In absence of an agreement, transfer of land by assessee to his AOP won’t be deemed as transfer

RAJESH KUMAR AGARWAL V. ITO (Uttarakhand)

Where assessee contended that he formed an AOP and transferred a land to it, but no agreement between assessee and AOP was found, transaction would not amount to transfer

In the instant case, the assessee had an agricultural land which was declared as industrial estate. He and other landowners within that industrial estate formed an AOP and transferred this land to it. The CIT (A) held that the land stood transferred in terms of section 2(47) to AOP. He, therefore, directed the AO to assess capital gain on each member of the AOP on account of transfer of capital asset. On appeal, the Tribunal refused to interfere. Aggrieved assessee filed the instant appeal.

The High Court held in favour of assessee as under:

• For the purpose of income tax, a capital asset may be transferred to an AOP as is provided in section 2(47);
• However, when the capital asset is an immovable property by reason of the provisions contained in the Transfer of Property Act, read with the Registration Act, transfer of an immovable property of the nature dealt with herein requires an instrument which is also required to be registered;
• Thus, transfer will take effect in a situation as provided in section 53A of the Transfer of Property Act, namely, when there is an agreement to transfer and, in part performance thereof, the transferee is in possession of the immovable property agreed to be transferred;
• In the instant case, there was no conveyance by the appellant in favour of AOP, nor there any agreement between them and AOP also didn’t contend that in pursuance of that agreement and in part performance thereof, it was in possession of the property in question. Therefore, the impugned transaction wouldn’t be deemed as transfer.

Identity Theft

Obtaining a person's personal and financial information through criminal means. A thief uses this information for illegal purposes, such as to make purchases using the victim's name. Thieves can find information through discarded credit card or bank statements that are not destroyed, and can find the information online in customer databases.

Payment of one time lease premium to acquire a leashold land isn’t subject to tax deduction under sec. 194-I

ITO v. Indian Newspapers Society (Delhi - Trib.)

Where payment of lease premium was not made on periodical basis but it was one-time payment to acquire land with right to construct a commercial complex thereon, section 194-I had no application on deposit of such lease premium

In the instant case the Mumbai Development Authority offered certain land on lease to assessee for a period of 80 years for certain consideration comprising of lease premium. The assessee paid said premium in two installments. The AO held that the assessee was liable to deduct tax at source on lease premium under section 194-I. The CIT (A) held in favour of assessee. Aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

• In Durga Das Khanna v. CIT (1969) 72 ITR 796 (SC), the Supreme Court held that the onus was on the Revenue to demonstrate that premium has been camouflaged as advance rent and the AO, in the instant case has not brought on record any material to indicate that the rent has been suppressed and the premium has been inflated.
• Thus, undoubtedly premium in relation to leased land was on capital account not liable to be classified as revenue outgoing;
• Since the payment of lease premium was not to be made on periodical basis but it was one- time payment to acquire land with right to construct a commercial complex thereon, section 194-I was not applicable
• Therefore, the impugned sum does not constitute advance rent, but it was to be classified as capital expenditure not falling within the operative realm of section 194-I.

Fiscal Policy

Decisions by the President and Congress, usually relating to taxation and government spending, with the goals of full employment, price stability, and economic growth. By changing tax laws, the government can effectively modify the amount of disposable income available to its taxpayers. For example, if taxes were to increase, consumers would have less disposable income and in turn would have less money to spend on goods and services. This difference in disposable income would go to the government instead of going to consumers, who would pass the money onto companies. Or, the government could choose to increase government spending by directly purchasing goods and services from private companies. This would increase the flow of money through the economy and would eventually increase the disposable income available to consumers. Unfortunately, this process takes time, as the money needs to wind its way through the economy, creating a significant lag between the implementation of fiscal policy and its effect on the economy.

