ITR VOL 341 PART 2

 

INCOME TAX REPORTS (ITR)

Volume 341 : Part 2 (Issue dated 20-2-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Business expenditure --Deduction only on actual payment--Assessee taking over sick company--Rehabilitation scheme--Interest payable by sick company to bank--Assessee entitled to benefit under scheme--Income-tax Act, 1961, s. 43B--Sick Industrial Companies (Special Provisions) Act, 1985, s. 32-- CIT v. Tube Investments of India Ltd. (Mad) . . . 199

Capital gains --Agricultural land--Whether land agricultural land or otherwise--Date of permission for conversion treated as the cut-off date--Tribunal finding land retained its agricultural character till date of order permitting non-agricultural use--No capital gains tax leviable--Income-tax Act, 1961, ss. 2(14), 45, 48-- CIT v. Smt. K. Leela-vathy (Karn) . . . 287

Capital or revenue expenditure --Construction works--Amount spent on acquiring unfinished works and inventories of another company--Revenue expenditure--Income-tax Act, 1961, s. 37-- Alacrity Housing Ltd . v. CIT (Mad) . . . 264

Cash credit --Production of demand drafts and confirmation letters--Denial of financial transaction by parties before Tribunal--Credits not satisfactorily explained--Addition justified--Income-tax Act, 1961, s. 68-- CIT v. S. L. N. Traders (No. 1 ) (Karn) . . . 232

Depreciation --Higher rate of depreciation--Assessee leasing truck--Assessee not entitled to higher rate of depreciation because not engaged in business of hire--Income-tax Act, 1961--Income-tax Rules, 1962, Appendix I, entry III, clause (2)(ii)-- Deputy CIT v. Pradip N. Desai (HUF) (Guj) . . . 277

----Ownership of asset--Assessee-company giving vehicles on hire--Vehicles registered in the names of directors--Funds for purchase of vehicles provided by company--Income from vehicles assessed in hands of company--Company entitled to depreciation on vehicles--Income-tax Act, 1961, s. 32-- CIT v. Aravali Finlease Ltd. (Guj) . . . 282

----Rate of depreciation--Vehicles given on lease--Assessee not entitled to higher rate of depreciation--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962-- CIT v. Aravali Finlease Ltd. (Guj) . . . 282

Dispute Resolution Panel --Assessee referring matter to Panel and submitting objections to draft assessment order--Subsequent application to withdraw reference and file appeal--Panel not right in confirming draft assessment order without considering assessee's objections--Income-tax Act, 1961, s. 144C-- AIA Engineering Ltd. v. Dispute Resolution Panel (Guj) . . . 145

----Constitutional validity of provisions--Panel having Commissioner as member--Possibility of bias of Commissioner--Not a ground for declaring section 144C and rule 3(2) invalid--Income-tax Act, 1961, s. 144C--Income-tax (Dispute Resolution Panel) Rules, 2009, r. 3--Constitution of India-- Hyundai Heavy Industries Ltd . v. Union of India (Uttarakhand) . . . 203

----Draft assessment--Assessee to file objections--Panel to pass speaking order with cogent reasons--Income-tax Act, 1961, ss. 94C, 144C(6), (7)-- Ericsson AB v. Additional Director of Income-tax (International Taxation) (Delhi) . . . 162

Export --Special deduction--Computation of special deduction under section 80HHC--Effect of clause (baa) in Explanation to section 80HHC and Circular No. 772--Special deduction under section 80-IB not to be taken into account--Income-tax Act, 1961, ss. 80HHC, 80-IB--CBDT Circular No. 772, dated 23-12-1998-- CIT v. Millipore India P. Ltd . (Karn) . . . 219

Penalty --Concealment of income--Addition of credits in assessment--Assessee explaining in penalty proceedings that it had agreed to addition because of its inability to prove genuineness of credits--Explanation accepted by Commissioner (Appeals) and Tribunal--Penalty could not be levied--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. S. L. N. Traders (No. 2 ) (Karn) . . . 235

Reassessment --International transactions--Arm's length price--Requirement of notice under section 143(2)--Time limit for service of notice--Draft assessment order--Not a final order--Notice issued beyond time limit under section 143(2)(ii)--Assessment invalid--Income-tax Act, 1961, ss. 143(2)(ii), 144C, 292BB-- Alpine Electronics Asia Pte. Ltd . v. Director General of Income-tax (Delhi) . . . 247

Rectification of mistakes --Condition precedent--Mistake must be obvious--Debatable issue--Rectification proceedings not justified--Subsequent decision of Supreme Court would not obliterate conflict of opinion existing on date of order--Income-tax Act, 1961, s. 154-- CIT v. Thambi Modern Spinning Mills Ltd .(Mad) . . . 229

Revision --Business expenditure--Year in which allowable--Mercantile system of accounting--Interest on belated payment--No evidence that liability accrued during relevant assessment year--Order revising to that extent justified--Income-tax Act, 1961, s. 263-- CIT v. Madras Electrical Conductors Pvt. Ltd. (Mad) . . . 155

