572915 57700 Direct Tax Short Notes for CA Final Student

8/10/2019 572915 57700 Direct Tax Short Notes for CA Final Student

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SEC. ABOUT REQUIREMENT TIME LIMIT FOR ISSUE TIME LIMIT FOR SERVE OTHER NOTES

142(1)(i) Assesseenot file ROItill due datet then he NO TIME LIMIT NO TIME LIMIT 1. If not compliancethen 144,not required notice 144

requiredto furnish ROI within time limit in notice 2. Return filed u/s 142(1)(i) may revisedbutloss can not

carried forward

142(1)(ii) For making assessmentA.O. can requirefurnish whether return filed or not Require the said itemnot more 1. If ask statement of A&Lwhich not include in a/c

a/c,documents,information,statement of A&L then 3 yearsprior to p/y then J.C. approval required

2. Alone by 142(1)(ii)assessementisnot possible

142(2A) Special Audit :-complexitiesin the Accounts 1. No appealagainst 142(2A) 1. Case should pending in a assessement/reassessement

and having interest of revenue 2. if not show cause to assessee or he proves that no

coplexities but A.O. direct for S.A. then assessee can file 2. Approval of CC or Commissionerwrit in H.C. against direction of S.A. then H.C. shall quash 3. C.A. and fees will apoint by CC/C

imp Note -in 147 no evidence that income is escaped but a.o. want to give direction for special audit - No 142(2A) possible because intt 4. Total time limit is max. 180 days(after extention)

of revenue is not from the date on which direction received by assessee

Note -A.Owill givean opportunity of being heard (execept where 144 is made) ifany materialgathered on the basis of 142(2A) on requestof assesseeorby sue- moto by A.O.but

is proposed to be utilisedfor the purposes of assessment not on request ofC.A.

6. If delayin audit/a. reportbyC.A. firmthen no 144

7. Assessee will furnished report to A.O. rather C.A.

142A Valuation for u/s 69/69a/69b and also 56(2) 1. Not appeal against valuation report but appeal

can move against A.O. order

143(1) 1. Intimation will sand only if- REFUND,TAX and Nointimationof 143(1) can be sandafterend of one year 1. If no intimation in point 1. then no demand payable

INTT. DUES, LOSS ADJUSTED or REDUCED or INCREASE from F/Y in which ROI is filed 2. Assesseeshall be deemed in defaultwithout

2. In any other case no requirement of intimation sanding demand notice 156 -and ack. Will be treated as deemed intimation - in case of inti 143(1) - 30 days from receving

- in case of deemed inti 143(1) - next day

3. Only 154 possible within time limit

4.No inti sand after 143(2), tax will recover in 143(3)

143(2) Requiringthe assessee either to attendanceor No noticeshall be servedafter the expiry of6 months 1. If ROI filed in 139(1),142(1)(i)

produce Books,evidences from the end of F/Yin which ROI filed 2. Subsequent notice will valid if 1st valid

note:- in case of revised return the 6 months from end of 3. Without 143(2), 143(3) will invalid

f/y in which ROI filed


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143(3) To ensurethat not understated income,excessive Ordershall bepassed (signed)within 2 yearsfrom the end of 1. A.O can not reduce income, increase lossbelow ROI

loss, underpaid tax in any manner the relevent A/Y 2. Point 9 on page 34 in book is imp.

3. Reason to believe not required

144 If any person fails 1. No time limitto issue noticefor 144 1. Can not reduce income or increase loss below ROI

i).139(1),139(4) up to date of issue SCN 2. Time limit for assessment same as 143(3) 2. A.O.can not takean arbitary manner or adhoc

ii).Comply with all terms of 1421(i),1421(ii) 3. if reply of SCN u/s 144is satisfactoryfornon-filing ROIthen 144 basis formaking assessment

142(2A),143(2) procedingsshall droped 3. Assessementmust be based on the collected

materialsfrom last ROI,growth rate, on scientific basis

4. A.O.must specifythe basis of compute the income

in assessement order

5. 144 is Best judgment and Ex-party assessement

144A Direction of J.C. - - imp 1. Directionshall be bindingon A.O.

1. If caseis pendingin assessment/reassessm 2. No directions prejudicial before being heard

2. by own motionof J.Cor on request of A.O / Assessee imp 3. No appealpossible against direction

148 If Reason to believefor escap income- then 1.Notice 148 shall be issuein time Serve may after but necessary 1. If any matters has gone in revision/appeal then

Requireto furnish ROIwithin time limit in notice in 149(1),151- refer to Book that matter can not be re-opened in 147

note:- i) if assesseefile ROIin 148 then A.O.make 147 in 2.Exception of Time Limit u/s 149(1)of issue notice 148- 2. Recording of reasons of doing so is requir

manner of 143(3) i) first proviso- 148can not issuedafter expiry of 4 yearsif all 3.Reason to believe is -S.C. judgement,Retro,

note:- i)if assessee do notfile ROI in 148 then A.O. following conditionsare satisfied- Evidence in possession, mistake apparent,CAG

make 147in manner of 144 -earliar assessement u/s 143(3),147 completed and 4. Separate noticefor Separate A/Y

-assessee has field ROI in any sec. of income tax and 5. Return file in 148 can not reviesed

-assessee has disclosed fully and truly all material fact necessary for 6. On demand on assesseeA.O. is duty boundto

assessment supply reasons,after filing ROIothewise he can not

ii)Assetlocated outside India -up to 16 years further processediii)Noticeissue to N.R-upto 6 years 7. If reason recorded is invalid then assessee can file writ

iv)No Time Limitin these cases - in H.C. ,H.C. can quash the issued notice 148

-in order to give effectin order of S.C.or Any other Law-to All Assessee

- in order to give effectin order of H.C. -Only to Juridictional Assessee

- in order to give effectin order of H.C. -Only to Juridictional Assessee

- in order to give effectin order of 250,254,263,264 - this is possible only two cases -

- any incomeisexcludedfrom the toral income ofthe assesseefor an A/Y andinclude in another A/Y for that assessee

- any incomeisexcludedfrom the toral income ofthe one personandinclude in another person

3. Retro spective amendments refer to book pg. 58


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147 Note-when return filed in 148 then A.O. should serve No order of 147may pass after the expiry of 1 yearfrom Sec. 152,Sun Engineering refer to book

a notice u/s 143(2) for books,evidence and personal the end of F/Yin which 148 has been served Note- For 143(3),144,147,153(2A) time increase

attendance of assesseewithin 6 monthsfrom the end of Note- The assessmentcan be saidto be completewhen Incomeis by 1 year in T.P.

the F/Yin which return filed u/s 148 other wise 147 will determinedandtax is levied Note-in 147income can not be reducedbelow the income

invalid even all compliances of 147 is fullfilled origionaly assessed

Note- if A.O. do 147 in the form of 144 he shall issue 142(1)(ii) for books etc. note: 147 is in the benefit of Revenue

Note:- In 147 A.O. may assess the income of any issue whether such issue comes to his notice subsequently

Note:- i) where a person is found to have any asset, located outside India or

ii) where the assessee has failed to furnish a report of T.P. in respect of any international transaction which was required u/s 92E

and both of these are not declared in books of assessee then deemed that income is escaped assessment. Then A.O. shall be empowered to issue notice u/s 148 to make

assessment/ re-assement and time limit for this purpose shall be..

153(2A) Time limit where assessment is cancelled/set-aside and order to A.O to make fressh assessment

Time limitfor completion is 1 yearfrom the end of P/Y in which order 263,264 passed by CITOR order 254 received by CIT

Note- it is possibleonly in 254,263,264.because H.C.,S.C. decide only case law while cancelled is the metter of fact 1. This overruled sec. 153(1),153(2)

2.A.O.shall completethe fress assessmentin same sec.

imp 3. No requiredto givenew notice 143(2),144,148

imp 4. A.O. can call for documents by notice in plain paper

150 Only these are cases where no time limit for issue 148

See sec 148 point (iv)

Note:- in case of a firm, an assessment is made on the partner of the firm in consequence of 147 on the firm then there is no time limit

153(3) Only these are cases where no time limit for completion of assessment 147

See sec 148 point (iv)Note:- in case of a firm, an assessment is made on the partner of the firm in consequence of 147 on the firm then there is no time limit

note:- see explation 1 on pg. 68

154 Mistake Apparent from record 1. 154 ordershall be passedtill 4 years from the end of the F/Y 1. Whose order there is mistake,will rectify in 154

in which order/Intimatsought to be amended was passed imp 2. 154 is possibleon the basis ofS.C./Retro judgement

imp 2. If assessee make applicationwithin prescribed timeno time limitfor but time will 4 years

passing order if 154if is beneficial to assessee 3. Own motion by I.T. authority or Mistake bought notice

3. Application can be moved same period as above said in p.no. 1&2 by assessee or Mistake bought notice by A.O. to CIT(A)

4. ROI filing date will be the date of deemed intimation imp 4. 154order shall passwithin 6 monthsfrom the end of

the month in whichthe applicationis received by A.O.

