[aaykarbhavan] Judgments and Infomration [3 Attachments]

CIT vs. Datta Mahendra Shah (Bombay High Court)

Posted on September 16, 2015 — No Comments ↓

COURT:	Bombay High Court
CORAM:	G. S. Kulkarni J, M. S. Sanklecha J
SECTION(S):	28, 45, 48
GENRE:	Domestic Tax
CATCH WORDS:	Business profits, capital gains, shares
COUNSEL:	Dr. K. Shivram
DATE:	September 9, 2015 (Date of pronouncement)
DATE:	September 16, 2015 (Date of publication)
AY:	2008-08
FILE:	Click here to download the file in pdf format
CITATION:
Circumstances in which gains from sale of shares can be assessed as short-term capital gains and not as business profits explained

Judgement of CIT(A) and Tribunal that assessee is an investor and not a trader on the basis of the following facts cannot be faulted:

(a) assessee has been an investor in shares and has consistently treated its entire investment in shares as "investment in shares" & not "stock-in-trade";

(b) the income earned on sale of shares was offered as short term capital gains even when losses were suffered in a particular year;

(c) dealing in 35 scrips, involving 59 transactions for the entire year could not be considered for high volume so as to be classified as trading income;

(d) the assessee earned 75% of the income as short term capital gains by holding shares for more than nine months;

(e) no transfer in shares was done by the assessee for over 75% of working days during the year;

(f) 56% of the Short term capital gains during the year resulted from shares held during the earlier assessment year as a part of the opening investment on 1 April 2007.

(g) the assessee had not resorted to churning of shares or repetitive transactions in shares of the same company.

(h) for the earlier Assessment Years i.e. AY 2005-06 and AY 2006-07, the Assessing Officer had, in the proceedings under Section 143(3) of the Act, accepted the stand of the respondent assessee and taxed the profit earned on purchase and sale of shares as short term capital gains;

(i) dividend Income earned was over Rs.8.50 lakhs;

(j) the assessee had not borrowed any funds but has used her own funds for the purpose of investment in shares;

(k) all transactions were delivery based transactions; and

(l) the speculation loss to which the Assessing Officer has made reference was in fact not so, but happened as a result of punching error

On consideration of the above facts, the CIT (A) and Tribunal rightly concluded that compliance on the part of the assessee in terms of Instruction No.1827 dated 31 August 1989 issued by the Central Board of Direct Taxes laying down the tests for distinguishing the shares held in stock-in-trade and shares held as an investment, the shares held by the assessee was investment and held the income to be treated as short term capital gains.

Related Judgements

1. Mahendra C Shah vs. Addl CIT (ITAT Mumbai) 
   The question whether the surplus on the sale of shares is to be assessed as capital gains (short term or long term) or as business income has to be decided according to the cumulative effect of several facts and circumstances such as (a) the intention of the assessee, (b)…
2. CIT vs. Vaibhav J. Shah (HUF) (Gujarat High Court) 
   In Rewashanker A. Kothari 283 ITR 338 (Guj) six objective tests have been laid down to distinguish between capital gains and business profits on sale of shares. From this, it is clear that where number of transactions of sale and purchase of shares takes place, the most important test…
3. CIT vs. Suresh R. Shah (Bombay High Court) 
   The appellate authorities have come to a finding of fact after examining the relevant material that the assessee is an investor in shares and not a trader. This finding of fact is not perverse. As held in Gopal Purohit 228 CTR (Bom) 582, there is no bar for an…
4. CIT vs. Avinash Jain (Delhi High Court) 
   The intent and purport of Circular No. 4 of 2007 dated 15.06.2007 is to demonstrate that a tax payer could have two portfolios, namely, an investment portfolio and a trading portfolio. In other words, the assessee could own shares for the purposes of investment and/or for the purposes of…
5. Smt. Sadhana Nabera vs. ACIT (ITAT Mumbai) 
   The decision in Gopal Purohit 122 TTJ 97 (affirmed in 228 CTR 582 (Bom)) is distinguishable because there the assessee had consistently been investing in shares and the ratio of sales to investment was very less and the LTCG was more than the STCG. Similarly Janak S. Rangwalla…

Circumstances in which gains from sale of shares can be assessed as short-term capital gains and not as business profits explained

On consideration of the above facts, the CIT (A) and Tribunal rightly concluded that compliance on the part of the assessee in terms of Instruction No.1827 dated 31 August 1989 issued by the Central Board of Direct Taxes laying down the tests for distinguishing the shares held in stock-in-trade and shares held as an investment, the shares held by the assessee was investment and held the income to be treated as short term capital gains

