Income tax
dadibattini
(Querist) 16 May 2013
This query is : Resolved
Kindly help in solving the following Questions as my colleague is appearing for exam the coming Sunday i.e.20.5.2013:
Discussion provisions relating to principles underlying capital
expenditure and revenue expenditure citing decisions.
Explain in brief the provisions of Section 50 C of the Act
relating the consideration for transfer of the Property
lower than stamp duly valuation and its effect and the
remedies provided in the said Section.
Explain in brief provisions relating to bad debts in Section 36 of the
Act.
Explain in brief the concept of slump sale and the provisions
regarding computation of the capital gains.
Explain in brief -
• Under what circumstances certain transfers are regarded as void under Section 281 of the Act.
• What are the exceptions to the said provisions?
• What are the safeguards to be adopted to avoid tax liability?
Write Short Notes on any five of the following.
i. Permanent Account Number
ii. Self Assessment
iii. Best Judgment Assessment
iv. Deduction at Source and Advance Payment
v. Advance Tax
vi. Agricultural Income
vii. Income deemed to be received in previous year
viii. Income from other sources.
ix. Tax planning versus Tax Avoidance.
Answer the following with reasons:-
a. The assesse received a sum of Rs. 41.58 lakhs from
Union Bank of Switzerland (UBS) towards loss of
reputation and goodwill and claimed the same as -capital
receipt not chargeable to tax. The Assesse Officer desires
to tax the said amount as Revenue Receipt? Please
advise the Assesse.
b. In the A.Y 2003 - 04, the assesse had entered into certain
transactions in exchange - traded derivatives which
resulted in loss amounting to Rs. 28,37,7071-. The assesse
claimed the loss as business loss. The Assessing Officer
held that the loss is speculation loss covered Uls. 43 (5).
Please advise the assesse.
c. The assesse the respondent herein-filed its return for the
asst. yr. 1996-97 declaring an income of Rs. 55,20,147.
During scrutiny, inter alia it was found by the AO that the
assesse had claimed Rs. 14,26,260 as bad debts written
off consisting of twenty items. Insofar as bad debts are
concerned, the AO, called for details and Explanations.
After conducting enquiry. the AO came to the conclusion
that eleven items of bad debts. in a sum of Rs. 11,85.086
could not be written off as bad debts and that the
explanation of the assesse that it had issued computer
_generated reminders to the customers (sundry debtors) in
a standard Proforma was not convincing. Please advise
the assesse, in the light of provisions of Sec. 36(1) (vii) of
the Act.
d. Pursuant to a foreign collaboration agreement, the foreign
collaborator paid Rs. 54 Lac in DM towards share
application money for 54,000 shares. The amount so
received was deposited in Frankfurt Branch of the State
Bank of India. The assesse had also paid advance to the
foreign collaborator against supply of plant and machinery.
However, the project was subsequently abandoned and
the assesse was required to refund the share application
money received. By then, on account of appreciation in
value of foreign currency, the balance in the SBI's account
in terms of rupees had appreciated by more than Rs. 1
Crore. After obtaining RBI's permission, the assesse
repaid to its erstwhile foreign collaborator share application
money by adjusting advance paid for plant and machinery
and the balanced sum out of the balance with RBI. The
Dispute was regarding the taxability of Rs. 1 Crore which
arose on account of appreciation in value of foreign
currency. The assesse contended before AO that, such
amount was liable to be treated as Capital receipt not
liable to tax while the AO, would like to be taxed as
Revenue Receipt. Please advise the assesse.
e. During the A.Y. 1997 - 98 the assesse received Rs. 50
Lakhs from Ranbaxy as non-competition fee. The said
amount was paid by Ranbaxy under an agreement dated
31st March, 1997. The assesse was a part of the Guffic
group. The assesse had agreed to transfer its trade marks
to Ranbaxy and in consideration of such transfer the
assesse agreed that it shall not carry on directly or
indirectly the business hitherto carried on by it on the
terms and conditions appearing in the agreement. The
assesse was carrying on the business of manufacturing,
selling and distribution of pharmaceutical and medical
preparations including products mentioned in the list in
'.'schedule A to the agreement. The agreement defined the
period i.e. a period of 20 years commencing from the date
of the agreement. The agreement defined the territory as
territory of India and rest of the world. In short, the
. agreement contained p'rohibitory I restrictive covenant in
consideration of w, hich' a non competition fee of Rs. 50
lacks was received' by the assesse from Ranbaxy. The
agreement further showed that .the payment made to the
assesse was in consideration of the restrictive covenant
undertaken by the assesse for a loss of source of income.
Please advise the assesse, whether, the said
consideration received towards non - competition would
be treated as Capital Receipt or Revenue Receipt? Will it
make difference if the said consideration was received by
the assessee, after 1st April, 2003. ?
R.K Nanda
(Expert) 16 May 2013
academic query.