----Commissioner--Business loss--Carry forward and set of--Continuance of business--Manufacture and sale of aluminium conductors--Temporary break--Purchase and sale of aluminium foils and other materials thereafter as distributor of group concern--Both activities not separate or independent--Revision on premise that activity not revival of old business--Not justified--Income-tax Act, 1961, s. 263-- CIT v. Madras Electrical Conductors Pvt. Ltd . (Mad) . . . 155

----Commissioner--Reassessment--No addition made on grounds mentioned in reasons recorded--Assessment order not erroneous--Order under section 263 to be set aside-- Income-tax Act, 1961, s. 263-- CIT v. Software Consultants (Delhi) . . . 240

----Condition precedent--Commissioner not doubting statement of finished goods but directing deeper probe--Insurance claim--No accrual of income without enforceable right--Rejection of claim under section 80HHC--No necessity of further inquiries--Variation in exchange rate--Order not indicating whether there was no such income or income shown was lower--Order not mentioning how order of Assessing Officer was erroneous and prejudicial to interests of Revenue--Revision not valid--Income-tax Act, 1961, s. 263-- CIT v. Leisure Wear Exports Ltd . (Delhi) . . . 166

----Powers of Commissioner--Assessment after enquiry --No error in order--Order cannot be revised on ground enquiry should have been more detailed--Income-tax Act, 1961, s. 263-- CIT v. Hindustan Marketing and Advertising Co. Ltd. (Delhi) . . . 180

Search and seizure --Block assessment--Penalty--Tribunal confirming addition over and above income declared by assessee--Imposition of penalty proper--Income-tax Act, 1961, s. 158BFA(2)-- Kandoi Bhogilal Mulchand v. Deputy CIT (Guj) . . . 271

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(14) --Capital gains--Agricultural land--Whether land agricultural land or otherwise--Date of permission for conversion treated as the cut-off date--Tribunal finding land retained its agricultural character till date of order permitting non-agricultural use--No capital gains tax leviable-- CIT v. Smt. K. Leelavathy (Karn) . . . 287

S. 32 --Depreciation--Ownership of asset--Assessee-company giving vehicles on hire--Vehicles registered in the names of directors--Funds for purchase of vehicles provided by company--Income from vehicles assessed in hands of company--Company entitled to depreciation on vehicles-- CIT v. Aravali Finlease Ltd. (Guj) . . . 282

----Depreciation--Rate of depreciation--Vehicles given on lease--Assessee not entitled to higher rate of depreciation-- CIT v. Aravali Finlease Ltd. (Guj) . . . 282

S. 37 --Capital or revenue expenditure--Construction works--Amount spent on acquiring unfinished works and inventories of another company--Revenue expenditure-- Alacrity Housing Ltd . v. CIT (Mad) . . . 264

S. 43B --Business expenditure--Deduction only on actual payment--Assessee taking over sick company--Rehabilitation scheme--Interest payable by sick company to bank--Assessee entitled to benefit under scheme-- CIT v. Tube Investments of India Ltd. (Mad) . . . 199

S. 45 --Capital gains--Agricultural land--Whether land agricultural land or otherwise--Date of permission for conversion treated as the cut-off date--Tribunal finding land retained its agricultural character till date of order permitting non-agricultural use--No capital gains tax leviable-- CIT v. Smt. K. Leelavathy (Karn) . . . 287

S. 48 --Capital gains--Agricultural land--Whether land agricultural land or otherwise--Date of permission for conversion treated as the cut-off date--Tribunal finding land retained its agricultural character till date of order permitting non-agricultural use--No capital gains tax leviable-- CIT v. Smt. K. Leelavathy (Karn) . . . 287

S. 68 --Cash credit--Production of demand drafts and confirmation letters--Denial of financial transaction by parties before Tribunal--Credits not satisfactorily explained--Addition justified-- CIT v. S. L. N. Traders (No. 1 ) (Karn) . . . 232

S. 80HHC --Export--Special deduction--Computation of special deduction under section 80HHC--Effect of clause (baa) in Explanation to section 80HHC and Circular No. 772--Special deduction under section 80-IB not to be taken into account--CBDT Circular No. 772, dated 23-12-1998-- CIT v. Millipore India P. Ltd . (Karn) . . . 219

S. 80-IB --Export--Special deduction--Computation of special deduction under section 80HHC--Effect of clause (baa) in Explanation to section 80HHC and Circular No. 772--Special deduction under section 80-IB not to be taken into account--CBDT Circular No. 772, dated 23-12-1998-- CIT v. Millipore India P. Ltd . (Karn) . . . 219

S. 94C --Dispute Resolution Panel--Draft assessment--Assessee to file objections--Panel to pass speaking order with cogent reasons-- Ericsson AB v. Additional Director of Income-tax (International Taxation) (Delhi) . . . 162

S. 143(2)(ii) --Reassessment--International transactions--Arm's length price--Requirement of notice under section 143(2)--Time limit for service of notice--Draft assessment order--Not a final order--Notice issued beyond time limit under section 143(2)(ii)--Assessment invalid-- Alpine Electronics Asia Pte. Ltd . v. Director General of Income-tax (Delhi) . . . 247