CIT vs. V. S. Dempo and Company Pvt. Ltd (Bombay High Court)

Posted on September 16, 2015 — No Comments ↓

COURT:	Bombay High Court
CORAM:	G. S. Kulkarni J, M. S. Sanklecha J
SECTION(S):	172, 40(a)(i)
GENRE:	Domestic Tax
CATCH WORDS:	TDS disallowance
COUNSEL:	Mihir Naniwadekar
DATE:	September 8, 2015 (Date of pronouncement)
DATE:	September 16, 2015 (Date of publication)
AY:	1999-00, 2000-01
FILE:	Click here to download the file in pdf format
CITATION:
Law laid down in CIT Vs. Orient (Goa)(P) Ltd 325 ITR 554 that s. 172 is applicable only to non-residents carrying on shipping business and not to residents and that the expenditure of demurrage charges cannot be allowed u/s 40(a)(i) in the absence of TDS does not appear to be correct and issue is referred to Full Bench

The High Court had to consider whether its earlier decision in CIT Vs. Orient (Goa)(P) Ltd. 325 ITR 554 in which it was held that Section 172 of the Act is applicable only in respect of a non-resident carrying on shipping business and not to residents and that the expenditure of demurrage charges cannot be allowed in the absence of tax being deducted at source was correctly decided. HELD by the High Court:

(i) We are unable to agree with the above view of this Court in Orient (Goa)(P) Ltd. (supra). This is for the reason that the assessee placed reliance upon Section 172 of the Act in respect of payments made by it to a non-resident shipping company by way of demurrage charges. The tax which is deducted at source by the assessee company is on behalf of the recipient of the charges. The issue before the Court was whether demurrage charges which are paid by the assessee to a non-resident company would be allowed as an expenditure in the absence of deduction of tax at source in view of Section 40(a)(i) of the Act. Although the Court was concerned with the issue in an appeal concerning a resident company. The introduction of section 172 of the Act by the assessee was to determine whether in view thereof, was there any obligation to deduct tax at source by the payer-assessee. Section 172 of the Act has to be examined through the prism of the non-resident shipping company in respect of it's income. It is in the above view that Section 172 of the Act and Circular No. 723 issued by the CBDT was relied upon by the assessee to point out that as Section 172 of the Act provides a complete code itself for levy recovery of tax ship wise and journey wise. Thus there is no occasion to deduct tax under Chapter XVII of the Act.

(ii) It is a settled position under the law of precedents that, it is not open to us (Division Bench) to take a view contrary to the view taken by another Division Bench of this Court. In case, we are unable to agree with the view of the earlier Division Bench and it does not fall within the exclusionary categories of binding precedent by being contrary to and/or in conflict with a decision of the Apex Court or rendered per incurrim. In such a case it is best that the issue is resolved at the hands of a Larger Bench of this Court. Certainty of law is an important ingredient of Rule of Law.

(iii) As we do not agree with the view taken by this Court in Orient (Goa) (P) Ltd. (supra) and it does not fall with the exclusions mentioned in Paragraph 12 above, we direct the Registry to place papers and proceedings of the present two appeals before the Hon'ble The Chief Justice to obtain suitable directions to place the following question of law for the opinion of the Larger Bench of this Court as under:

Whether while dealing with the allowability of expenditure under Section 40(a)(i) of the Act, the status of a person making the expenditure has to be a non-resident before the provision to Section 172 of the Act can be invoked?

Related Judgements

1. Jagati Publications Ltd vs. ITAT (Bombay High Court) 
   During the pendency of the assessee's appeal before the Division Bench of the Tribunal, the CBDT addressed a letter to the President of the Tribunal and sought the constitution of a Special Bench u/s 255(3) for hearing the appeal. The…Read more ›
2. The Prudential Assurance Company vs. DIT (Bombay High Court) 
   S. 245S stipulates that an advance ruling is binding on the applicant, the CIT and the authorities subordinate to him in relation to which it was sought. S. 245S(2) postulates that the ruling shall cease to be binding if there is a change in law or facts on the…
3. CIT vs. Crescent Export Syndicate (Calcutta High Court) 
   The key words in s. 40(a)(ia) are "on which tax is deductible at source under Chapter XVII –B" and this makes it clear that it applies to all expenses. Nothing turns on the fact that the legislature used the word 'payable' and not 'paid or credited'. Unless any amount…
4. ACIT vs. Maharashtra State Electricity Distribution Company Ltd (ITAT Mumbai) 
   (i) It is thus clear that in a situation in which the payment in made for the use of an asset simpliciter, whether with control and possession in its legal sense or not, the payment could be said to be…Read more ›
5. CIT vs. The Stock and Bond Trading Company (Bombay High Court) 
   As the payments made by the assessee to the Stock Exchange for violation of their regulation was not an account of an offence or which is prohibited by law, the invocation of the Explanation to s. 37 of the Act was not justifiedRead more ›

