16 Replies
Sunshine
(Helping All)
(10575 Points)
Replied 29 December 2010
u/s 24B interest on borrowed capital is allowed as a deduction...in case you take a loan and construct a H.P then the interest upto the construction is pre construction interest and can be claimed as a deduction in 5 equal installments ......eg if loan taken in 2000 and construction compleleted in 2010-11 ...then interest upto 2009-10 is pre construction interest and can be claimed as a deduction in 5 installments...
Sunshine
(Helping All)
(10575 Points)
Replied 29 December 2010
employer's contribution to PF...
in case of a recognised PF- employer's contribution upto 12% of salary is exempt and rest is taxable...at time of retirement it is tax free
in case of unrecognised PF- employer's contribution is tax free ... at time of retirement it is taxable under head salary
salary= basic pay+ DA subject to retirement benefits + commission on fixed%
Sunshine
(Helping All)
(10575 Points)
Replied 29 December 2010
benefit of indexation not available-
1. GDR
2. Slump sale u/s 50B
3.depreciable asset
4.bonds and debentures other than capital indexing bonds
Sunshine
(Helping All)
(10575 Points)
Replied 29 December 2010
indexation is done in case of long term asset ...it is not compulsory to do so ....if indexation is done then capital gain is taxable at 20% rate...
Sunshine
(Helping All)
(10575 Points)
Replied 29 December 2010
in case capital asset converted into stock...then capital gain is taxed only when the stock is sold and indexation done upto the date it was a capital asset.
eg- in A.Y 2001-02 short term asset of cost 20000 converted into stock at market value 25000 then capital gain is of 5000 but it will not be taxed in that year....this stock sold in 2005-06 at 26000....now in A.Y 2005-06 short term capital gain of 5000 and BP income of 1000 will be taxed..
CHIRAG DEEPAK GANATRA
(CA FINAL)
(1054 Points)
Replied 29 December 2010
sneha thanx for your replies, but i want long answers plz gv if you have
Rajesh
(student)
(76 Points)
Replied 29 December 2010
1.pre construction period means the interest at the stage of construction. interest can claim for 5 instalments when construction is completed and earning house property income.
2.We can claim normal dep and additional dep.
3.in case of employers contribution to pf is taxable when it exceeds 12% of salary of the employee salary means basic salary+da if the terms of employement so provide.
4.If the borrowed capital is invested in the source of income which is taxable. Then that interest can claim as expense.
5.Specified business loss can be setoff only from specified business profit. where as normal businees loss can be setoff from any source of income except salary income.
Rajesh
(student)
(76 Points)
Replied 29 December 2010
6&7. we cannot claim cost of indexation in case of debentures and short term capital gain it is the benefit which will give low taxation.
8. In case when capital asset is converted into stock in trade then the capital gain on that conversion is taxable as capital gain from 1-4-98. when converted stock sold for profit then that is taxable as business profit.
Sunshine
(Helping All)
(10575 Points)
Replied 29 December 2010
i dont have any notes to give...i just gave a brief explaination...u refer the book ...its given clearly along with examples and revert back with any queries...
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 29 December 2010
Section 32
DEPRECIATION.
(1) In respect of depreciation of - (i) Buildings, machinery, plant or furniture, being tangible assets;
(ii) Know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed - (i) In the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed;
(ii) In the case of any block of assets, such percentage on the written down value thereof as may be prescribed 440 439 ]:
Provided that no deduction shall be allowed under this clause in respect of - (a) Any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, unless it is used - (i) In a business of running it on hire for tourists; or
(ii) Outside India in his business or profession in another country; and
(b) Any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42 : 443 ]
Provided further that where an asset referred to in clause (i) or clause (ii), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii), as the case may be :
Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asses shall be allowed on such percentage on the written down value thereof as may be prescribed.
Explanation : For the purposes of this proviso, - (a) The expression "commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not include "maxi-cab", "motor-cab", "tractor" and "road-roller";
(b) The expression "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "road roller" shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988).
Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991 the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991.
Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, as the case may be, in the ratio of the number of days for which the assets were used by them.
Explanation 1 : Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee.
Explanation 2 : For the purposes of this clause "written down value of the block of assets" shall have the same meaning as in clause (c) of sub-section (6) of section 43;
Explanation 3 : For the purposes of this sub-section, the expressions "assets" and "block of assets" shall mean - (a) Tangible assets, being buildings, machinery, plant or furniture;
(b) Intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature.
Explanation 4 : For the purposes of this sub-section, the expression "know-how" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto);
(iii) In the case of any building, machinery, plant or furniture in respect of which depreciation is claimed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof :
Provided that such deficiency is actually written off in the books of the assessee.
Explanation : For the purposes of this clause, - (1) "Moneys payable" in respect of any building, machinery, plant or furniture includes - (a) Any insurance, salvage or compensation moneys payable in respect thereof;
(b) Where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso;
(2) "Sold" includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company.
(2) Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be, - (i) Shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year;
(ii) If the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the income under any other head, if any, assessable for that assessment year;
(iii) If the unabsorbed depreciation allowance cannot be wholly set off under clause (i) and clause (ii), the amount of allowance not so set off shall be carried forward to the following assessment year and - (a) It shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year;
(b) If the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed :
Provided that the business or profession for which the allowance was originally computed continued to be carried on by him in the previous year relevant for that assessment year :
Provided further that the time limit of eight assessment years specified in sub-clause (b) shall not apply in the case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses.
Explanation : For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 29 December 2010
THE interest paid on capital borrowed for business/profession is eligible for deduction under Section 36(1)(iii). But if the borrowed capital is used for personal purpose, then the interest on such borrowal is not eligible for deduction. Also, if the nex us between the borrowed capital and personal use or diversion to other investments is established, then such interest is not eligible for deduction from the business income.
Whether the interest payable on the undisbursed expenditures is eligible for deduction under Section 36(1)(iii) was discussed in CIT vs Saraswathi Chemicals & Allied Industries (P) Ltd (249 ITR 235). It was held that `interest' would mean a consideration paid for the use of the money or for the forbearance of the lender from demanding the payment after it has fallen due. `Interest' is a compensation given to the person who allows his money for use by another person. The court thus held the interest pai d to the directors on the undisbursed salary as not eligible for deduction under Section 36(1)(iii), by categorising it as monies borrowed for business or profession.
Similarly, if the amounts borrowed are invested elsewhere, then such borrowal will not be eligible for deduction in the books in which the borrowals have been credited in the first instance. For example, if a loan taken by an assessee carrying on busines s is later invested in shares, the interest on the loan is not eligible for deduction against business income. The dividend income on shares is exempt under Section 10(33), hence, the interest on the borrowal cannot be claimed by the assessee. If the inc ome from such investment is chargeable to tax, then the assessee can claim the interest only against such income (Mandideep Engg. & Packaging Industries (P) Ltd vs Deputy CIT -- 77 ITD 307).
Notice of demand
AN ASSESSEE should pay the tax specified in a notice of demand issued under Section 156 within 30 days from the date it is served. If the amount is not paid so, then the assessee is liable to pay interest @ 1.25 per cent for every month of delay (Section 220(2)). The time granted for payment can be less than 30 days if the assessing officer (AO) has reason to believe that allowance of the full period of 30 days will be detrimental to the Revenue.
Where the assessee does not pay the tax as specified in the notice of demand, he can be treated as assessee in default and penalty under Section 221 can also be levied in addition to interest under Section 220.
Recently, in SMS Schloemann Siemag A. G. vs Deputy CIT (250 ITR 97), the interesting issue of when interest under Section 220 can be levied was discussed. In this case, the assessee paid tax as per the notice of demand and won the first appeal, thus obta ining refund of the tax paid. The Revenue went on second appeal and won. The Revenue, while recovering the tax finally, charged interest under Section 220(2) for the period from the date of original demand.