S. 144C --Dispute Resolution Panel--Assessee referring matter to Panel and submitting objections to draft assessment order--Subsequent application to withdraw reference and file appeal--Panel not right in confirming draft assessment order without considering assessee's objections-- AIA Engineering Ltd. v. Dispute Resolution Panel (Guj) . . . 145

----Dispute Resolution Panel--Constitutional validity of provisions--Panel having Commissioner as member--Possibility of bias of Commissioner--Not a ground for declaring section 144C and rule 3(2) invalid-- Hyundai Heavy Industries Ltd . v. Union of India (Uttarakhand) . . . 203

----Reassessment--International transactions--Arm's length price--Requirement of notice under section 143(2)--Time limit for service of notice--Draft assessment order--Not a final order--Notice issued beyond time limit under section 143(2)(ii)--Assessment invalid-- Alpine Electronics Asia Pte. Ltd . v. Director General of Income-tax (Delhi) . . . 247

S. 144C(6) --Dispute Resolution Panel--Draft assessment--Assessee to file objections--Panel to pass speaking order with cogent reasons-- Ericsson AB v. Additional Director of Income-tax (International Taxation) (Delhi) . . . 162

S. 144C(7) --Dispute Resolution Panel--Draft assessment--Assessee to file objections--Panel to pass speaking order with cogent reasons-- Ericsson AB v. Additional Director of Income-tax (International Taxation) (Delhi) . . . 162

S. 154 --Rectification of mistakes--Condition precedent--Mistake must be obvious--Debatable issue--Rectification proceedings not justified--Subsequent decision of Supreme Court would not obliterate conflict of opinion existing on date of order-- CIT v. Thambi Modern Spinning Mills Ltd . (Mad) . . . 229

S. 158BFA(2) --Search and seizure--Block assessment--Penalty--Tribunal confirming addition over and above income declared by assessee--Imposition of penalty proper-- Kandoi Bhogilal Mulchand v. Deputy CIT (Guj) . . . 271

S. 263 --Revision--Business expenditure--Year in which allowable--Mercantile system of accounting--Interest on belated payment--No evidence that liability accrued during relevant assessment year--Order revising to that extent justified-- CIT v. Madras Electrical Conductors Pvt. Ltd. (Mad) . . . 155

----Revision--Commissioner--Business loss--Carry forward and set of--Continuance of business--Manufacture and sale of aluminium conductors--Temporary break--Purchase and sale of aluminium foils and other materials thereafter as distributor of group concern--Both activities not separate or independent--Revision on premise that activity not revival of old business--Not justified-- CIT v. Madras Electrical Conductors Pvt. Ltd . (Mad) . . . 155

----Revision--Commissioner--Reassessment--No addition made on grounds mentioned in reasons recorded--Assessment order not erroneous--Order under section 263 to be set aside-- CIT v. Software Consultants (Delhi) . . . 240

----Revision--Condition precedent--Commissioner not doubting statement of finished goods but directing deeper probe--Insurance claim--No accrual of income without enforceable right--Rejection of claim under section 80HHC--No necessity of further inquiries--Variation in exchange rate--Order not indicating whether there was no such income or income shown was lower--Order not mentioning how order of Assessing Officer was erroneous and prejudicial to interests of Revenue--Revision not valid-- CIT v. Leisure Wear Exports Ltd . (Delhi) . . . 166

----Revision--Powers of Commissioner--Assessment after enquiry--No error in order--Order cannot be revised on ground enquiry should have been more detailed-- CIT v. Hindustan Marketing and Advertising Co. Ltd. (Delhi) . . . 180

S. 271(1)(c) --Penalty--Concealment of income--Addition of credits in assessment--Assessee explaining in penalty proceedings that it had agreed to addition because of its inability to prove genuineness of credits--Explanation accepted by Commissioner (Appeals) and Tribunal--Penalty could not be levied-- CIT v. S. L. N. Traders (No. 2 ) (Karn) . . . 235

S. 292BB --Reassessment--International transactions--Arm's length price--Requirement of notice under section 143(2)--Time limit for service of notice--Draft assessment order--Not a final order--Notice issued beyond time limit under section 143(2)(ii)--Assessment invalid-- Alpine Electronics Asia Pte. Ltd . v. Director General of Income-tax (Delhi) . . . 247

Income-tax (Dispute Resolution Panel) Rules, 2009 :

R. 3 --Dispute Resolution Panel--Constitutional validity of provisions--Panel having Commissioner as member--Possibility of bias of Commissioner--Not a ground for declaring section 144C and rule 3(2) invalid-- Hyundai Heavy Industries Ltd . v. Union of India (Uttarakhand) . . . 203

Income-tax Rules, 1962 :

Appendix I, entry III, clause (2)(ii) --Depreciation--Higher rate of depreciation--Assessee leasing truck--Assessee not entitled to higher rate of depreciation because not engaged in business of hire-- Dy. CIT v. Pradip N. Desai (HUF) (Guj) . . . 277