"NOTE:- FRESH/RE-ASSESSMENT OR ANY TIME LIMIT IS NOT APPLICAPLE IF ASSESSMENT IS AFIRM,DELETE,VOID BY HIGHER AUTHORITY" because the assessment shall end(not finished)

H.C or S.C. order to make fresh assessment then no any time limit but other thing will same as sec.153(2A).it will happen when all impact of assessem is being change due todecide case law


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Note: point 10 case law imp. See book pg. 77 but time limit of 6 month will not apply if 4 years expired

Note : If the amendment has the effect enhancing the tax

liability, reducing the refund then 154 is not possible without SCN

Prorective Assessment/ Alternative Assessment The authoritiesa are merely making an assessment and leaving it 1. while protective assessment is permissible but

as apaper assessment until the matter is decided a protective order for recovery is not permissible

158A Repetitive Appeals See Book pg no. 79

133 Power to callfor Information/Requisition by A.O / CIT(A) 1. Department ask info through letter and assessee

is also required to furnish info. through a letter

imp 2. Reason to believeis not required

3. See pg. 123 133(6) imp.

133A Power to Survey 1. I.T.Authority may enter only at which Business/profession is carried and other place where relevant things is kept

1. To detecttax evesionso reason to believe is not required 2. Only during the hoursat such place is open for conductof business and in other place,only after sunrise before sunset

3. whether proceedings are panding or not

Note : Inspector,ITO,AC/DCshall take prior approvalof JCfor survey

Powerof an I.T.Authority -

i)place marks on the books,documents,take copies

iii)counting of cash,stock or valuable article but can not impound

iv)record statement of any person which may usefull for proceedings

note: if any person refuses or evades to do so as above then 131(1) shall apply

Note : A.O and inspectorenter territory and extra territoryand other authorized place where business/profession carried on

133B Power to Collect Information 1. A.O and inspectorenter territory and extra

territorywhere business/profession carried on

2. Onlyduring business hours

3. No itemcan be impound

131(1) Power to Summon 1. Proceedings pandingnotrequired

I.T.Authority & DRPhave power as civil court-

i)discovery and inspection- i.e. he can go at the site

ii)enforcing the attendance of any person and examining him on oath (receiver can not sand others on his behalf)

iii)compelling the production of books,documents

iv)issuing commissions i.e. appoint some one to give report on certain matter

ii)impound and retain in his custody books and other documents inspected by him- after recording his reasons for so doing but not more than 10 day(excl Holiday) if more approval of CC or DG


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Note-Impound and retain in his custody books and other documentsbefore it- after recording reasons for so doingbut not more than 15 day(excl Holiday) if moreapproval of CC or DG,CIT,D

Note- For making an inquiry or investigation in respect of any person in relation to an agreement referred to in sec. 90 or 90A for any I.T.Auth. Not below A.C. to exercise the powers of 131(1 )

132 Search and Seizure Conduct by authorized A.O. 1. Every placeshall have to requiredseparate warrant

Note : Searchcan be take place at any timeand at any placeeven in mid night at businesh place or resindential place 2. Searchmay be authorized byJurid CCIT,DG,CIT,D

Note- Such authorisationcould take placeifthe authority(in 1&2) on the basis of infor.in his possession , has reasons to believe that- 3. However search can be authorized by Jurid AD,

Note :- Power at the time of Raid - see book pg. 130,132 AC,JD,JC only if he is empowered by CBDT to do so

Deemed/Constructive Seiqure: See book on pag.130 4.Assessee can never demand reasons of c onducting raid

5. Can notseize any type SIT

Reason to Search - authority who will authorise have reason to believe that-

i)a person whom 131 or 142(1)has been issued, has been faild to comply this

ii)a person is in possisson of any article or any things, mony etc.which is concealed

Order of Restraint: See book on pag.131, note- such ordershall not be in forcefora periodexceeding 60 days from the date of the order in any case

imp Note : Authorised officershallnotretained seized books,other documents for a period exceeding 30daysfrom date of the order of assessment u/s 153A unlessthe reasons for retaining are

recorded by him in writing and approval of CCIT,CITfor such retention is obtainedbutfurther it is noted that CCIT,CIT shall not authorise the retentionfor a period exceeding 30 daysafter all

proceedings are completed(i.e. proceedings of penalties etc.)

Note :Wherethe authorised officerhas no jurisdictionover the person searched by him, the books or other documents,all other valuable articleshall be handed overto A.O.

having jurisdictionover such person within 60 daysfrom the date on which search was completed

note:- imp. On pg. 131 point 4,5

153A Assessment in case of Search

1. A.O shall issue notice to such person requirinig him to furnish ROI for 6 A/Yfalling withiin six A/Ys immediately preceding the P/Y in which search was started, whether

assessee has been filed ROI in any sec.or any proceedings are pending in any sec or there is no escape income in any year or income is blow max limit not chargable to tax

2. In relevant a/y in which search was startedit is required to make 143(3)/147

3. Only one notice is requiredfor point 1 and butseprate-2 order shall passfor point no. 2

imp 4. There is no time limit for sanding notice in point no. 1 & 25. The time limit of completion of 153A,143(3)/144will 2 years(excl. stay period)form the end of the F/Yin which search was completed

imp 6. If assessement/reassessment of any specified years in u/s 143(1),144,147 are pending on the date of initiation of search u/s 132,then such pending assessment/reassess

shall abate.and the assessment/reassessment shall be made in u/s 153A on ly

imp 7. The appeal/revision/154proceedings pendingon the date of initiation of search then, such proceedingshall not abatebut shall continue

8. All other provisions of I .T.Act shall apply to assessment/reasses made u/s 153A ex. Penalties for concealment ,non-filing of ROI,interest u/s 234A,B,C, prosecution,appeal

imp 9. No order of assessment/reassshall be passed by an A.O. below the rank of J.C. in respect of each 6 years and p/y exceptwith the prior approval of the J.C.

10. A.O. can direct to assess for audit u/s 142(2A)

153C Assessment of other person


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Where the A.O of the person on whom sec 153A is applicablesatisfy thatall seized itemsare blong to other porsonthen said A.Oshall do hand oversuch items to respective

A.Owho have juridiction on such other person and that A.O.shall assess/reassessincome of such other person as same in sec. 153Aandthe date of search shall be deemed tha date will same

-Time limit for completion of search -:same as in point 5 of sec. 153A or 1 year from the end of F/Y in which seized books or other asset are handed over to respective A.O (which ever is later)

153A(2) If order of assessment/reassement of 153A has been annulled by higher authority(in appeal,writ) then the assessement/reassm relating to any A/Y which was abated shall

stand revived from the date of receipt of such annulment order by the CIT and further suvh revival shall cease to have effect,if such order of annulment is set aside

And in above case the time limit of completion revived asssessment/reassessment of 143(3),144,147 will be as - whichever is later

- within 1 year from the end of the month of such revival or

- time limits given u/s 153(1)

- 21 months from the end of the F/Y in which search was completed

And the time limit of completion revived asssessment/reassessment of 153(A) shall be increased by the following time period as-

imp - the period commencing from the date of annulment of proceedings u/s 153A till the date of order setting aside the order of such annulment by the CIT

132A Powers to requisition books of accounts,etc.

Where the DG.D,CCIT,CIT, in consequence of information in his possession, has reason to believe that - see book pg. no. 133

then the said authority may authorise any A.O. (called requisitioning officer) to require to take delivery such books,other documents of assesst after it when the other

law authority if of the opinion that i t is no longer necessary to retaiin the same in his or its custody then that shall be delivered to reuisition officier

at last when requisition officer will received above items then sec 132,132B shall apply

132B Application of seized or requisitioned Assets

the seized u/s 132,132A may be dealt with the following manner-

i) - the amount of existing liability(demand raised till the date of raid) under the I.T.ACT,W.T.ACT,G.T.ACT

- the amount of liability determined on completion of assessment/reasse u/s 153A,current year 143(3)/144

- Assessee in default amount

provided that where the person concerned makes an appplication to the A.O. within 30 days from the end of the month in which the asset was seized and for release of

asset and the nature and source of acquisitionof any such assest is explained to the satisfaction of the A.O. then that A.O. shall release said asset after recover the exiting

liability with prior approval of CCIT,CIT,withen period of 120 days from the date on which search was completed or assets/books were delivered to the requisitioning officer

ii) see book pg. 134

iii) see book pg. 134

Point 2,3,4 also book pg 134,135

amend Sec.-: The processing of a return shall not be necessary, where a notice of 143(2) has been issued to the assessee even iin case of refund is due on the basis of ROI

amend No exemptionwould be availableto a trust or institutuionfor tha p/yin which the receipts from commercial/trading activities exceed Rs. 25 Lacs . Whether

or not approval granted to such trust or institution has been cancelled. And also iin sec 143(3) in such a circumstances no effect shall be given by A.O., of

exemption in that p/y. these rule shall see in seprate-2 year


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The Loss of PGBP and C.G. cannot C/F if ROI is not furnished within time

Condone of Delayinfiling of ROI having a claim of C/F

-If the returned oss is upto Rs. 10000 -- CIT

-If the returnedloss exceeds 10000 but upto Rs. 100000 --- CCIT

-If the returned loss exceeds 100000 --- CBDT

ROI can be filed/revised up to the date of 139(1),139(4),139(5) or the date of completion of assessment- which ever is earlier

imp When A.O. is doing 143(3) and A.O. required any iniformation to assessee u/s 143(2) and assessee does not give reply then A.O. shall do 144 and issue

SCN u/s 144 if after assessee give repl of SCN u/s 144 satisfactory then A.O. shall drop 144 and should complete 143(3)

