Form 49AA replaces PAN Application form, Form 49A for Non Indian Citizen and entities formed outside India w.e.f 1/11/2011

Click on the link to view revised Form 49A and Form 49AA
(You will be taken to Income tax website)

Revised Form 49A
[applicable for Indian Citizens, Entities incorporated or formed in India]
http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/pdf/itr62Form49A.pdf


New Form 49AA
[applicable to Non Indian Citizens and Entities incorporated outside India]
http://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/pdf/itr62form49aa.pdf

Latest CBDT Circular: Applicability of TDS provisions on Interest accruing from Deposits made with Bank under the direction of Court in the course of Litigation

CBDT has issued Circular no.08/2011 dated 14/10/2011 clarifying position of TDS applicability in case where interest in accrued/becomes payable on Deposits made under the direction of Court under any Litigation.

Click on the following link to view Circular:
(You will be taken to National Website of Income Tax)

http://incometaxindia.gov.in/archive/BreakingNews_Tax_Delhi_10172011.pdf

TAX ACCOUNTING STANDARD (TAS) : Whats that?

CBDT PUBLISHES DISCUSSION PAPER ON TAX ACCOUNTING STANDARDS

The Central Board of Direct Taxes (CBDT) has made public the
discussion paper on accounting standards, to be known as Tax Accounting
Standards (TAS), for feedback from all concerned.

The proposed TAS, while enabling smooth transition to International
Financial Reporting Standards (IFRS), will provide certainty on accounting
issues for tax purposes as it removes alternatives and will cover all tax
accounting issues.

The TAS, applicable only to computation of taxable income under the
Income Tax Act 1961, will be different from accounting standards issued by the Institute of Chartered Accountants of India (ICAI) and notified by the Ministry of Corporate Affairs under the Companies Act 1956. However, separate books of account are not required to be maintained under TAS, thus reducing compliance burden on businesses.

A Committee of experts from the government and professionals was
constituted by the CBDT in December 2010 to suggest accounting standards for
tax purposes that could be notified under section 145 of the Income Tax Act
1961. The Committee submitted its interim report in August 2011, suggesting
the above measures. At present, section 145 provides that the method of
accounting for computation of income under the head “Profits and gains of
business or profession” and “Income from other sources” can either be the cash
or mercantile system of accounting. The Finance Act, 1995 empowered the
Central Government to notify Accounting Standards for any class of taxpayer
or for any class of income.

Click the link below to view the discussion paper:
(You will be taken to National Website of Income Tax)

                http://www.incometaxindia.gov.in/archive/DiscussionPaper_10172011.pdf

Online Service Tax return (ST-3) filing due date extended to 26.12.2011 from 25.10.2011

Sale of Depreciable asset though charged as Short Term Capital Gain but the same can be set off against any other Long Term Capital Loss- [Komac Investment & Finance (P) Ltd V/s ITO- ITAT, Mumbai]

Brief Background
-Assessee sold office premise on which depreciation was claimed every year
-Gain Rs.53,16,397/- arising therefrom charged as Short Term Capital Gain by virtue of Provisions of
  S.50(2)
-Office premise was held for more than 36 months
- Other items in the return being
    [a] Business Loss Rs.11,46,422
    [b] Unabsorbed Depreciation Rs.25,39,085/-
    [c] Brought forward Long Term Capital Loss of Rs.47,13,107
-Assessee claimed set off of all of the above against Short term Capital Gain of Rs.53,16,397/-
-Assessing Officer disallowed the claim of set off of Long Term Capital Loss against STCG above, applying provisions of S.74(1)(b)
-Assessee filed First appeal to CIT (A)
-CIT (A) confirmed the action of Assessing officer thereby disallowing  the claim of set-off
-Assessee filed 2nd Appeal to ITAT (Mumbai)

Provision of Section 74(1)(b)
74(1) Where in respect of any assessment year, the net result of the computation under the head of "Capital Gain" is a loss to the assessee, the whole loss shall, subject to other provisions of this chapter, be carried forward to the following year, and-
(a) ....................
(b) insofar as such loss relates to a long term capital asset, it shall be set off against, income, if any, under the head "Capital Gain" assessable for that assessment year in respect of ANY OTHER CAPITAL ASSET NOT BEING SHORT TERM CAPITAL ASSET.''