Sick Industrial Companies (Special Provisions) Act, 1985 :

S. 32 --Business expenditure--Deduction only on actual payment--Assessee taking over sick company--Rehabilitation scheme--Interest payable by sick company to bank--Assessee entitled to benefit under scheme-- CIT v. Tube Investments of India Ltd. (Mad) . . . 199

 

Law on taxing non-compete fee [1 Attachment]

---------- Forwarded message ----------

From: Aditya Vaidya <vas_adi@hotmail.com>
Date: Thu, Feb 16, 2012 at 10:59 AM
Subject: Message from EGroup of SolapurCAs Law on taxing non-compete fee [1 Attachment]
To: Solapur CA <solapurcas@yahoogroups.com>

 

[Attachment(s) from Aditya Vaidya included below]

Dear Members,

For your reference,

Also attached full judgement.

Regards,

Aditya Vaidya

SMV & Associates

ACIT vs. Dr. B.V. Raju (ITAT Hyderabad Special Bench)

Law on taxing non-compete fee u/s 28(va) & 55(2)(a) explained

 

In AY 2000-01, the assessee received Rs. 11 crores pursuant to a non-compete agreement which was for 5 years. The AO held that there was a "transfer" by way of relinquishment of the assessee's "right to manufacture" and that the same was chargeable to capital gains by taking Nil cost u/s 55(2)(a). This was reversed by the CIT (A) on the ground that the personal skills of the assessee were placed under restraint and as the said personal skills were not a "capital asset", capital gains was not chargeable. On appeal to the Tribunal, the matter was referred to the Special bench. HELD by the Special Bench:

 

(i) The taxability of a non-compete fee depends on the purpose for which it is paid. A non-compete fee can be divided into two categories: (a) consideration received by the transferor of a business for agreeing not to carry on the same business; (b) consideration received by other persons associated with the transferor to ensure that they do not indulge in competing business. For AY 2003-04 & onwards, non-compete fee received by the transferor of a business is taxable as a capital gains in view of s. 55(2)(a) which provides that the cost of a "right to carry on business" shall be Nil. Though s. 55(2)(a) as amended by the FA 1997 w.e.f. 1.4.1998 referred to a "right to manufacture, produce or process any article or thing", that would not cover a non-compete covenant. For AY 2003-04 & onwards, a non-compete fee received by a person associated with the transferor is taxable as "business profits" u/s 28(va)(a) as being a payment for "not carrying out any activity in relation to any business". A non-compete fee received in an earlier year is not chargeable to tax in view of Guffic Chem vs. CIT 320 ITR 602 (SC);

 

(ii) On facts, the consideration of Rs. 11 crores received by the assessee was not for sale of any business nor was it for not carrying on any business which he was carrying on, which he had transferred. It was also not a payment for a "rightto manufacture, produce or process any article or thing". The sum was not paid for transfer of any intangible right in respect of manufacture, production or process of cement. Accordingly, the capital gains provisions were not attracted. The amount was paid for "not carrying out any activity in relation to any business" and would fall within the ambit of s. 28(va)(a). However, as s. 28(va) came into effect in AY 2003-04, the receipts was not chargeable to tax in AY 2000-01

__._,_.___

Attachment(s) from Aditya Vaidya

1 of 1 File(s)

raju_non_compete_compensation_taxability.pdf

Landmark Case Law - Capital Gains not chargeable on TDR

---------- Forwarded message ----------
From: CA. Rahul Bajaj <ca.rahulbajaj@gmail.com>
Date: Mon, Feb 13, 2012 at 1:18 PM


Dear All,

Please find below an important and interesting case law on capital gains. The decision is pronounced on 09.02.2011

Ishverlal Manmohandas Kanakia vs. ACIT (ITAT Mumbai)

TDR is "improvement" of land & if it has no cost, then, even if the land has a "cost", no part of the gain on transfer of land is taxable

 

The assessee was the owner of land acquired in 1963. Pursuant to the Development Control Regulations, 1991, the assessee was entitled to construct up to 1:1 FSI on the property. The assessee was also entitled to load Transferable Development Rights ("TDR") on the property. The assessee entered into a development agreement with a developer pursuant to which the developer agreed to develop on the said land by utilizing the FSI & TDR and paid compensation to the assessee. The assessee claimed that the TDR was an "improvement" of the land and as a "cost of improvement" of the land could not be determined, no capital gains was chargeable. In appeal, the CIT (A) held that the FSI and TDR were separate & distinct assets and that while the TDR did not have a cost, the FSI did and if both were transferred together, there was a "cost" for the "asset" and capital gains was chargeable. On appeal by the assessee, HELD allowing the appeal:

The assessee transferred "Development Rights" being the FSI and the "right to load TDR" on the land. While the right to construct on the land by consuming FSI was a capital asset which was acquired at a cost, the right to load TDR arose pursuant to the DC Regulations, 1991 without payment of any cost. The said right to "load TDR" was an improvement to the "capital asset" held by the assessee. If the "cost of improvement" of an asset is not determinable, capital gains are not chargeable. The result was that even the consideration attributable to the FSI (which had a cost) was not assessable to tax (Principle laid down in Jethalal D. Mehta 2 SOT 422 (Mum) & Maheshwar Prakash CHS 24 SOT 366 (Mum) in the context of transfer of only TDR followed).