Law laid down in CIT Vs. Orient (Goa)(P) Ltd 325 ITR 554 that s. 172 is applicable only to non-residents carrying on shipping business and not to residents and that the expenditure of demurrage charges cannot be allowed u/s 40(a)(i) in the absence of TDS does not appear to be correct and issue is referred to Full Bench

We are unable to agree with the above view of this Court in Orient (Goa)(P) Ltd. (supra). This is for the reason that the assessee placed reliance upon Section 172 of the Act in respect of payments made by it to a non-resident shipping company by way of demurrage charges. The tax which is deducted at source by the assessee company is on behalf of the recipient of the charges. The issue before the Court was whether demurrage charges which are paid by the assessee to a non-resident company would be allowed as an expenditure in the absence of deduction of tax at source in view of Section 40(a)(i) of the Act

 

ACIT vs. Victory Aqua Farm Ltd (Supreme Court)

Posted on September 16, 2015 — No Comments ↓

COURT:	Supreme Court
CORAM:	A.K. Sikri J., Rohinton Fali Nariman J.
SECTION(S):	32
GENRE:	Domestic Tax
CATCH WORDS:	Depreciation, Plant
COUNSEL:	Guru Krishna Kumar
DATE:	September 4, 2015 (Date of pronouncement)
DATE:	September 16, 2015 (Date of publication)
AY:	-
FILE:	Click here to download the file in pdf format
CITATION:
S. 32: The "functional" test has to be applied to determine whether an asset is "plant". Even a pond designed for rearing prawns can be "plant"

(i) Applying the 'functional test', since the ponds were specially designed for rearing/breeding of the prawns, they have to be treated as tools of the business of the assessee and the depreciation was admissible on these ponds.

(ii) In Commissioner of Income Tax vs. Anand Theatres 224 ITR 192 it was held that except in exceptional cases, the building in which the plant is situated must be distinguished from the plant and that, therefore, the assessee's generating station building was not to be treated as a plant for the purposes of investment allowance. It is difficult to read the judgment in the case of Anand Theatres so broadly. The question before the court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a "plant" and it was in relation to that question that the court considered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or cinema theatre could not be given depreciation on the basis that it was a plant. We must add that the Court said, "To differentiate a building for grant of additional depreciation by holding it to be a plant in one case where a building is specially designed and constructed with some special features to attract the customers and the building not so constructed but used for the same purpose, namely, as a hotel or theatre would be unreasonable." This observation is, in our view, limited to buildings that are used for the purposes of hotels or cinema theatres and will not always apply otherwise. The question, basically, is a question of fact, and where it is found as a fact that a building has been so planned and constructed as to serve an assessee's special technical requirements, it will qualify to be treated as a plant for the purposes of investment allowance (Commissioner of Income Tax, Karnataka v. Karnataka Power Corporation [2002(9) SCC 571] followed)

Related Judgements

1. Seshasayee Paper & Boards Ltd vs. CIT (Supreme Court) 
   Once the unabsorbed carried forward depreciation has become a part of the depreciation of the current year, it is not open to the assessee to bifurcate the two again and exercising its choice to claim the depreciation of the current year under Section 32(1) of the Act and take…
2. CIT vs. Bharat Hotels (Delhi High Court) 
   The very concept of depreciation suggests that the tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset, is utilizing the capital asset and thereby loosing gradually investment caused by wear and tear, and would need to replace the same by having…
3. Hoshang D Nanavati vs. ACIT (ITAT Mumbai) 
   S. 14A permits a disallowance of "expenditure incurred by the assessee" and not of "allowance admissible" to him. There is a distinction between "expenditure" and "allowance". The expression "expenditure" does not include allowances such as depreciation allowance. Accordingly, depreciation cannot be the subject matter of disallowance u/s 14A (ratio…
4. CIT vs. Bougainvillea Multiplex Entertainment (Delhi High Court) 
   A subsidy of such nature cannot possibly be granted by the Government directly. Entertainment tax is leviable on the admission tickets to cinema halls only after the facility becomes operational. Since the source of the subsidy is the public at large which is to be attracted as viewers to…
5. Dheeraj Amin vs. ACIT (ITAT Bangalore) 
   What the assessee has got today is only a right to sell the 1,28,940.26 fts of constructed area in the Alexandria project and the profits, howsoever certain they may appear to be, will only fructify and be realized, and can even be quantified, only when this right is exercised-…