ConsequencesofNon-compliance of142(1)(i), 142(1)(ii), 143(2), 142(2A)

-It may result 144 or

-Penalty of Rs. 10000 for each failure

-Prosection - imprisonment upto 1 year

sec. 152

If case is not panding any where then any judgement of S.C. or Juridictional H.C. is come out in any other assessee cases then assessee can go for 154 or 264 within time liimit if not expired

imp. on pg. 136


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S SEC. ABOUT REQUIREMENT OTHER NOTES

1 55 Cost of acquisition of Intengible asset FMV on 01/01/1981 option is not available because it is no possible to find out

If acquired - the amount of purchase

In any other case - nil

Note - there are some self generated asset where C.G. shall chargable to tax otherwise no tax see pg 21

2 55 Cost of Improvement

Goodwill of business,Right to manuf,produ,process,right to carry on business - NIL

Any other assets - all capital expenditure on/after 01/04/1981 even in the case of Previous owner

3 Indexation is not availavle on debentures and bonds (except capital index bond)

4 50C SDV - It is applicable in the case of sale (not in gift) of Land, Bulding,Both held as capital asset not SIT

5 10(38) L.T. capital assets which are entered(in i&ii) in Recognized S.E (subject to STT). -

i) Sales of equity shares 0.125%

ii) Sale of unit of an qquity oriented fund 0.125%

iii) Sale unit of equity oriented M.f. to M.f. 0.025%

as above case L.T.C.G. will exempt u/s10(38). If said hold as Capital Asset but not SIT

Deduction of STT is available if security held as SIT

10(38) is not available buyback,openoffer for sale,sale of right etc

Acquisition mode is not relevant

Tax Planning Sales the share other than on stock exchange LTCL will be allowed to be set off and c/f since 10(38) is not applicable

imp. pg. no. 35 proviso to section 112

6 111A If said asset in point no. 5 is short term capital gain then sec. 111A shall applicable and s.t.c.g. tax rate will 15%

note- the other balance income(excl. 111A) of such person shall the total income

note- extra benefit to an individual or HUF, who are resident of india. See pg. 30

note- Chapter VI-A shall not allowed from 111A but it will allowed from other Income

7 Proviso Transfer of a long term capital asset, being -

to sec.112 listed securities (eg. Shares,scrips,bonds,debentures,debenture stock

units

zero coupon bond

and if benefit of indexation is not taken then L.T.C.G. shall be taxable @ 10%

note - this proviso is applicable to Residents as well as Non-Residents

7 56(2)(vii) Purchase/Gift re eive by INDIVIDUAL or HUF as c pit l sset in the hand of receipient

a) any sum money- without consideration - aggregate value exceed Rs. 50,000

b) any immovable property- without consideration - in every case value exceed Rs. 50,000

c) any *movable property - without consideration or less than the FMB - aggregate value exceed Rs. 50,000

Note - 56(2)(vii) shall not applicable in case - see book on p.g. 179

Note - If movable property gift /sales less then FMV by transferer(trader) who hold such asset as SIT then 56(2)(vii) shall applicable

Note - If immovable property gift by transferer(trader) who hold such asset as SIT then 56(2)(vii) shall applicable

Note- in case of 56(2)(vii) the COA in the hand of receiver shall- FMV/SDV on the date of transfer

Note- in case of 56(2)(vii) the POH shall be from the date of transfer

Note - also see determination of FMV on pg. 198 to 200

8 56(2)(viia) where a Firm or Closely Held Companyreceives *Shares of a closely held companyfrom any person

*movable property means- shares & securities,jewellery,archaeological,drawings,paintings,sculptures,any work or art,bullion

Note- if imovable property received by indi/huf as gift in the form of SIT then 56(2)(vii) will not apply and also 50C shall not applicable


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without consideration

consideration less than FMV

Note - if said assessee received other asset then 56(2)(viia) is not applicable

*shares means equity or preference shares

9 first proviso No Indexation in case of any Non-Resident even co.

of sec. 48 - it applicable on the shares or debenture,bonds(also covered govt co. bond but not cover C.G,RBI bond)

- such asset was purchased in the foreign currency or it should be a case of re-investment

- It will not apply on units of UTI and M.F

- it is applicable for both short term/long term

- no metter of cost of improvement arise in case of securties

note- expenditure on transfer shall be considered on the date of transfer even incurred different dates

L.T.C.G. - 10%

S.T.C.G. - 15%(is STT paid), otherwise N.RATE

10 45(1A) i) If capital asset destroyed and no insurance compensation received - No Tax Treatment,even scrap sold

ii) If capital asset destroyed (due to certain reason see pg. 54)insurance compensation received then -

IMP. - Year of taxable = in the year in which such receipt will be received

IMP. - Value of considetation = Value of Money or FMV of Asset on the date of such receipt

IMP. - POH and indexation = till to date of destroyed

- COA of new asset = FMV on date of receipt

- POH of new asset = From the date when new asset receipt

iii) If capital asset destroyed (any other reason)insurance compensation received then - Genrel rules shall applied

iv) If asset is partly destroyed and composation received then no C.G. shall arise

11 45(2) Note - if SIT received without any cost then the FMV on that date shall be deemed the COA

Note - if shares convert in SIT and after sales in recognized stock exchange and STT paid then 10(38) shall not applicable

12 i) If Bonus share/security or right share were issued before 01//04/81 then FMV option is available

and if such asset issued before said period without any cost then COA will be FMV

ii) Equity share/P.Share,Unit of UTI,Unit of M.F./Zero coupon bond/Listed Debenture - L.T if POH is more than 12 months

13 i) If Bonus,Right share/security alloted then POH shall count from the date of such share/security allotment

ii) In case of renounced share/security - the POH shall be count from-

- in hand of renouncer - from the date when co. make offer

- in hand of renounceree - date of allotment

14 A.o can not take FMV as sales consideration except following cases -i) 45(1A) - insurance claim on damage

ii) 45(2) - conversion of capital asset into SIT

iii) 45(4) - distribution of asset on partition of FIRM/AOP/BOI

iv) 46(2) -

v) 55

15 45(3) Capital Asset transfer by partner/member to Firm/AOP/BOI then S.C will the amount recorded in Books

(Whether capital contribution or otherwise)

[in case of firm subject to 56(2)(viia)]

Note - excep- 50C

16 Imp. Where a firm is dissolved but business is not discontinued - its SIT must be valued at the FMV or Cost (whichever is less)

Where a firm is dissolved and business is also discontinued - its SIT must be valued only at the FMV (PGBP income)

Exp.- where firm is dissolved and business has been taken by one partner,company,other firm,any company then stock

shall be valued at FMV or Cost whichever is less


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17 45(4) Capital Asset transfer by Firm/AOP/BOI to Partner/Member -(whether dissolution or otherwise)

i) Sales Consideration in hand of firm - FMV on the date of dissolution

ii) IFOS sec. 56(2)(vii) in hand of partner/member - if FMV is more then his capital

18 47 Certain transactions not regarded as transfer - so no capital gains will arise

i) any distribution of capital assets on the partition of a HUF

note- logic of indian is that the such asset is tranfer to an indian assessee then such asset will remain in the hand of indian

assessee in future such indian assess will sell such asset then it will atract capital gain. If assessee was no indian then in

future C.G. will not attract in india

ii) any transfer of capital asset under a gift,will,an irrevocble trust

note- see 43c

iii) any transfer of capital asset by amalgamating co. toINDIAN amalgamated co.

note- see 43c

iv) any transfer of capital asset by holding co. to its INDIAN subdidiary co. (100% holding with nominee)

Sec. 47A- if holding co. with nominee cease to hold shares or capital asset converted in to SIT (for both 8 years from the date

when asset was transfered) then past capital gain shall be charged in the year of such event

Sec. 155- where sec. 47A is attracted,the assessment of the transferer co. will be rectified in sec. 154 and 4 years shall count

from the end of the previous year in which the such event occured

note - when 47A attracted them COA in the hand of transferee shall be the price was charged by transferor

v) any transfer of capital asset by subsidiary co. to its INDIANholding co.(100% holding with nominee)

Sec. 47A- same as in (iv)

Sec. 155- same as in (iv)

note - when 47A attracted them COA in the hand of transferee shall be the price was charged by transferor

note - if capital asset is transgerred as stock in trade in (iv) & (v) both then exemption u/s 47 shall not available

vi) Any transfer in a scheme of amalgamation, of shares held in an indian company,by the amalgamating foreign co. to amalgamated foreign co.

if following condition are satisfied- see book pg. 100

49(1) In above I to VII said cases cost of acquisition of the asset shall be deemed to the cost of previous owner (also consid COI)

(except in the case of gift to indi/huf)

2(42A) in above I to VII cases the period of holding of previous owner shall be considered

(except in the case of gift to indi/huf)

vii) see book pg. 101 , sec. 49(1) & 2(42A) shall not applicable

viii) Any transfer of bonds etc. see pg. 101

ix) Any transfer of a capital asset, being any work of art, archaeological, scientific, or art collection, book, manuscript, drawing,

painting, photograph, print to the GVT.,UNIVERSITY,N.MUSEUM,N.A.G. etc.

x) Any transfer by ways of conversion of bonds, or debentures or debenture stock of deposit certificates of a company into the

shares or debentures of that company

xa) as per book pg. 103

xi) Any transfer by a shareholder, in a scheme of amalgamation of the shares held by him in the amalgamating company if-

a- the transfer is made in consideration of allotment to him of the shares ini the amalgamated company and

b- the amalgamated company is an indian company


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then sec. 49(2), 2(42A) shall apply

Note - if shareholder of amalgamating company receives shares and also cash,debenture etc from amalgamated company,

then C.G. shall chargable to tax

xii) see book pg. 106

xv) see book pg. 107

xiii) Where Part. Firm is succeeded by a Company in the Business carried on by it as a result of which the firm sells of otherwise

transfers any capital asset or intangible asset to the company

provided that -

- all assets and liabilities of firm relating to business immediately before succession become assets and liabilities of co.