Case law referred: ACE Builders (P) Ltd of Jurisdictional Bombay High Court

Held by ITAT as under:

11. We find the Hon'ble Bombay High Court in the case of ACE Builders (P.) Ltd. (supra) at pages 219 and 220 has held as under :

"It is true that section 50 is enacted with the object of denying multiple benefits to the owners of depreciable assets. However, that restriction is limited to the computation of capital gains and not to the exemption provisions. In other words, where the long-term capital asset has availed of depreciation, then the capital gain has to be computed in the manner prescribed under section 50 and the capital gains tax will be charged as if such capital gain has arisen out of a short-term capital asset but if such capital gain is invested in the manner prescribed in section 54E, then the capital gain shall not be charged under section 45 of the Income-tax Act. To put it simply, the benefit of section 54E will be available to the assessee irrespective of the fact that the computation of capital gains is done either under sections 48 and 49 or under section 50. The contention of the Revenue that by amendment to section 50 the long-term capital asset has been converted into a short-term capital asset is also without any merit. As stated hereinabove, the legal fiction created by the statute is to deem the capital gain as short-term capital gain and not to deem the asset as short-term capital asset. Therefore, it cannot be said that section 50 converts a long-term capital asset into a short-term capital asset."

12. From the above it is clear that although the gain is short term capital gain due to the fiction created by provisions of section 50(2), the asset remained as "long term capital asset". Therefore, in view of the ratio laid down by the Jurisdictional High Court, the brought forward long term capital loss can be set off against the capital gain on account of transfer of the depreciable asset which has been held by the assessee for more than 36 months thereby making the asset a long term capital asset . In this view of the matter, we hold that under section 74(1)(b) the assessee is entitled to the claim of set off of long term capital loss against the income arising from the sale of office premises, the gain of which is short term due to the deeming provision but the asset is long term. The ground raised by the assessee is accordingly allowed.

13. In the result, the appeal filed by the assessee is allowed in favor of Assessee.

                                                             

S.50C has no implication on Calculation of depreciation- Mumbai High Court in CIT V/s Cable Corporation of India Ltd [2011, 336 ITR 56]

Brief facts of the case:
Flat sold for Rs.9,00,000
Stamp duty value Rs.66,44,902
Ld. AO reduced stamp value from block of asset to compute depreciation on WDV of the block
CIT (A) allowed the appeal in favor of assessee

High court held as follows:

When an asset is sold, section 43(6)(c)(i)(B) of the Act provides that the written down value of the block of assets shall be reduced by “moneys payable” in respect of the asset that is sold. The expression “moneys payable” as per Explanation 4 to section 43(6) shall have the meaning as in the Explanation below sub-section (4) of section 41.

7. As per Explanation below section 41(4) the expression “moneys payable” in relation to the sale of a building, machinery, plant or furniture would be the price for which it is sold and not the fair market value of the asset. Therefore, on a plain reading of the above provisions, it is clear that the written down value of all the assets falling within that block of assets at the beginning of the previous year has to be adjusted by the amount at which the asset is actually sold and not by the fair market value of the asset that is sold.

8. As rightly observed by the Income-tax Appellate Tribunal, the Legislature in section 43(6)(c)(i)(B) has used a different connotation in respect of sale of assets and sale of scrap. As per that section on sale of an asset, the written down value of the block of assets is to be reduced by the amount at which the asset is actually sold, whereas, in the case of sale of scrap, the value of the scrap, meaning thereby, the fair market value of the scrap and not the price at which the scrap is sold should be reduced from the written down value of the block of assets.

9. In our opinion, the interpretation adopted by the Income-tax Appellate Tribunal is in accordance with law and no fault can be found with the decision of the Tribunal. In the result, the question of law raised in this appeal is answered in the affirmative i.e. in favour of the assessee and against the Revenue.