S. 32: The "functional" test has to be applied to determine whether an asset is "plant". Even a pond designed for rearing prawns can be "plant"

In Commissioner of Income Tax vs. Anand Theatres 224 ITR 192 it was held that except in exceptional cases, the building in which the plant is situated must be distinguished from the plant and that, therefore, the assessee's generating station building was not to be treated as a plant for the purposes of investment allowance. It is difficult to read the judgment in the case of Anand Theatres so broadly. The question before the court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a "plant" and it was in relation to that question that the court considered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or cinema theatre could not be given depreciation on the basis that it was a plant

SEBI enhances disclosures requirements by NBFCs in public issue of debt securities

SEBI amends disclosure requirement​s to be made by NBFCs in Offer Documents for public issue of debt securities under SEBI (Issue and Listing of Debt Securities) Regulations, 2008; NBFCs are required to disclose aggregated exposure to Top 20 borrowers w.r.t. concentration of advances / exposures in accordance with RBI Guidelines; Where borrower(s) of NBFCs form part of 'Group' as defined by RBI, then NBFC ​shall ​give the ​following ​details: (i) Borrower's Name, (ii) Amount of Advances /exposures to such borrower (Group), (iii) Percentage of Exposure; Additional disclosures in Offer Documents include: (i) Portfolio Summary with regard to industries/ sectors to which borrowings have been made by NBFCs, (ii) Quantum & percentage of secured vis-a-vis unsecured borrowings made by NBFCs, (iii) Any change in promoter's holdings in NBFCs during the last financial year beyond particular threshold: SEBI

Click here to read more.

Govt. notifies ICDR Regulations amendment, relating to timeline modification for submitting post-issue reports

Govt. notifies SEBI (Issue of Capital and Disclosure Requirements) (Fifth Amendment) Regulations, 2015, wherein SEBI modified the timelines for submitting post-issue reports by merchant banker; Pursuant to the amendment, the lead merchant bankers shall dispatch offer document & forms for ASBA to Registrar to Issue & Share transfer agents, depository participants, stock brokers in advance

Click here to read more.

Govt. notifies Takeover Code amendment, exempting public announcement for company listed on ITP

Govt. notifies SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2015; Vide the amendment provisions relating to making of public announcement by way of open offer as contemplated by Regulation 3(1) are not applicable to direct and indirect acquisition of shares / voting rights in, or control over a company listed without making a public issue, on Institutional Trading Platform

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Govt. notifies AIF Regulations amendment, about investment treatment in ITP Listed cos.

Govt. notifies SEBI (Alternative Investment Funds) (Amendment) Regulations, 2015, whereby investment by Category I and Category II Alternative Investment Funds in the shares of companies listed on ITP shall be deemed to be investment in 'unlisted securities'

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Govt. notifies amendment to Delisting Regulations regarding its non-applicability to ITP listed cos.

Govt. notifies SEBI (Delisting of Equity Shares) (Second Amendment) Regulations, 2015, whereby delisting regulations shall not apply to securities listed without making a public issue, on the institutional trading platform

Click here to read more.

SEBI introduces 'commodity derivatives exchange' provisions in Securities Contracts Regulation (Exchanges & Clearing Corporation

SEBI amends Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012; Introduces the definition of 'commodity derivatives exchange' to mean recognized stock exchange which assists, regulates or controls business of buying, selling or dealing only in commodity derivatives; Includes a regulation which states that the recognized stock exchange (including commodity derivatives exchange) shall not introduce any new segment without SEBI's prior approval: SEBI

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SEBI amends Brokers & Sub-Brokers, Regulations for introducing commodities exchange's clearing member/broker

SEBI amends Stock Brokers and Sub-Brokers, Regulations, 1992, alters definition of 'clearing member' to include any person having clearing and settlement rights on a commodity derivatives exchange; Amends definition of 'self-clearing member' to include any person having clearing and settlement rights on a commodity derivatives exchange; Introduces regulation, wherein the stock broker carrying on activity of buying, selling or dealing in commodity derivatives, shall not undertake any other activity, unless permitted by SEBI; Prescribes the fees for members (as stock brokers, clearing members, self-clearing members) for dealing in the commodity derivatives: SEBI

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SEBI prescribes annual regulatory fees for regional commodity derivatives exchange

SEBI amends Regulatory Fee on Stock Exchanges, Regulations, 2006; States that regional commodity derivatives exchange shall pay annual regulatory fees of Rs. 50,000, within 30 days of conclusion of the relevant financial year: SEBI

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