- all the partners of firm immediately before the succession become the shareholders(equity or preferance or both) of co. in

same proportion in which their capital a/c stood in books of firm on the date of succession -but after this ratio may be changed

-the partners of firm do not receive any consideration/benfit,directly or indirectly,in any form,other than by way of allotment of shares in co

- the aggregate of the shareholding(equity) in co. of partners is not less than 50% of the total voting power in co. and their

shareholding continues to be as such for a period of 5 years from the date of the succession - old shares held by partners shall also include

Note- if the co. allots shares to the wife or friends of partners then this will assume that such shares are transferred by the partners and sec.

56(2)vii attract in hand of receiver but relative will safe

Note- sec. 49(1) and 2(42A) shall apply

Sec. 47A - if fails in any condition then exempt tax shall be chargable to tax in the hand of successor company in that year

note- see book pg. no.109- analysis of sec. 47(xiii)

xiv) Where Prop. Firm is succeeded by a Company in the Business carried on by it as a result of which the firm sells of otherwise

transfers any capital asset or intangible asset to the company

provided that -

- all assets and liabilities of prop. firm relating to business immediately before succession become assets and liabilities of co.

-the prop. of firm do not receive any consideration/benfit,directly or indirectly,in any form,other than by way of allotment of shares in co

- the aggregate of the shareholding(equity) in co. of prop. is not less than 50% of the total voting power in co. and hisshareholding continues to be as such for a period of 5 years from the date of the succession - old shares held by propr. shall also include

Note- if the co. allots shares to the wife or friends of partners then this will assume that such shares are transferred by the partners and sec.

56(2)vii attract in hand of receiver but relative will safe

Note- same as in xiii)

Note - same as in xiii)

Sec. 47A - same as in xiii)

(xiiib) Transfer of a capital asset/intangible asset by private co. or unlisted public co. to LLP or transfer of a shares held in the co. by a shareholder

- all assets and liabilities of co. immediately before the conversion become assets and liabilities of LLP

- all shareholders(equity/preferance) of co. immediately before conversion become the partners of LLP and their capital contribution and

profit sharing ratio in LLPare in the same proportion as their shareholding in the co . on the date of conversion

- shareholders of co. do not receive any consideration directly or indirectly,in any form,except share in profit and capital contribution in LLP

- aggregate of profit sharing ratio of shareholders of co. in LLP shall not be less than50% at any time during 5 years from date of conversion

- total turnover of co. in any3p/y preceding to p/y in which conversion take place does not exceed 60 lacs rupees. Even current year exceed

- no amount is paid, either directly of indirectly, to partner out of balance of accumulated profit standing in Books of co. on the date of

conversion fora period of 3 years from the date of conversion

Note- sec. 49(1) and 2(42A) shall apply

Sec. 47A - if fails in any condition then exempt tax shall be chargable to tax in the hand of LLP in that year

Note- MAT credit of co. shall not allowed to LLP

Note- where capital asset of u/s 35AD received to LLP then actual cost shall be NIL to LLP

Note- BOA shall be same as Co. to LLP

Note- Dep. shall be apportioned between co. and the LLP in the ratio of the no. of days for which asset was used

Note- VRS incurred by the co. shall be amortised in hands of LLP as if such conversion has not taken place

xii) transfer of capital asset, being landof a sick industrial co . made, where such sick industrial co. is being managed by its workers' co-operative


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provided condition-

this transfer of land should be made during = the period commencing from p/y in which said co. has vecome as sick industrial co. and ending

with the p/y during which the entire net worth of such co. becomes equal to or exceeds the accumulated losses

note- sick co. means a co. whose accoumulated loss is exceed net worth

xiii) any transfer of a capital asset to a company in the course of demutualisation or corporatisation of a recognised stock exchange in india as a

result of which an AOP/BOI is succeeded by such copmany- provided some condition -

- all the assets and liabilities of AOP/BOI relating to business immeediately before succession become assets and liabilities of company

- a scheme should be approved by SEBI

note- Actual Cost and WDV of capital Asset in hand of co. shall be same as R.S.E.

xiiia) any transfer of a capital asset being a membership right held by a member of a R.S.E. in india for acquisition of shares and trading or clearing

rights acquired by such member in that R.S.E. in accordance with a scheme approved by SEBI

COA- For equity shares - cost of acquisition of his origional membership of the exchange

COA- For trading and clearing rights of R.S.E. - nil

POH- for both equity & trading and clearing right - from that person was the member in R.S.E.

19 43C Special provision for computation of COA in certain cases

1) A capital asset transfers as SIT by amalgamating co. to amalgamated co. then COA shall be the aggregate of-

- COA of said asset to the amalgamating co.

- expenditure on improvement of the said asset incurred by both co.

- expenditure incurred in connection with the transfer by transferor co.

2) A capital asset transfers as SIT by amalgamating co. to amalgamated co. then COA shall be the aggregate of-

- COA of said asset to the transferor

- expenditure on improvement of the said asset incurred by both- expenditure incurred in connection with the transfer by transferor inclu. Gift tax,exp. On partition of huf,create a trust

note for 1) & 2)-: FMV as on 01/014/81 is not available for sec. 43C

note for 1) & 2)-: Cost of improvement incurred before 01.04.81 shall be considered for sec. 43C

20 72A

21 Revers Mortgage- read from book on pg. 130

22 S.SALE It will be applicable for all type assessee

Definition of slum sale, undertaking - book pg no. 139

COA & COI -: net worth of the undertaking of the division shall be deemed

note- in regarding of net worth the report of C.A. shall be furnished

note- if the agreement for transfer specifies the individual value of each asset to be transgerred,then the provisions of slump sale shall not

be applocable and C.G. on each asset shall be computed separately

note - if undertaking is hold more than 36 months then L.T.C.G.

note - benefit of Indexation shall not be available in slump sale

note - no profit under P/G/B/P shall arise in case of a slump sale even if stock is transferred in slump sale

COMPUTAION OF CAPITAL GAIN --

Slump Sale consideration - Net worth

computation of net worth ----

a) Dep. Asset - WDV of block of Assets

b) Non-Dep. Asset - Book value of such asset

C) Less-: Liabilities appearing in Books and also should be transferred


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computation of WDV of Block of Assets -- see book pg. 142

Note - Revaluation of assets shall be ignored whether current year or past years

Note - U/D of the said undertaking shall not be available to the transferee for carry forward while U/L will available

imp G.Note - only one block of asset should create for same rate assets even there are more than one business is runing by same assessee

23 some important point

i)- if any asset is transfer due to family disputes/settelment there shall no capital gain arise

ii)- if land and building is transferred then capital gain shall find out sepreate-2 on land and building

if in sale deed composite sale price is given then this sales price shall allocated for both on the basis of FMV of both

24 45(5) Compulsory Acquisition of an asset and consideration is determined by C.G.or R.B.I.

- chargeable in the year in which original compensation or part thereof is first received by assessee

- the nature of enhanced compensation shall be same as original compensation

POH - form the date the asset was acquired by the assessee to the date on which asset was transferred

- COA & COI of enhanced compensation shall be NILL, however legal exp. Incurred to obtain enhan compens are deductible from EH.Comp

- Interest in enhance compulsory acquisition shall be taxable oncash bases even assess followed accrual system, In IFOS only 50%

- the enhace comps. Received by any other person by any reason then the C.G shall be chargeable in hand of receiver

- while original compensationshall be chargeable in hand of original assessee

note - if compensation is reduced then any authority can be done 155(15) till 4 years from the end of the year in which the

order of reducing was passed by court

25 10(37) Exemption in respect of C.G. in case of Urban Agricultural Land

- if assessee is an individual of a HUF

- income is chargeable in C.G. and arising from agricultural land

provided-

i)- during two years immediately preceding date of transfer, was being used for agricul puroses by HUF or individual or his parent

ii) transfer is by way of compulsory acquisition under law, or a transfer consideration for which is determined/approved by C.G. or RBI

not- rural agriculture land is exempt for capital gain in all cases

26 50 C.G. on depreciable asset always S.T.C.G. and sec. 50 shall applicable


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SEC. ABOUT REQUIREMENT OTHER NOTES

Note: i) Amount received ofkeyman insurance policyshall be taxable in hand of employeeunder head Salary

ii) Amount recd of keyman insurance policyand if employee-employer relation is not exitthen it shall taxable in hand of receiver in head IFOS

Note:Any benefit or perquisite ,whether convertible into money or not,arising from any business/professionshall be taxable under head PGBP

Note: any sum on a/c or any capital asset(other than land or goodwill or financial instrument) being demolised,destroyed,discarded or transferred,

if the whole of the expenditure on such capital asset has been allowed u/s 35AD shall chargeable in PGBP