--
warm regards,
CA. Rahul Bajaj

Amendments to the Equity Listing Agreement

Amendments to the Equity Listing Agreement

Securities and Exchange Board of India

CIRCULAR

CIR/CFD/DIL/1/2012                                        February 8, 2012

To

All Stock Exchanges

Dear Sir/Madam,

Sub: Amendments to the Equity Listing Agreement

1. As part of SEBI's endeavour to review the listing conditions, certain amendments are hereby carried out to the Equity Listing Agreement. The full texts of amendments to be effected in the Listing Agreements are given at Annexure-1. The gist of the amendments

are as under:-

a. Amendment to Clause 40A

In addition to the existing methods which listed company can adopt to achieve minimum public shareholding, the listed company may also achieve the minimum level of public shareholding through Institutional Placement Programme (IPP) in terms of Chapter VIII-A of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended.

Further, sale of shares by promoters through stock exchanges shall be now carried out in terms of SEBI circular CIR/MRD/DP/05/2012 dated February 1, 2012.

b. Amendment to Clause 43 & 43A

In order to enhance disclosure requirements, listed entities have been mandated to disclose utilization of funds raised upon conversion/ exercise of warrants issued along with public or rights issue of specified securities.

2. This circular shall be applicable with immediate effect.

3. The above listing conditions are specified in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992. The said listing conditions should form part of the existing Listing Agreement of the stock exchange.

4. All stock exchanges are advised to ensure compliance with this circular and carry out the amendments in their Listing Agreement as per the Annexure to this circular.

5. This circular is available on SEBI website at http://www.sebi.gov.in/ under the categories "Legal Framework" and "Issues and Listing".

Yours faithfully,

Sanjay Purao

Deputy General Manager

+91-22-26449612

sanjayp@sebi.gov.in

Annexure-1

Amendments to Listing Agreement

1. Sub-clause (ii)(c) of Clause 40A, shall be substituted by

"(c) sale of shares held by promoters through the secondary market in terms of SEBI circular CIR/MRD/DP/05/2012 dated February 1, 2012; or"

2. After sub-clause (ii)(c) of Clause 40A, the following sub-clause shall be inserted:

"(d) Institutional Placement Programme (IPP) in terms of Chapter VIIIA of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended."

3. 'The proviso' and 'Explanation to sub-clause (ii)(c) of Clause 40A, shall be omitted.

4. In Clause 43, a new sub-clause (d) shall be inserted:

"(d) The statement referred to in clause (a) shall also be given for warrants issued along with public or rights issue of specified securities".

5. In Clause 43A, a new sub-clause (5) shall be inserted:

"(5) The statement referred to in clause (1) shall also be given for warrants issued along with public or rights issue of specified securities".

ITR (TRIB) VOL 13 PART 6

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 13 : Part 6 (Issue dated : 6-2-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

 

Business expenditure --Disallowance--Cash payments exceeding prescribed limit--Payments to Airports Authority of India in accordance with directions of Authority--Payments falling under exceptions specified in rule 6DD(k)--Not to be disallowed--Income-tax Act, 1961, s. 40A(3)--Income-tax Rules, 1962, r. 6DD(k)-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

----Disallowance--Excessive and unreasonable payments--Payment to directors--No proof that payments not excessive or unreasonable--Matter remanded--Income-tax Act, 1961, s. 40A(2)(b)-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

Deduction --Disallowance of expenditure in relation to exempted incomes--Prohibition on reopening of completed assessments for purpose of making disallowance--Does not apply to summary assessments under section 143(1)--Income-tax Act, 1961, s. 14A, prov.-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

Depreciation --Car purchased in name of director and used for company--Depreciation allowed in previous year--To be allowed for subsequent year--Income-tax Act, 1961, s. 32-- ITO v. Electro Ferro Alloys Ltd. (Ahmedabad) . . . 594

----Claim to 100 per cent. depreciation on certain items--Expenses either relating to spare parts or repairs and allowable in any case as revenue expenditure--Income-tax Act, 1961-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

Income --Dividend--Computation--Disallowance under section 14A--Law applicable--Rule 8D applicable from assessment year 2008-09--Disallowance based on consideration of facts and circumstances of case--Matter remanded--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

Industrial undertaking --Special deduction under section 80-IA--Computation--Special deduction not claimed and depreciation and loss set off against other income in earlier year--Set-off not to be carried forward and notionally set off against profits in year in which special deduction is claimed--Income-tax Act, 1961, ss. 80AB, 80-IA-- Anil H. Lad v. Deputy CIT (Bangalore) . . . 581

