maintained any separate records on account of expenditure having been incurred for earning of dividend income, that the appellant had failed to produce any cash flow statement or any other material which could establish that borrowed fund had not been utilised for earning of exempt income, that merely on the basis of balance of own fund and borrowed fund as on the date of the balance sheet it could not be presumed that borrowed fund had not been utilized for earning of exempt income, that the appellant's contention that no expenditure had been incurred to earn exempt income was not acceptable, that the assessee being a share trade undertook transactions of share which subsequently yielded dividend of capital gain and same was exempt, that the expenses including interest and administrative expenses debited to Profit and Loss Account included expenditure incurred for undertaking transactions of shares which yielded exempt income. FAA partly allowed the appeal filed by the assessee.

3. Before us, Authorised Representative(AR) submitted that assessee was a investor in derivatives, that investment was not related to interest, that in earlier years no disallowance was made, that disallowance should not have exceeded the dividend income, that no infirmity was in the working submitted by the assessee was pointed out by the AO. He relied upon the cases of Winsome Textile Industries Ltd.(319ITR204) and Hero Cycles Ltd.(324ITR518). Alternatively, it was submitted that disallowance should be restricted to Rs.2.2 lakhs. Departmental Representative (DR) submitted that AO had rightly invoked Rule 8D, that decisions cited by the AR related to the period prior to AY 2008-09.

4. We have heard both the sides and perused the material available on record. We are of the opinion that while dealing with the issue AO has not considered various factors and has not given any finding about them. Assessee had claimed that borrowed fund of Rs.3.5 Crores were not used for investing in shares, that loans advanced to various persons were not connected with acquisition of shares. We find that these are crucial issues for deciding disallowance u/s. 14 A of the Act. Assesee himself has made an alternate plea that even if disallowance has to be made it has to restricted to certain amount which is much lower than the actual disallowance made by the AO.

Considering the above we are of the opinion that matter should be restored back to AO. He is directed to make fresh calculation after considering the submissions of the assessee.

Ground No.1 is partly allowed.

5. Next ground is related with rebate available u/s. 88E of the Act. During the course of assessment proceedings, the assessee was asked by the AO to submit the working of rebate claimed in respect of securities transaction tax amounting to Rs.1,01,87,300/-. He found that though the assessee had applied average rate on income, but the average rate was adopted before setting off business loss of earlier years. With regard to rebate claimed u/s.88E of the Act, the AO held as under :

"In the instant case, the assessee's total income of Rs.5,94,71,620/- includes only Rs.3,34, 49,474/- (after setting of business loss of Rs.1,62,36,858/- b/f from A.Y. 2007-08) which is chargeable under the head 'profit and gains of business or profession' arising from taxable securities transactions. Therefore, the assessee is entitled to get rebate u/s.88E on the income of Rs.3,34,49,474/- but not on Rs.4,95,93,132/-."

Adopting an average rate of 21.31%, he held that the assessee was entitled to tax rebate of Rs.75.07 lakhs as against the rebate claimed by the assessee amounting to Rs.1.01 Crores. In the appellate proceeding, the FAA held that AO had rightly worked the average rate of tax as per the provisions of section 88E of the Act.

6. Before us, AR submitted that relief u/s. 88E was available on the income before setting off of losses, that calculation made by the assessee was as per law. He relied upon the case of Ashika Stock Broking Ltd.(44 SOT556).DR submitted that 88E-releif was available after set off of loss of earlier years. He relied upon the decision of Oasis Securities Ltd. delivered by the C Bench of Mumbai ITAT(ITA No.2534/Mum/2009 AY 2006-07 dtd.30.09.2010).

6.1. After considering the rival submissions and perusing the material before us we are of the opinion that the assessee is entitled to rebate Rs.1.01 Crores u/s. 88E of the Act, as against the rebate of Rs.75.07 lakhs-allowed by the AO. Amount to be allowed under this section has to be calculated in background of the provisions of Sec. 87(2) of the Act as discussed in next paragraph. We have considered the case laws cited before us. In the case of Oasis Securities facts were as under:

During the course of assessment proceedings AO noted that the assessee had income of Rs.1.92 Crores from speculation business in respect of which STT was paid, that said income was set off against brought forward speculation losses leaving no taxable income from security transactions. Considering these facts he held that rebate u/s. 88E was not allowable. FAA upheld the order of the AO. His order was challenged before the Tribunal. After considering the issue at length ITAT held:

"14.It is simple and plain that rebate can be allowed only when there is some liability to income tax. If there is no such liability, according to the relevant provisions, the otherwise eligible rebate becomes unavailable. This position can be viewed from another angle also. Section 88,which also falls under part A of the same chapter provides for rebate on life insurance premium and contribution to provident fund etc. Under this section an assessee is entitled to deduction of an amount equal to 20% of the payment of eligible sums subject to Rs. 1 lakh. This rebate is allowable against the amount of income tax on the total income of the assessee. This provision is similar to section 88E, to the extent of providing rebate against the amount of income tax. Take a situation in which albeit the assessee has paid life insurance premium etc., which otherwise entitle him to rebate under section 88E,but there is no income chargeable to tax. In such a case, there is no possibility to allow any rebate notwithstanding the fact that life insurance premium was paid by the assessee on which rebate is otherwise available under section 88E of the income tax act.

15.In the final analysis, we approve the view taken by the learned CIT(A) that the amount of STT is not eligible for rebate under section 88E for the reason that there is nil income from the transactions which suffered STT.As no amount of income tax is payable in respect of such transactions, the question of granting any debate under section 88E does not arise. The ground fails."

Clearly, the facts of the case under consideration are different from the facts of Oasis securities Ltd (supra).

7. In the case of Ashika Stock Broking Ltd. (supra) it was held that once there was a net surplus from share dealing of market segment and future and option segments together and if there was a net profit therefrom the assessee was entitled for rebate of entire STT. In the case under consideration surplus from share dealing from market segment/ future and option segment is not there, but there is net income after setting off of losses. We are of the opinion that once there was overall profit for the AY under consideration, rebate under section 88E of the Act had to be allowed.

Following the order of Ashika (supra) we hold that section 88E does not envisage any restriction for allowing rebate u/s.88E till positive income is filed by the an assessee. We find that while passing the assessment order the AO has not given any finding about applicability or otherwise of Section 87(2) of the Act. We are of the opinion that if the provision of said section are not coming in way to allow the rebate to the assessee, same should be allowed at the rate calculated by the assessee. For this limited purpose we remit the matter back to the file of the AO to decide the issue afresh.

Ground No.2 is partly allowed.

Appeal filed by the assesee stands allowed in part.

Order pronounced in the open court on 1st August, 2012.

Sd/- Sd/-

(B.R. MITTAL) (RAJENDRA)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai,

Date 1st August, 2012

Roshani

Copy to:

1. Appellant

2. Respondent

3. The concerned CIT (A)

4. The concerned CIT

5. DR "B" Bench, ITAT, Mumbai

6. Guard File

(True copy)

By Order

Asst. Registrar,

Income Tax Appellate Tribunal,

Mumbai Benches, Mumbai

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Rule 19 applied for dismissing in the absence of prosecution of appeal

Court

Brief

Citation

Judgement

Disallowance under sec 14A cannot exceed dividend income and rebate can be allowed only when there is some liability to income tax

Court

Brief

Citation

Judgement

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