No tax on Fees for Technical Services if service utilized for business carried abroad; upgradation of existing website is revenue expense

MAHINDRA HOLIDAYS & RESORTS INDIA LTD. V. JCIT (LTU) (Chennai - Trib.)

In the instant case, two moot questions were raised before the ITAT which were as under:

A. Liability of tax deduction on overseas commission

B. Whether website development charges were deductible as revenue expenditure?

On first issue, it held in favour of assessee as under:

1. Commission paid to non-residents for services rendered outside India does not accrue or arise in India; 
2. Hence, no TDS was deductible from such commission and such commission couldn’t be disallowed under section 40(a)(i); 
3. Even if services rendered by the non-resident did fall within the definition of "fees for technical services, the commission paid would not be taxable in India as clause(b) of section 9(1)(vii) would save the assessee.

On second issue, it held in favour of assessee as under:

1. Expenses incurred for upgradation of an existing website ought to be distinguished from expenses for development of a new website; 
2. The former was revenue expenditure and the latter was capital expenditure, resulting in creation of an intangible asset; 
3. Expenditure on upgradation of existing website was equivalent to maintenance of an existing asset. Thus, it was revenue expenditure.

Liquidity

The ability of an asset to be converted into cash quickly and without any price discount.

Hollow rooms with basic amenities can’t be said to be an habitable house; not eligible for sec. 54F relief

SMT. USHARANI KALIDINDI V. ITO (Hyderabad - Trib.)

Where house constructed by assessee was not found to be habitable, deduction under section 54F could not be allowed

In the instant case the assessee claimed deduction under section 54F on ground that she had purchased a house. When the AO carried enquiry, he found that there was no construction as mentioned in the sale deed. Instead, there was a small construction consisting of two rooms made of hollow bricks. Accordingly, the claim of deduction was disallowed by AO. Further, the CIT (A) upheld the order of the AO. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

• The assessee had not placed necessary evidence in support of his claim to show that the said construction was in habitable condition. A construction in inhabitable position couldn’t be equated with a residential house; 
• If a person cannot live in premises, then such premises cannot be considered as a residential house. Investment in the construction would be complete as a house only when such house becomes habitable; 
• The evidence brought on record by the AO clearly shows that the property purchased by the assessee would not fall within the description of residential house. Thus, the claim of the assessee couldn’t be allowed under section 54F. 

LIBOR

London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans. This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day.

Quantitative Easing

A process of increasing the money supply, typically only seen when interest rates have already been reduced to zero and when the government is still trying to stop a credit crunch situation. The first notable usage of quantitative easing was by the Bank of Japan in the early 2000s, and similar tactics were used again in 2008 by the Federal Reserve to deal with the United States credit crisis.

Share issue exp. remains a capital expenditure even if SEBI disapproves of issue of shares; no sec. 37(1) allowance

MASCON TECHNICAL SERVICES LTD. V. CIT (Madras High Court)

Share issue expenses cannot be allowed as revenue expenditure even when shares could not be issued due to non-approval by SEBI

In the instant case the assessee incurred expenditure for issuing shares. However, on account of non-clearance from the SEBI, shares could not be issued. It claimed deduction for share issue expenses as revenue expenditure by contending that since the expenditure did not yield any desired result, the character of the expenditure had to be decided on the basis of the result that would yield benefit in assessee's business. The Assessing Officer and the CIT (A) disallowed such expenses. The Tribunal also affirmed the view of the Assessing Officer. Aggrieved assessee filed the instant appeal.

The High Court held in favour of revenue as under:

• The impugned expenses were incurred by the assessee for the purpose of widening its capital base. The assessee, admittedly, took steps to go in for public issue and after incurring expenditure, just before the public issue, by reason of the orders from the SEBI, the assessee could not go in for public issue. Thus, the efforts were aborted; 
• There was no justifiable ground to accept the plea of the assessee that on account of the abortive efforts, the expenditure incurred would lose its character as capital expenditure for the purpose of allowing it as a revenue expenditure.