Reserve Bank of India Bulletin - December 2012

News Updates- December-12, 2012  Reserve Bank of India Bulletin - December 2012 RBI allows issuance of rupee denominated co-branded pre-paid cards   Alteration in the name of "Oman International Bank S.A.O.G" to "HSBC Bank Oman .A.O.G" in the Second Schedule to the Reserve Bank of India Act, 1934 . Huge Opportunity to Increase in Investments from Australia in India

India-Australia bilateral partnership which was raised to the level of strategic partnership in 2009 has led to a rapid expansion in trade and investment ties between two countries, strengthening of our common interest in a stable and outward looking India-Pacific region, a growing collaboration in multilateral and regional forums and fast growing people to people ties. Case studies-Income tax

1. DIT v. OHM LTD. [2012] A tax-resident of the UK, was awarded contracts for procuring, processing and interpretation of data in respect of an offshore exploration block in India. It applied for a lower tax deduction certificate under Section 197. However, the concerned authority directed the assessee to receive payments after effecting tax deduction at the rate of 10% in respect of such revenue. The assessee approached the AAR pleading that its services clearly fell within the ambit of section 44BB. The AAR accepted the assessee’s claim. The revenue, filed the t writ petition contending the validity of the AAR's ruling. The writ filed by the revenue contending the decision of the AAR was dismissed

2. ADIT v. CREDIT LYONNAIS [2012] (Mumbai - Trib.) The Disallowance under section 37 (2) cannot be imported in section 37 (1) after omission of section 37 (2) The assessee claimed certain amount towards entertainment expenses. During assessment, the AO noticed that no disallowance in this respect was made by the assessee suo moto in its computation of income. The AO opined that the omission of provisions of section 37 (2) should not mean that no disallowance could be made for the expenses otherwise covered under such sections. In his opinion, such disallowances hitherto included in section 37 (2) would henceforth be covered under section 37 (1). Accordingly, he made the addition to the entertainment expenses. It was held that disallowance in respect of entertainment expenses couldn't be made from AY 1998-99. Consequently, the addition made by AO was deleted

3. M.P. RAJYA OPEN SCHOOL v. DCIT [2012] (Indore - Trib.) The assessee earned huge abnormal profit which was in excess of limits prescribed under Rule 2BC, exemption was also not available under section 10 (23C) (iiiad) The assessee was a registered society formed by Govt. of Madhya Pradesh for promotion and development of open school system in the State. It had claimed exemption under section 10(23C)(iiiab). During assessment proceedings, the AO opined that the assessee was systematically generating profits, thus, it couldn't be regarded as existing for the benefit of the public at large. Accordingly, the exemption was denied by AO for impugned assessment years.

It was held that there was no infirmity in the conclusion drawn by the lower authorities to deny section 10 (23C) exemption.

4. AKZO NOBEL COATINGS INDIA (P.) LTD. v. DCIT [2012](Bangalore - Trib.) Where an assessee purchases an asset by taking a loan from a related concern and claims depreciation thereupon and were subsequently such loan was waived and assessee treats such waiver as capital receipt not chargeable to tax and continues to claim depreciation on such asset, revenue cannot do anything to deny claims of depreciation as the law has a lacuna in that regard The assessee purchased a depreciable asset for which it took a loan of the same amount from a group company. Subsequently, parent company waived off the loan, which was shown as capital receipt by the assessee in its financial statements, without adjusting the book value of such asset. During assessment, the AO reduced the WDV of the asset to the extent of waived off the loan and disallowed the claim for a differential depreciation amount pertaining to the period when such loan was waived off and for the subsequent years. It was held that under law revenue had no remedy and, therefore, disallowance of depreciation could not be sustained.

5. SHIV KUMAR AGARWAL v. DCIT [2012] (Agra - Trib.) The gold received by the assessee on redemption of gold bond certificates issued under the Gold Deposit Scheme, 1999, is a new asset and, therefore, income arising from the sale of said gold within twelve months of its acquisition was to be taxed as short-term capital gain The assessee deposited certain quantity of gold on 27-11-1999 in Gold Deposit Scheme, 1999 ("the scheme"). Thereafter, he redeemed the certificate of gold on 22-11-2006 to obtain the physical gold, which was finally sold on 7-11-2007. Assessee treated the income arising out of the said sale as short-term capital gains. However, the AO opined that the date of acquisition of gold was 27-11-1999 and he, accordingly, computed the long-term capital gains. Further, the CIT (A) upheld the order of the AO. The orders of the authorities were set aside and it was directed that the cost and the date of acquisition of the gold for the purpose of computing the capital gains be taken as the date on which the gold had been received by the assessee on redemption of the gold bonds, i.e., 22-11-2006.