Note: If any assessee is purchaseing trading and clearing rightin stock exchange then it shall be treated asintagible asset

Note: It is not required that asset should be registered in the name of assessee beneficial ownership is sufficient

Note: For calaiming Dep. Actual put to useis requiredrather than ready to use,except standby assets

Note:Tea bushes or livestockarenot included in P&M

Note: A buildingshall bedeemed to be usedmainly for residential purposesif the built up floor area used for residential purposes is not less than

66.67% of the totoal built up floor area

Note:Insurance compensationreceived/receivable shall be deductiable from WDVin the yearin which assets destroyedwhile

Capital Gainshall be taxable in the yearin which compensation is received

50 Computation of C.G. in case of Depreciable Assets. Note- always S.T.C.G/L on Depreciable Assets

(A) the total sales consideration arising as a result of transfer of one or more asset but Block of asset is exit

Sales Consideration Aess:

i) Opening W.D.V. of Block of Asseets X

ii) Actual cost of the assets falling within the block acquired during the previous year Y

iii) Expenditure incurred in connection with the transfer Z

S.T.C.G(in this case there will be gain only.Loss shall remain in block) A-X-Y-Z OR

(B) where any block of assets ceased to exist for the reason that all assets in that block are transferred during the p/y

Sales Consideration A

Less:

i) Opening W.D.V. of Block of Asseets X

ii) Actual cost of the assets falling within the block acquired during the previous year Y

iii) Expenditure incurred in connection with the transfer Z

S.T.C.G/L A-X-Y-Z

imp Note:- if any asset is not the part of BLOCK OF ASSET then sce. 50 shall not applicable and C.G. shall calculated as normal and it is not

mandatory to claim dep.

imp Note:- Exp. on transfer shall not deduct from WDV,while it shall be considered at the time of C.G.

If an asset is stolen/damaged from BOA and no insurance compensation is received -

A) if there are other assets in Block then no tax treatment .Loss shall be contained in WDV and dep. Shall allowed

B) if there are no other assets in Block then No Tax Treatment. It shall capital loss

Note:- for A&B Sec 50 shall not applicable because it shall not treated transfer

Revaluation of Assets should be ignored

Proviso to sec 32(1):- Apportioned of Dep.i) Predecessor and successor- i.e. Firm to Co.,Prop to Co.,Unlisted Co. to LLP,170ii) Amalgamation co. to Amalgamaed co.iii) Demerged co. to Resultinig co.

Additional Depreciation- only on new Plant & Machinery @ 20% (if used less 180 days then 10%)- Only in theBusiness of Manufacture of Production of any article or thing

- In the Business of Genetation or Generation and Distribution of PowerProvided-

# Not on ships and aircraft, road transport

# Before installation used outside india by other person

# Any office appliances

# Any P&M ,the whole of the actual cost of which is allowed as a deduction (by way of depreciation or otherwise)

imp Example 15 on page 31


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Format of WDV pg.21

Intt. Treatment pg no. 33

Note : If subsidy is given for acquiring asset or subsidy is computed in reference of asset even given to seeting up business in Backward area, then

subsidy shall deduct from cost of such asset

43(1) Actual Cost means the actual cost of the asset to the assessee

DETERMINATION OF ACTUAL COST IN SPECIAL CASES: "Note- for the purose of C.G. the S.C. shall remain same it is only for WDV"

Special Case Actual Cost

i) asset is used in scientific research - nilii) asset is acquired by way of gift or inheritance the actual cost to the previous owner

(Note: if p/o not claim dep. then dep. not deduct ) less- dep. Actually allowed up to a/y 1987-88

(logic- on which part of asset p/o calimed dep. then the less- dep. allowable after a/y 1987-88 as if the asset was only asset in BOA

new assessee can not claim)

Note: gift sec. 56(2)(vii) shall not apply on PGBP because this actual cost is determined u/s 43(1) for the purpose of claiming Dep.

iii) If before transfering asset the P/O was using asset - A.O. may determine actual cost with previous approval of J.C.

in his busi/prof and A.O. is satisfied that main

purpose of transfer is avoidence the tax liability - the actual cost to him in past

iv) where asset which had once belonged to assessee less- dep. Actually allowed up to a/y 1987-88

and used by him in Busi/Prof and after transfer less- dep. allowable after a/y 1987-88 as if the asset was only asset in BOAand after re-acquired by him note- dep. Till to date when asset hold by assessee in actual

i.e. in other word w.d.v. at the time of transfer

or

actual price for which the asset is reacquired by him

which is lower

v) where asset acquire by assessee (first person) and after the actual cost to the other person (seller) at the time of transfer

leased/hire to other peson(seller who also calim dep. note- if more then one intermediate seller then W.D.V. at the time of first sales

on that asset) assuming that such asset was only asset in BOA

vii) where a asset transfer by holding to subsidiary - if transferer not claimed dep. then- actual cost

note: subsidiary is indian co. and whole share - if whole BOA is transferred and condition of 47 satisfied then-transferer has claimed dep.

capital held by holding and its nominal co. then- W.D.V. of BOA in hand of holding co. at beginning of the P/Y in which transfer made

- if single asset transferred then assume this is only asset in Block

vii) where a asset transfer bysubsidiary to holding same as above

note: holding is indian co. and whole share

capital held by holding and its nominal co.

viii) where asset is transferred in amalgamation same as above

ix) personal asset other than building brought into business - Actual cost to assessee

personal asset If building brought into business less: notional dep(from purchasing date). At the rate applicable on that date

x) Where c.asset which was acquired outside india by assessee, - Actual cost to assessee

being N.R.I, is brought by him to india and used in his business less: notional dep(from purchasing date). At the rate applicable on that date

(note: whether used for personal or business purpose)

(note: this will not applicable if N.R. sells asset to company/firm in india in which he is shareholder/partner respectively)

xi) when private co. or unlisted public co. convert - WDV of BOA shall be actual coston the date of conversion

into LLP and all condition satisfied, then

If income is derived,partly from agriculture and partly from business then dep Shall be computed as if entire income is business income and such dep shall fully allowed

Where assessee is carrying on the business of TEA, COFFEE, RUBBERand deposit amountin Development Account before the due date of

furnishing the ROI then-

he shall be allowed a deduction- which ever is lower

a)Amount Deposited

b)40% of *"TOTAL INCOME" of such business

*NOTE- after deduction expenditure on this business

note- after it balance income the PGBP income shall be 35% for rubber, 25% coffee, 40% tea of said income

note: Account should be audited


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NOTE:-Any amountcan be withdrawn from following said purpos from account -

i) for the purposes *specified in the scheme of Board or

ii) in following circumstances- to see pg. 64

* non specified purposes- see pg. 65

note- amount withdrawn and not utilizedfully or partlyfor specified purposein same yearin which was withdrawn or

If said assetis sold or transferredin any P/Y before the expiry of 8 yearsfrom end of P/Y in which it was acquiredthen it shall taxable as PGBP(40%of said amount)

excpt. of above note- Asset can sold/transferred to govt,a local authority, a corporation,govt co.,succession of firm by a company before 8 years

SITE RESTORATION FUND

where an assessee is carrying on businessofprospecting for, or extraction or prodiction of, petroleum or natural gas in india,and

in relation to which the C.G. has entered into an agreementwith assessee

- and assessee has before the end of the p/y-

a) deposited with SBI any amount

b) deposited with special account any amount

- allowed deduction-:

i) a sum aqual to the amount so deposited or

ii) 20 % of profit of such business

which is less

note: all other point as point 10 ( tea,coffee)

35 Expenditure on Scientific Research

a) Any revenue expenditure :- 100%

i) related to the business of assessee

ii) where any such expenditure has been incurred before the commencement of business then only payment of SALARY(not perquisite,R.M in

scientific research and these exp. should incurred within 3 years and said exp. shall be prescribed by authority

b) Any sum paid to research association or to a University, College, or Other Institutions to be used for S.Research : 175%

i) above should be approved by prescrived authority

ii) S.R. whether related or not related to assessee's business

imp- which main object is only S.R

c) Any sum paid to company 125%

provided that such co. should be registered in india, main object is S.R.,approve by prescribe authority

d) Any sum paid to a research association or to a University, College, or Other Institutions to be used for Social Science or Statistical Research: 125%

i) above should be approved by prescrived authority

ii) S.R. whether related or not related to assessee's business

e) Capital expenditure on S.R. 100%

i)related to the businessof assessee

ii) where such expenditure has been incurred before the commencement of business then these exp. Should be incurred within 3 years immediately

precding the commencement of business

iii) it is not necessary that the assessee should do S.R. shelf

note : expenditure on Land is not addmisible

Note: when S.R asset is sold-

i)When asset is sold without having been used for other purposes-

a) PGBP income- least of the following

- S.C. - WDV(Cost-Deduction)

- Deduction Allowed

b) Capital Gain (only when S.C. is more than original cost)

- S.C. - Actual cost of asset(subject to indexation)

f) Higher deduction on payment made to *APPROVED SPECIFIED PERSON for S.R. 200%

*National Laboratory or a University or an IIT or Other Specified person, under a programme approvedby prescribed authority

g) In House Scientific Research 100%

- Only for Company which are engaged in business of Manufacture or Production of Articles

except- not being exp.in the nature ofcost of Land or Building

Note:- this deduction shall be allowed only if the co. has entered into an agreement with the prescribed authority