The court held that, as the assessee had paid the tax as mentioned in the notice of demand issued under Section 156 and obtained refund, the tax became due only after the second appeal and interest under Section 220 cannot be charged from the original da te of notice of demand.
The apex court, in Vikrant Tyres Ltd vs First ITO (247 ITR 821), held that once the assessee has paid the tax as per the notice of demand, then, upon a judgment of the appellate authority, a demand does not revive. Hence, interest cannot be levied from t he date of original notice of demand issued under Section 156. In this case, the assessee lost its appeal before the High Court, hence, a fresh demand notice was issued again which was paid within time. It was held that Section 3(2) of the Validation Act , 1964 does not revive for seeking the assessee to pay interest from the date of original notice of demand.
The apex court, in Mohan Wahi vs CIT (248 ITR 799), held that if the tax recovery officer comes to know that the demand of tax is cancelled due to appellate order or otherwise, then he has to cancel the tax recovery proceedings. The stage of the recovery proceedings will not in any way empower the Revenue to proceed with the sale once the tax dues have been paid or struck down for any other reason.
Advantage Revenue
A NOTICE under Section 148 for making assessment or reassessment under Section 147 can be given by the AO. Section 149 gives a maximum of six years from the end of the assessment year for issuing a notice under Section 148. This would mean that the AO ca n now resort to assess the incomes only from the AY 1995-96 by invoking Section 147.
Section 148 notice is issued only to benefit the Revenue. If an assessee files a loss return in response to a notice under Section 148 and, upon assessment, if the loss is accepted or reduced, even then such loss cannot be carried forward for future year s for set-off. However, if an assessee has filed a return within the time prescribed under Section 139(1), then the loss can be carried forward for set-off because of Section 80. Even if a notice under Section 148 is issued and the loss is accepted, the mere compliance by the assessee of Section 139(3) -- filing of loss return within time -- would enable him to carry forward the loss to future years.
The apex court, in CIT vs M. K. K. R. Muthukaruppan Chettiar (78 ITR 69), held that a return already filed with the Department must be disposed of before a notice under Section 148 is issued. This was reiterated in Bhagawan Das Sitaram (HUF) vs CIT (146 ITR 563 SC). However, in practice, notice under Section 148 is issued even if the assessee has filed a return because the AO may not be definitely aware of the date of filing of the returns by the assessee. In CIT vs State Agro Development Corporation ( 248 ITR 487) it was held that where a return is filed in response to notice under Section 148 and if the income is a negative figure, that is, a loss, then such loss cannot be carried forward for set-off in the future years.
The apex court, in CIT vs Sun Engineering Works (P) Ltd (198 ITR 297), held that in the reassessment proceedings, the assessee cannot re-agitate on the issues concluded in the assessment proceedings if they are unconnected with the issues dealt with in t he reassessment proceedings. The assessee cannot take advantage of the proceedings to have a complete review/revision of the concluded assessment, though the assessment made under Section 147 bestows upon the Revenue the power to complete the whole asses sment de novo.
Hence, it is clear that if a notice under Section 148 is issued, then the loss assessed consequent to the reassessment proceedings will not be eligible for carry forward and set-off. However, if the return is filed in accordance with Section 80 read wit h Section 139(3), then the assessment under Section 147 cannot deprive the assessee of the carry-forward benefits.
Recent Topics
- NRO Interest - Taxed at source and in Foreign Coun
- Clarity needed on effective date
- Income Tax Refund Deadline Shortened to Five Years
- Rectification Applications for Past GST Demands
- Where can I find a trusted provider to hire a skip
- GST Invoices Series
- FILING OF ITR AY 20-21
- CLAIMING OF U CLAIMED RCM
- Building construction works
- REGARDING GSTR-9 F.Y 2023-24
Related Threads
CAclubindia
