Direct Tax Ca Final Case Study

Topics: Capital asset, Court, Tax Pages: 26 (8965 words) Published: May 23, 2012
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CA. Bikash Bogi.


2012 CA FINAL MAY 2012


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CA. Bikash Bogi.

Source / Journals Referred:
≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ Income tax Review: Monthly journal of The Chamber of Tax Consultants. BCAJ (Bombay Chartered Accountant Society) Monthly journal Tax India Online. Taxman : The tax law weekly SOT : Selected Orders of ITAT ITD : Income Tax tribunal decisions. DTR : Direct Tax Reporter. ITR : Income Tax Reports. CTR Encyclopedia of Income Tax Law.

All the case decisions compiled below are selected on the basis of their practical applications in periods 201 the Income Tax proceedings. These cases are pronounced between the periods Nov 2010 to NOV 2011 specifically applicable for CA FINAL May 2012 term. 2012 Section 2(22)(e) : A partnership firm is a shareholder for applicability of section 2(22)(e), even though shares held in names of individual partners : [CIT vs. M/s National Travel Services (Delhi HC)(Very Important)]

The assessee was a partnership firm consisting of three partners being Naresh Goyal, Surinder Goyal and Jet Enterprises Pvt. Ltd. The assessee was the “beneficial owner” of 48.18% of the share capital of Jet Air Pvt. Ltd which were held in the name of its partners Naresh Goyal and Surinder Goyal. The assessee took a loan of Rs. 28.52 crores from Jet Air Pvt Ltd. The AO held that the said loan was assessable as “deemed dividend” u/s 2(22)(e) in the hands of the assessee which was reversed by the Tribunal, but High court had decided the same in favour of the department by giving the said principle: The first limb of s. 2(22)(e) is attracted if the payment is made by a company by way of advance or loan “to a shareholder, being a person who is the beneficial owner of shares”. While it is correct that the person to whom the payment is made should not only be a registered shareholder but a beneficial share holder, the argument that a firm cannot be treated as a “shareholder” only because the shares are held in the names of its partners is not acceptable. If this contention is accepted, in no case a partnership firm can come within the mischief of s. 2 (22)(e) because the shares would always be held in the names of the partners and never in the name of the firm. This would frustrate the object of s. 2(22)(e) and lead to absurd results. Accordingly, for s. 2(22)(e), a firm has to be treated as the “shareholder” even though it is not the “registered shareholder”.

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Section 4 : Non Compete fees Constitutes Revenue receipts : Tata Coffee Ltd. (Kar.) Non–compete fee received by assessee for refraining from manufacturing and selling timepieces for a period of ten years after the sale of one unit while it was continuing with its other business activities constituted revenue receipt.

Section 4: Compensation received on Breach of contract is capital receipt : S Zoraster & Co. (Rajasthan) The assessee firm entered into an agreement for sale of a cinema building along with land. The agreement failed and as per terms of agreement the firm became entitled to compensation. It was held that compensation amount received on breach of contract was a capital receipt.

Section 4: Compensation received on premature termination of JV agreement : [ION Exchange (India) Ltd. (Mum ITAT) Consideration received for premature termination of the joint venture agreement is a revenue receipt.

Section 4 / section 28: Compensation for Infringement of copyright is Business Income : [Eastern Book Company (Allahabad)] Amount received as compensation for infringement of copy right assessable as business income.

Section 10(23C) : Coaching Activity by ICAI is not falling under the...
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