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imp NOTE: if a asset is not eligible for deduction u/s 35 then normal dep. can claim

ANY SUM PAID for obtaining LICENCE TO OPERATE TELECOMMUNICATION

note:- either before the commencement of business or thereafterBUTpayment has actually been madeto obtain licence

note:- the expenditure shall allow in four equal installmentin *relevant previous years

*relevant p/y means- i) in case where the said payment is made before the commencment of business- the p/y beginning with the

p/y in which such business commenced till the p/y in which licence will expired

ii) in any other case, the p/y beginning with the p/y in which said payment has made till the p/y in which licence will expired

where the licence is transferred-

i) where fully licence transfer and S.C. is less than WDV :-

- if WDV(cost-deduction allowed) - S.C = Loss allowed PGBP in same p/y

ii) where a part of the licence is transferred and S.C. is less than WDV -:

- WDV- S.C. = Loss allowed in balance no. of years as PGBP in equal and in this case no C.G/C.L.

iii) where fully or any part transferred and S.C. is more than WDV :-

a) PGBP income- least of the following

- S.C. - WDV(Cost-Deduction)

- Deduction Allowed

b) Capital Gain (only when S.C. is more than original cost)

- S.C. - Actual cost of asset(subject to indexation)

imp note: for computation of L.T.C.G or S.T.C.G. period of holding shall count from the date of obtaing licence to the date of transfer

imp note: indexation is available

imp if asset is transferred to indian co. in case of amalgamation/demerger then above rule of tranfering not applicabe

where deduction u/s 35ABB allowed then dep. not allowed

35CCA :- on pg. no. 83

35D Amortisation of Certain Preliminary Exp.

INDIAN COMPANYorRESIDENT NON-CORPORATE ASSESSEE - incurs any expenditure on *specified purpose

- Before commencement of his business or

- After commencement of his business, in connection with extension of his undertaking or in connection with setting up a new unit

than shall be eligible to deduction of said above exp. in 5 successive p/y begininng with p/y in which business commences,or the p/y in which extension completed

*Expenditure on specified purposes means the following expenditure incurred on- see book pg. 84

Amount of Deduction- see book pg. 85 point 4

Cost of project, Capital employed- see book pg. 85

note : see note on pg. 84 & 85

note: in case of amalgamation, demerger the deduction shall be allowed to resulting indian co.

note : audit is mandatory

35DD Amortisation of amalgamation or Demerger expenses

note: Assesseeshould beINDIAN COMPANYwho incurs expenditure for above said porpose

- 1/5th of such expenditure, deduction shall be allowed till 5years

- note : if exp. Incurredby amalgamating co. then it can calim only 1/5th exp. in ithe year of amalgamation

not: if amalgamation/demerger scheme is disapproved by court then these exp. will allowed as revenue exp. not exp u/s 35DD

Amortisation of expenditure incurred under VRS

- Only for INDIAN COMPANYincurs

- 1/5th from the P/Y in which actual payment is made till 5 years

note- in case of amalgamation,demerger,converion of private/unlisted co. in to LLP than the deduction shall allowed to resulting co.

Expenditure on Agricultural Extension ProjectAny Assesseeincures exp. on said projectnotified by the boardthan 150%deduction of such expenditure

Expenditure on Skill Development Project

where a COMPANYincures exp.(not being Land or Building) on said project notified by board than 150% deduction of such expenditure

35AD 150% DEDUCTION AVAILABLE TO ASSESSEES CARRYING ON SPECIFIED BUSINESS- IF ESSENTIAL FOR INDIAN ECONOMY

i) to v) see amended pg

35ABB

5DDA

5CCC

5CCC


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if exp capital nature- 150%

if exp revenue nature- 100%

note 1: if said business commence before 01/04/2012 then 100% if after said date then 150% deduction

note:- if exp. Incurred prior to the commencement of its operationand the amount is capitalizedin the books of account on date of

commencement of its operationsthen the said exp. shall allowsubject to note 1

100% DEDUCTION AVAILABLE TO ASSESSEES CARRYING ON SPECIFIED BUSINESS

i) to vi) see amended pg

if exp capital nature- 100%

if exp revenue nature- 100%

note:- if exp. Incurred prior to the commencement of its operationand the amount is capitalizedin the books of account on date of

commencement of its operationsthen the said exp. shall allowsubject to note 1

Expenditure not eligible for deduction u/s 35AD

i)- land,ii) goodwill, iii) financial instrument

note: condition, additional condition, 73A, from book pg 93 to 95

No capital gain/loss- so (i) if sale price/insurance compensation of such asset shall be taxable as "PGBP".

note: in case of slum sale the value of said asset shall be taken nil

Actual cost in various cases on pg. 94- shall be taken nil

35E An Assessee who is engaged in the operation of

- Prospecting for, or Extraction of, or Production of :- any mineral like coal, limestone, iron, zink, gold

- expenditure incurredon any operationprospecting for minerals OR on the development of a mine during the year of production and four years

immediately preceding said p/yi.e. qualifying expenditure

note- exp. met by other shall not include

- period of deduction- 1/10th of qualifying expendityre subject to income of all mines till 10 p/y. if 1/10th is more than all mines

income than that portion of more shall be add in 1/10th of next year

note- in case of amalgamation,demerger,converion of private/unlisted co. in to LLPthan the deduction shall allowed to resulting co.

Premium for insurance on health of Employeesallowed deductionprovided that any mode of payment other than cash

Bonus or Commissionpaid to Employees for services renderedwhether it exceed Bonus Actbut it would have not been payable as profitsto employee

Interest is not deductiblewhere borrowed money isloaned to a directorwithout charging any interest

Guarantee Commission paid to the bank in relation to income tax deptt, is not allowed as exp.

Tax Audit Fees,Litigation exp. In relation to income tax cases are allowable as deduction

Discount on Zero Coupon Bond

zero coupon bond means- a bondissued by any infrastructure capital co,infrastructure capital fund, public sector co., scheduled bank

, in respect of which no payment and benefit is received or receivable before maturity/redemption

Discount:-the differencebetween the amount received/receivable at the time of issuing the bond and the amount payable at the time

of maturity/redemption

Computation of pro-rata amount of discount- the period of life of the bond shall be converted onto number of calendar month

P.F. pg. no. 106-107

A Bed Debt shall be allowed as deduction if the following conditions are satisfied-

i) the bed debtshould bewritten off as irrecoverablein books of account of the assessee for thep/y in which deduction is claimed

ii) the debtshould have beentaken into accountin computing the income of the any p/y OR debtrepresents the money lending

the ordinary course of business of money lending /banking carried on by the assessee

where a bed debt deductionhas been allowedand sebsequently recovered, then the amount so recoveredshall be deemed to be

income of PGBPof the p/yin which amount is so recovered even business/profession is not in existence but assessee should same

note: who claimed the deduction of bed debt and the assessee who recovers the bed debt must be same

Deduction of revenue expenditureincurred by comp nyfor the purposes ofpromoting family planning amongst its employees

where Capital Expenditureincurred on family planningfor employees then 1/5th deduction allowed till 5 years

note: when said capital asset sold then-

note- in case of amalgamation,demerger than the deduction shall allowed to resulting indian co.

Provision for Bad and Doubtful Debts relating to banks- panding


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Transfer to special reserve- panding

Some important General Point

- Penalties/fine imposedfor infraction of law are not deductible

- Interest paid under EPF & Misc provision act is allowable if it is compensatory and not penal

- Donations to political party and electoral trust are disallowed

- The deduction for the loss on embezzlement shall be allowed in the year in which loss on a/c of embezzlement is discovered

Any sum payable to(i) outside india or (ii) in india to a non-resident or to foreign co

TDS shall be deduct and paid- for april to feb.- 31st march, march- 30th aprilprovidedthat if not paid within above time this deduction shall allowed in the subsequent p/y in which TDS deposit

and Deductor shall deemed to be Assessee in Default

Any sum payable to RESIDENT

TDS shall be deduct and paid- date of 139(1)

providedthat if not paid within above time this deduction shall allowed in the subsequent p/y in which TDS deposit

and Deductor shall deemed to be Assessee in Default except-: if these condition are followed -

i)the resident payee has furnished his ROI

ii)the residence payee has taken onto account such sum

iii)the residence payee has paid the tax due on iincome declared by him in ROI

iv)the DEDUCTOR has to furnish a certificate to this effect from a C.A. in prescribed form

41(1) i) whereany loss or expenditurehas beenallowed as deductionand subsequentlyany amount is receivedthenit shall

be taxable as PGBPeven business is not in existence . In case of successor it shall be taxable in hand of successor

ii) where a deduction has been allowedin respect of a trading liabilityand subsequently there is a remission/cessation of

trading liability, then it shall be taxable as PGBPeven business is not in existence. In case of successor same as in point i)

pg no 135 point 2,3,4

Insurance compensation received for loss of SIT that shall taxable as PGBP

Bank waived- i) Loan amount ii) Intt thereon then loan is not trading liabilityso 41(1) not applicable and Intt would have disallowed u/s 43B