----Special deduction under section 80-IB--Interest received from various parties and miscellaneous income received from sale of non-excisable waste material--Matter remanded--Income-tax Act, 1961, s. 80-IB-- ITO v. Electro Ferro Alloys Ltd. (Ahmedabad) . . . 594

----Special deduction under section 80-IB--Profits of business--Excise income, insurance claim received for shortage of material--Assessee entitled to deduction--Income-tax Act, 1961, s. 80-IB-- ITO v. Electro Ferro Alloys Ltd. (Ahmedabad) . . . 594

Precedent --Decision of High Court to be followed and not that of Special Bench of Tribunal-- Anil H. Lad v. Deputy CIT (Bangalore) . . . 581

Reassessment --Income escaping assessment--"Reason to believe"--That Commissioner (Appeals) has held in favour of assessee for earlier years on same point--Will not take away jurisdiction of Assessing Officer to issue notice for subsequent year--Especially when appellate order taken on appeal by Department--Income-tax Act, 1961, ss. 147, 148-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

Refund --Interest on excess refund--Provision not retrospective--Income-tax Act, 1961, s. 234D-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

Revision --Commissioner--Depreciation--Rate of depreciation--Aircraft--Assessment order set aside on ground that aircraft owned by assessee not aeroplane--Finding that aircraft owned by assessee entitled to depreciation at 40 per cent.--Order of revision not valid--Income-tax Act, 1961, s. 263--Income-tax Rules, 1962-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

Search and seizure --Block assessment--Undisclosed income--Cash seized during search--No explanation regarding its source--Amount includible in block assessment--Income-tax Act, 1961-- Anil H. Lad v. Deputy CIT (Bangalore) . . . 581

Words and phrases --"Aeroplane"--Meaning of-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 14A --Income--Dividend--Computation--Disallowance under section 14A--Law applicable--Rule 8D applicable from assessment year 2008-09--Disallowance based on consideration of facts and circumstances of case--Matter remanded-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

S. 14A, prov --Deduction--Disallowance of expenditure in relation to exempted incomes--Prohibition on reopening of completed assessments for purpose of making disallowance--Does not apply to summary assessments under section 143(1)-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

S. 32 --Depreciation--Car purchased in name of director and used for company--Depreciation allowed in previous year--To be allowed for subsequent year-- ITO v. Electro Ferro Alloys Ltd. (Ahmedabad) . . . 594

S. 40A(2)(b) --Business expenditure--Disallowance--Excessive and unreasonable payments--Payment to directors--No proof that payments not excessive or unreasonable--Matter remanded-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

S. 40A(3) --Business expenditure--Disallowance--Cash payments exceeding prescribed limit--Payments to Airports Authority of India in accordance with directions of Authority--Payments falling under exceptions specified in rule 6DD(k)--Not to be disallowed-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

S. 80AB --Industrial undertaking--Special deduction under section 80-IA--Computation--Special deduction not claimed and depreciation and loss set off against other income in earlier year--Set-off not to be carried forward and notionally set off against profits in year in which special deduction is claimed-- Anil H. Lad v. Deputy CIT (Bangalore) . . . 581

S. 80-IA --Industrial undertaking--Special deduction under section 80-IA--Computation--Special deduction not claimed and depreciation and loss set off against other income in earlier year--Set-off not to be carried forward and notionally set off against profits in year in which special deduction is claimed-- Anil H. Lad v. Deputy CIT (Bangalore) . . . 581

S. 80-IB --Industrial undertaking--Special deduction under section 80-IB--Interest received from various parties and miscellaneous income received from sale of non-excisable waste material--Matter remanded-- ITO v. Electro Ferro Alloys Ltd. (Ahmedabad) . . . 594

----Industrial undertaking--Special deduction under section 80-IB--Profits of business--Excise income, insurance claim received for shortage of material--Assessee entitled to deduction-- ITO v. Electro Ferro Alloys Ltd. (Ahmedabad) . . . 594

S. 147 --Reassessment--Income escaping assessment--"Reason to believe"--That Commissioner (Appeals) has held in favour of assessee for earlier years on same point--Will not take away jurisdiction of Assessing Officer to issue notice for subsequent year--Especially when appellate order taken on appeal by Department-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

S. 148 --Reassessment--Income escaping assessment--"Reason to believe"--That Commissioner (Appeals) has held in favour of assessee for earlier years on same point--Will not take away jurisdiction of Assessing Officer to issue notice for subsequent year--Especially when appellate order taken on appeal by Department-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

S. 234D --Refund--Interest on excess refund--Provision not retrospective-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 619

S. 263 --Revision--Commissioner--Depreciation--Rate of depreciation--Aircraft--Assessment order set aside on ground that aircraft owned by assessee not aeroplane--Finding that aircraft owned by assessee entitled to depreciation at 40 per cent--Order of revision not valid-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

Income-tax Rules, 1962 :

R. 6DD(k) --Business expenditure--Disallowance--Cash payments exceeding prescribed limit--Payments to Airports Authority of India in accordance with directions of Authority--Payments falling under exceptions specified in rule 6DD(k)--Not to be disallowed-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