40A(3) pg. 140

Foreign Exchange Fluctuations - pg. 153

43B Certain Deductions are allowed on Payment Basis

a) Gvt. Dues- any sum payable by the assessee to tax,dut,cess,fee under any law for the time being force

b) Employees- any sum payable by the assessee as an employer by way of contribution to any P.F., S.F., G.F., other fund

c) any bonus or commission payable to the employees

d) Intt. on loan/advance to financial institution

e) Provision of leive in cashment

if above exp. Paid till due date of ROI, in the year in which libality to be paid arise then allowed otherwise in which p/y in that payment is made

43D Interest Income on Bad and Doubtful Debtsa) in case of an assessee being Financial Insititution/Bank-prescribed by R.B.I.

b) In cae of Public Co. -prescribed by National Housing Bank

shall be chargeable to tax-

i) in the p/y in which it iscredited by the assessee to its P/L

ii) in the p/y in which it is actually receivedby the assessee

which ever is earlier

Some important General Point

i) Exp. On issue of Right shares

ii) Exp. Paid to ROC for enhancement of authorized capital

iii) Issue of shares to public

shall not allowed as revenue exp. Except exp. on issue of bonus shares,Loan

44AB PGBP of Shipping Businessin case ofNon-Resident

- overruled sec.28 to 43A

A sum equal to 7.50%of the aggregate of the following sumshall be deemed to be the PGBP

a) amount paid or payable, whether in india or outside india , shipped at any port in india


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b) amount received or deemed to be received in india, shipped at any port outside india

note: in 44B business loss can carried forward while U/D can not carried forward

note: in 44B chapter VIA deduction can claimed

172 Shipping Business of Non- Residents

- this sec. overrulled entire I.Tax act

- provisions are for levy and recovery of tax in case of a ship, shippedat any port in india

-7.5%of the amountpaid/payable to the charterer or any person in his behalf,whether that sum is payable in india or outsided

india , shall be deemed to be he income arising to the owner/charterrer

- before departure from any port in india of any such ship, the master of the ship shall prepare and furnish to A.O. areturn of full amount paid/payable to the owner/charterer/other

- on receipt of a return, A.O. shall assess income and determine sum payable as tax thereon as rates which is applicable to the total income of a co.

- NO order assessing the income shall pass after expiry of 9 months from the end of f/y in which the return under point 5 is furnished

note: owner of chartercan claim before the expiry of relevent assessment yearthat an assessment should be madeon his total

income of the p/y accordance with 44 B.then the tax paid by him in 172 shall be deemed as advance tax

note:- no set off is permissible, no VI A allowed

PGBPfrom operation of Aircraftin case of A Non-Resident


A sum equal to 7.50%of the aggregate of the following sumshall be deemed to be the PGBPa) amount paid or payable, whether in india or outside india , carriage form any place in india

b) amount received or deemed to be received in india, carriage from any place outside india

PGBPof Foreign companiesengaged in the business of Civil Constructionetc. in certain turnkey power project

- overruled sec.28 to 44AA

where a foreign company is engaged in business of civil construction, or business of erection of P&M, or testing & commissioning thereof

- in connection with a turnkey project approved by C.G.

- 10%ofsum payable to assesseeshall be deemed PGBP

44BB where A non- residenceis engaged in business ofExploration, Etc. of Mineral Oils


A sum equal to 10%of the aggregate of the following sumshall be deemed to be the PGBP

a) amount paid/payable, whether in or out of India , to assessee or any person on his behalf on account ofprovision of services/facilities/supply

of plant or machine on hireto be used in prospecting/extraction/production of mineral oilin INDIA

b) amount received or deemed to be received in India , on account ofprovision of services/facilities/supply

of plant or machine on hireto be used in prospecting/extraction/production of mineral oilOutside INDIA

44AD from book 199

44AE "


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At the tiime of appealthese documentsare required-

- Two copies of form 32

- Two copies of statement of fact

- Two copies of form ground of appeal

- Two copies of Order passed

-Original copy of demand notic u/s 156

- Challan fees

-Our summission (it may be summit at the heiring time)

Appeal shall be furnishedwithin 30 days of the following date (if holyday on 30th day then the day before)

a)where the appeal is u/s 248- the date of payment of tax

b) where the appealis relatesto any assessment or penalty- the date of service of notice of demand

c)in anyother case- the date on which order sought to be appealed is served

note :appealmay admit after expiryof the above said periodif assessee has sufficient cause

imp note : if the CIT(A) does not admit appeal then no remedy except 264

No appealshall be admittedunless at the time of filling the appeal

a)where a return has been furnished- the assessee has paid the due taxon the return income

b)where a return has not been furnish - the assessee has paidthe tax assessed by assessing officerException of'b'-on application of assessee CIT(A) may exempt(fully /partly) to assessee from condition of payment by recording good and sufficient reason in writing

note:- if assessee has not paid tax on demand in case a) or b) or Exception of 'b' then whether appeal is admitted but assessee shall be deemed to be

assessee for in default non- payment of demand, unless stay of demand taken

- where an assessee file an appeal to CIT(A), then A.Omay in his discretion and subject to such conditions, treat the assessee as not

being in default In respect of the amount in dispute in the appeal, from begainingtothe date tillsuch appeal is not disposed off

note: no appeal is possible against refuesal of A.O. in above regarding

note: A.O may grant stay while the time period of 30 days of payment of demand has expired

note:assesseecangive application to CIT.CCITfor granting stay of demandwhen case is panding before CIT(A)andA.O. refuesed to grant staynote:if application of stay of demandispandingbefore higher authoritythenA.Ocan not deemed in default to assessee untillthe requestis rejectied by that authority

- whereA.O. has refusedtogrant stay of demandthen CIT(A)can grantstay at the time when appeal is pending before him, from the

first day when payment is required to made till to date of appeal dispossed

- whereCIT(A) has refusedto grant stay of demandthen CCIT can grantstay at the time when appeal is pending before CIT(A), from

first day when payment is required to made till to date of appeal dispossed

- whereCIT(A) or CCIT has refusedto grant stay of demand then ITAT can grantstay at the time when appeal is pending before ITAT,

from the first day when payment is required to made till to date of appeal dispossed but if ITAT can grant staythen ITAT shalldispossed the case

within 180 days otherwisesstaywill expireafter 180 days and assess shall be treated in default from begaining. provided that if the delay is cause by

ITAT then ITAT can extend stay but total stay time will 365 days. If appeal is not dispossed in this time then after 365 days asssess deemed in default

imp note: H.C., S.C. can not provide stay of demand

imp For filing an appeal to CIT(A),H.C,S.C there is no condition in law that the demand should be paid

CIT(A)mayat the time of disposing of any appealmake such further inquiry as he thinks fitormay direct the A.O.to make further

inquiry and report the result of the same to the CIT(A)

CIT(A) may allowto go any ground of appealwhich is discussed in orderif he satisfythat there is no willful or unreasonable of omission

The additional documents/evidencecan not produce to CIT(A)except-

i)where A.O.has refusedto admitevidence

ii)appellant was prevented by sufficient cause

iii)where A.O.did notprovidesufficient timeto produce evidenceProvided-

i)no additional evidenceshall beadmittedunless the CIT(A)recordin writingthe reasonfor it admission

ii)CIT(A) shall notadmit anyaddition evidence producedunless the A.O. has been given areasonable opportunity to cross examine

the evidence and witness

imp " The CIT(A) may pass orderu/s 250 within 1 yearfrom the end of the F/Yin which such appeal is filed"

APPEAL TO CIT(APPEAL)

Stay of Demand


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If assessee has not claimeda deduction in ROIwhile deduction was available thenassessee can not claimthis dedution at the

time of appeal to CIT(A). Decided in case of Gurjargravures P.LTD

Ifassessee has not claimeda deduction(on based on case of law even available)in ROIorAt the time of Assessmentand that the

ground became available on account of change in circumtances or law, then CIT(A) can admitthis dedution

i) To confirm, reduce, enhance or *annul(void) the assessment

* where technical requirment is not fullfilled by A.O. now A.O. shall not make fress assessment in same sec.

ii) To confirm, cancel, or vary an order imposing penalty

* CIT(A) can cancel penalty order while can not direct the A.O. to levy fresh penalty

iii) To pass such orders as deemed fit

Note: show cause notic is required

note: CIT(A) may consider and decide any matter arising out of the proceediings(assessment/reassessment) in which the order

appealed against was passed while such matter was not raised in appeal before it

note: CIT(A)can add income from new sources of income or items which have not been considred by A.O.

Where under an agreement, the tax deductible on any income,u/s 195 is to borne by the deductor,and such personhaving paid tax,

claim that no tax was required to be deductedon sich income,hemay appealto CIT(A)

Appealable Orders before CIT(A) - as per book

Appealable Orders before ITAT - as per book on page 58

Order against whichan appealcan be filed by A.O.to ITAT

a)order of CIT(A) u/s 250

b)order of CIT(A) u/s 154

Appeal should be filed within 60 days from the date on which the appealable order is communicated to assessee or to CITexcept. If there was sufficient causeto not file within said time

Appeal filed to ITAT by Department Appeal filed to ITAT by Assessee

i)- ITAT shall send a notice to assessee informing i)- ITAT shall send a notice to dpartment informing

him that an appeal has been filed by department him that an appeal has been filed by asessee

ii)- Assessee may file memorandum of cross objection to ITAT withiin 30 days ii)- Dpt. may file memorandum of cross objection to ITATwithiin 30 days

ITAT any time within 4 yearfrom the date of own order, can rectifyu/s 254(2) on application of A.O./Assessee/Suo-moto. If in benefit of

assessee then no time limit

ITAT shall decide appeal within a period of 4 years from the end of the F/Yin which such appeal is filed

On a question of factdetermined by ITAT, a writ petition can be filedto H.C.challenging the fact finding process adopted by ITAT. If H.C.

is satisfied then it will quash the order of ITAT and direct to ITATto do the fact finding in a proper manner and/or as per the direction of H.C.