R. 8D --Income--Dividend--Computation--Disallowance under section 14A--Law applicable--Rule 8D applicable from assessment year 2008-09--Disallowance based on consideration of facts and circumstances of case--Matter remanded-- SRC Aviation P. Ltd. v. Deputy CIT (Delhi) . . . 600

 

SEBI circular on Offer for Sale of Shares by Promoters through the Stock Exchange Mechanism

Offer For Sale of Shares by Promoters through the Stock Exchange Mechanism

Securities and Exchange Board of India

CIRCULAR

CIR/MRD/DP/ 05/2012                                 February 1, 2012

The Managing Director and CEO 
Bombay Stock Exchange Limited     

Phiroze Jeejeebhoy Towers            

Dalal Street                                  

Mumbai - 400001                         

The Managing Director
National Stock Exchange of India Ltd.
Exchange Plaza, Bandra Kurla Complex
Bandra (E), Mumbai - 400 051

Dear Sir,

Sub: Offer For Sale of Shares by Promoters through the Stock Exchange Mechanism

In order to facilitate promoters to dilute/offload their holding in listed companies in a transparent manner with wider participation, it has been decided to allow the offer for sale of shares by promoters of such companies through a separate window provided by the stock exchange(s). The guidelines for the same are as under:

1. Eligibility

(a) Exchanges

To begin with, the facility of offer for sale of shares shall be available on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

(b) Sellers

(i) All promoter(s)/ promoter group entities of such companies that are eligible for trading and are required to increase public shareholding to meet the minimum public shareholding requirements in terms Rule 19(2)(b) and 19A of Securities Contracts (Regulation) Rules, 1957 (SCRR), read with clause 40A (ii) (c) of Listing Agreement.

(ii) All promoter(s)/ promoter group entities of top 100 companies based on average market capitalization of the last completed quarter.

For (i) and (ii) above, the promoter/promoter group entities should not have purchased and/or sold the shares of the company in the 12 weeks period prior to the offer and they should undertake not to purchase and/or sell shares of the company in the 12 weeks period after the offer.

(c) Buyers

All investors registered with the brokers of the aforementioned stock exchanges other than the promoter(s)/ promoter group entities.

2. Definitions

(a) "Single Clearing Price” is the price at which the shares are allocated to the successful bidders in a proportionate basis methodology.

(b) “Multiple Clearing Prices” are the prices at which the shares are allocated to the successful bidders in a price priority methodology.

(c) “Indicative Price” is the price at which the quantity offered is exhausted.

(d) “Floor Price” is the minimum price at which the seller intends to sell the shares.

3. Size of Offer for sale of shares

The size of the offer shall be atleast 1% of the paid-up capital of the company, subject to a minimum of Rs 25 crores. However, in respect of companies, where 1% of the paid-up capital at closing price on the specified date is less than Rs 25 crores, dilution would be atleast 10% of the paid-up capital or such lesser percentage so as to achieve minimum public shareholding in a single tranche.

Note: Specified date shall be the last trading day of the last completed quarter

4. Advertisement and offer expenses

(a) Advertisements about the offer for sale of shares through stock exchange(s) shall be made after the announcement/ notice of the offer for sale of shares has been made to the stock exchanges in accordance with para 5 (b) below;

(b) All expenses relating to offer for sale of shares through stock exchange(s) shall be borne by the seller(s).

5. Operational Requirements

(a) Appointment of Broker

The Seller(s) would have to appoint Sellers‟ broker(s) for this purpose. The Seller‟s broker(s) may also undertake transactions on behalf of eligible buyers.

(b) Announcement/ Notice of the Offer for sale of shares

Seller(s) shall announce the intention of sale of shares at least one clear trading day prior to the opening of offer, along with the following information:

(i) Name of the seller(s) (promoter/ promoter group) and the name of the company whose shares are proposed to be sold.

(ii) Name of the Exchange(s) where the orders shall be placed. In case orders are to be placed on both BSE and NSE, one of them shall be declared as the Designated Stock Exchange (“DSE”).

(iii) Date and time of the opening and closing of the offer.

(iv) Allocation methodology i.e. either on a price priority (multiple clearing prices) basis or on a proportionate basis at a single clearing price.

(v) Number of shares being offered for sale.

(vi) The name of the broker(s) on behalf of the seller(s).

(vii) Floor price, if the seller(s) chooses to announce it to the market or a declaration to the effect that the floor price will be submitted to the stock exchange(s) in a sealed envelope which shall be declared post closure of the offer.

(viii) Conditions, if any, for withdrawal or cancellation of the offer.

(c) Floor price

(i) Seller(s) may declare a floor price in the announcement/ notice

(ii) In case the seller(s) chooses not to publicly disclose the floor price, the seller(s) shall give the floor price in a sealed envelope to DSE before the opening of the offer.

(iii) The floor price if not declared to the market, shall not be disclosed to anybody, including the selling broker(s).

(iv) Sealed envelope shall be opened by the DSE after the closure of the offer for sale and the floor price suitably disseminated to the market.

(d) Timelines

(i) The duration of the offer for sale shall not exceed one trading day.

(ii) The placing of orders by trading members shall take place during trading hours.

(e) Order Placement

(i) A separate window for the purpose of offer for sale of shares shall be created by stock exchanges. Modification/ Cancellation of orders/ bids will be allowed during the period of the offer. However, modification/ cancellation of orders/ bids shall not be allowed during the last 30 minutes of the duration of the offer..

(ii) Indicative Price and Cumulative orders/ bid quantity information shall be made available online by the exchanges at specific time intervals.

(iii) No price bands shall be applicable for the orders/ bids placed in the offer for sale. Stock specific tick size as per the extant practice in normal trading session shall be made applicable for this window.

(iv) In case of shares under offer for sale, the trading in the normal market shall also continue. However, in case of market closure due to the incidence of breach of „Market wide index based circuit filter‟, the offer for sale shall be halted.

(v) Only limit orders/ bids shall be permitted.

(vi) Multiple orders from a single buyer shall be permitted.

(vii) In case floor price is disclosed, orders/ bids below floor price shall not be accepted.

6. Risk Management

(a) Stock Exchange shall collect 100% of the order value in cash, at the order level for every buy order/ bid. Such funds shall neither be utilized against any other obligation of the trading member nor co-mingled with other segments. Such upfront collection shall also be applicable for all institutional orders.

(b) In case of order/bid modification/cancellation, such funds shall be released/collected on a real time basis by the stock exchange.

(c) The seller(s) shall deposit the entire quantity of shares offered for sale as payin with the clearing corporation/clearing house or DSE prior to the commencement of the offer. No other margin shall be charged on the seller(s).

7. Allocation

(a) Minimum of 25% of the shares offered shall be reserved for mutual funds and insurance companies, subject to allocation methodology. Any unsubscribed portion thereof shall be available to the other bidders.

(b) The orders shall be cumulated by the DSE immediately on close of the offer. Based on the methodology for allocation to be followed as disclosed in the notice, the DSE shall draw up the allocation. i.e. either on a price priority (multiple prices) basis or on a proportionate basis at a single clearing price.

(c) No allocation will be made incase of order/ bid is below floor price.

(d) No single bidder other than mutual funds and insurance companies shall be allocated more than 25% of the size of offer for sale.

8. Settlement

(a) The settlement shall take place similar to trade for trade basis.and shall be completed latest by T + 2 day (where T is the date of the closure of the offer). The allocation and the obligations resulting thereof shall be intimated to the brokers not later than T+1 day.

(b) There shall be no netting of settlement at broker‟s end.

(c) The clearing house of DSE shall transfer the shares received as payin to the clearing corporation/clearing house of the other stock exchange, to the extent of their obligations.

(d) Funds collected from the bidders who have not been allocated shares shall be released after the download of the obligation.

(e) The direct credit of shares shall be given to the demat account of the successful bidder provided it is indicated by the broker/bidder.

9. Issuance of Contract Notes

The brokers shall be required to issue contract note to the client based on the allotment price and quantity in terms of conditions specified by the exchange.

10. Withdrawal of offer

The offer for sale may be withdrawn prior to its proposed opening. In such a case there will be a cooling off period of 10 trading days from the date of withdrawal before an offer is made once again. The stock exchange(s) shall suitably disseminate details of such withdrawal.

11. Cancellation of offer

Cancellation of offer shall not be permitted during the bidding period. If the seller(s) fails to get sufficient demand at or above the floor price, he may choose to either conclude the offer or cancel it in full.

12. Stock Exchanges are advised to:

a. take necessary steps and put in place necessary systems for implementation of the above.

b. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.

c. bring the provisions of this circular to the notice of the member brokers

of the stock exchange and also to disseminate the same on the website.

d. communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Report.

13. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

Harini Balaji

Deputy General Manager

022-26449372

harinib@sebi.gov.in

Section 143 of the Income-tax Act, 1961 - Assessment - General - Processing of returns of assessment year 2011-12 - Steps to clear backlog

Processing of returns of assessment year 2011-12 - Steps to clear backlog

Section 143 of the Income-tax Act, 1961 - Assessment - General - Processing of returns of assessment year 2011-12 - Steps to clear backlog

Instruction No. 01/2012 [F.NO.225/34/2011-ITA.II], dated 2-2-2012

The issue of processing of returns for the Asst. Year 2011-12 and giving credit for TDS has been considered by the Board. In order to clear backlog of returns, the following decisions have been taken:

(i) In all returns (ITR-1 to ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs. One lac, the TDS claim may be accepted without verification.

(ii) Where there is zero TDS matching, TDS credit shall be allowed only after due verification. However, in case of returns of ITR-1 and ITR-2, credit may be allowed in full, even if there is zero matching, if the total TDS claimed is Rs. Five thousand or lower.

(iii) Where there are TDS claims with invalid TAN, TDS credit for such claims are not to be allowed.

(iv) In all other cases, TDS credit shall be allowed after due verification.