Ifthe writ petitionisdismissed by H.C., then assessee can file a SLP to the S.C. challenging the fact finding process of ITAT. If S.C. is satisfied

then it will quash the order of ITAT and direct to ITATto do the fact finding in a proper manner and/or as per the direction of S.C.

TheITAThas powerto admitany ground,deduction,additional evidence which is not presented/claim before A.O. or CIT(A)/ROI with

permission of ITAT after giving opportunity of being heard to assessee and department and also do suo-moto on said matter except. 80A

The ITAT during the rectification processingcannot admit additional evidence

Pg. 81 imp.

If Deduction of chapter VI A other than 80A is not claim in ROI then it can be claim in 154 if proper evidence is available

Appealshould befiledwithin 120 daysfrom the date on which appealable orderexcept if sufficient cause

If H.C. is satisfiedthat a substantial question of lawis involved in any case ,it shall formulate that question

imp No appeal can be file against the rejection order of H.C. while SLP in S.C. can be file

The appeal shall be heardonly on the question of law so formulated. However if H.C satisfiedthat b then

APPEALS TO HIGH COURT

Power of CIT(A)

APPEALS TO ITAT

mamorandom of cross objection can be file after 30 days if sufficient cause


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apeal can be hear even substantial question of law is not formulated

imp The H.C. may determine any issuewhich-

a)has not been determined by the ITAT. i.e. raised in ITATbutITAT did not decide by forgetten[note: assessee may opt 254(2) or 260A]

b)has been wrongly determinedby the appellate tribunal by reason of question of law

note: new issue even inbolve question of law can not raise in H.C. which is not raised in ITAT

imp Only ITAT,H.C.,S.C. may award the cost

An appealshall lie to S.C.against any judgement of H.C., in any case where the H.C. certifies to be a fit one for appeal to the S.C.

If not certifies by H.C. then no remedy

If Deptt. not filed the appealagainst reason other than monetary limitthen it will deemed that Deptt accept defeat so

Deptt can not file appealin tha case of same assessee in other A/Y or other assessee in any A/Y

Apeal in Inocme Tax Matter Monetary Limit

Before ITAT 300000

Before H.C. 1000000

Before S.C. 2500000

imp see pg. 269

If these condition satisfy-

i)Only Order of A.O.

ii)***Record

iii)*erroneous

iv)**prejudicial to the interest of the revenue

then revision u/s 263 by CIT is possible

imp note: Intimation/Deemed intimation u/s 143(1) is not an order therefore can not be revised u/s 263

*A.O. order may be erroneous only in these cases-i) a supreme court judgement

ii) a retrospective amendment in law

iii) evidence in his possession that the assessee has understated the income

iv) evidence in his possession that the assessee has claimed excessive loss,deductions and relief

v) mistake apparent from record

imp note: 263/147 can not possible on account of change in personal opinion

**A order can be said to be prejudicial to the revenue if-

i) income has been under assessed or losses have been over assessed

ii) income has been assessed at a lower rate

iii) excessive loss, deductions, allowances and reliefs allowed

*** "Record" means the information available at the time of Revision by CIT

If A.O.has completed the assessmentwithout initiating penalty proceedings, then the order of A.O.cannot be said to be erroneous

therefore the CIT in u/s 263 cannot set aside the order of assessment of A.O. and direct him to initiate penalty proceedings

for applicability of sec. 263, these are two requisites- i)order must be erroneous, ii)order must be prejudicial to revenue

CIT u/s 263 can do -

i) Increase the income by passing an order u/s 263 or

ii) Cancel/set aside the assessment and direct the A.O. to make fress assessment

note:- an opportunity of being heard is required before passes order u/s 263 otherwise it will void-ab-initio

If CIT starts revision proceedings u/s 263and assessee provesthat no income has escapedthen CIT shall drop proceedings u/s 263

imp The Order u/s 263 shall not be made after expiry of two years from end of the F/Y in which A.O. order to be revised was passed

except give effect to the order of H.C./S.C

imp Note: if a deduction is retrospectively disallowed,revison u/s 263 is possible upto 2 yearsfrom the end of the F/Yin which order

sought to be revised was passed

SEC. 263 REVISION BY COMMISSIONER

APPEALS TO SUPREME COURT


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imp CIT u/s 263 cancel the assessment and direct A.O. to make fresh assessment then A.O. shall complete that assessment in origional sec.

and if assessee is not satisfywith order of fresh assessmentthen the appeal can move to CIT(A) not in ITAT

comparision of Sec. 263 and Sec. 264 form book pg. no. 76

Any order (other than an order of 263),passed by A.O. can be revised

CIT can do 264either of his own motion or on an application by the assessee for revision

imp After 263, 264 is not possible while after 264, 263 is possible on other issue

263 may be many time for same A/Y while 264 may only once

imp DRP order can not revise in u/s 263 or 264

The CIT may passan order not being and order prejudicial to the assessee

imp CIT under section 264 can cancel/set aside the order of assessment of A.O. and direct him to make a fresh assessment and such

direction shall not be prejudicial to the assessee

CIT shall not revise any order on his own motion if order has been made more than 1 year previously from the date of passing order

Assessee can make applicationfor revision within 1 yearfrom the date on which the order was served to him except sufficient cause

Revision u/s 264 is possible if the assessee has not filed an appeal to CIT(A) on any issue and

i)The time period for filing an appeal to CIT(A) has expired or

ii)where the time for filing appeal to CIT(A) has not expired,the assessee has waived his right to appeal to CIT(A)

An order by CIT u/s 264 dcelines to interfereshall not be deemedto be an order prejudicial to the assessee

imp New ground,deductioncan claim at the time of 264 even it is not claimed before A.O. or Return

imp An order shall be passedby CIT within 1 yearfrom the end of F/Y in which such application made by assessee otherwiseit shall be

deemed that the reliefs claimed by assessee in the application u/s 264 have been allowed

No appeal is possible against the order of 264 by assessee or department even the application is totally rejected but order u/s264can be challenged in H.C. through a WRIT and thereafter in S.C. through a SLP

imp If there is error in order of 264 the 154 is possible

A.O passed the order u/s 143(3) or orher sec. in direction of DRP then appeal can move to ITAT but not CIT(A)

SEC. 264 REVISION BY COMMISSIONER


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S SEC. ABOUT REQUIREMENT OTHER NOTES

1 220 Any amount, otherwise than by advance tax, in a notice 156shall be paidwithin 30days of the service of notice otherwise assessee shall

be deemed in default and liable to paysimple intt at 1%for every month or part of a month from the day immediately following the end

of the period till the day on which amount is paid

note: where A.O. believe that it will be deterimental to revenue then he may reduces the time period of 30 days

2 Where as result of an appeal,revision,set-comm the amount on thich interest was paid/payable u/s 220 is reduced, the intt shall be reduced accordingly

3 The CCIT /CITmayreduce or waivethe amount of interest paid/payableby an assessee if he is satisfied that -

i) payment of such amounthascausedor would cause genuine hardshipto the assesseeii) default in the payment of the amount was due to circumstances beyond the control of the assessee

iii) the assessee has co-operatedin inquiry

4 A.O has power to extend the time for payment or allow payment by installments,subjects to such conditions

5 If,in a case where payment by installments is allowed as per point no. 4, the assessee commits defaults in paying any one of installments

within time fixed , assessee shall be deemed to be in default as to whole of the amount

6 point no 7 on pg. 159 imp.

7 "CASES" which can be refered to ITSC-Any proceedings for * assessmentof any previous yearwhich is ** PENDING beforean A.O. on the date on whichan application is made to ITSC

*assessment means proceesings u/s 143(3)/144/153A

**case becomes pending if SCN is issued in case of 143(3),144. and in case of 153A the notice issued for six previous year and P/Y in which

search is conducted the date shall first day of the A/Y

note: in case of 153A it is mandatory to go with six year to ITSC

8 ITSChas powerto grant immunityfrom penalties and prosecutions

9 No appealis possible against the order of ITSCby department or Assessee

10 imp In following casesassessee shall notallow to make applicationbefore the ITSC -

a)Assessement/Reassessment proceedings u/s 147

b)Proceedings for making fresh assessment where original assessment was set aside or cancelled by 254,263,264

11 Application for settlement of cases

An assessee may at any stageof a case relating to him, make an application to the ITSC containing

a)a full and true disclosure of his incomewhichhas not beendisclosed before A.O.

b)amannerin which such incomehas been derived

c)the additional amountoftax payableon such incocomeis -

Provided that- no such application shall be made unless-

i) In case of6 A/Y plus 1 A/Y (u/s 153A),the additional amountof tax payableon the income disclosedin the appliationexceeds Rs. 5000000 (exl intt)

ia) I

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572915 57700 Direct Tax Short Notes for CA Final Student

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