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2010 (10) TMI 664 - AT - Income TaxExemption u/s. 10{38)(b) - sale of equity shares - Sec. 10(38)(b) provides exemption to an income arising from the transfer of a long-term capital asset being equity share in a company where such transaction is chargeable to securities transaction tax - Since, assessee contended that it had sold shares through M/s Kodak Securities Ltd. on the regular stock exchanges and securities transaction tax has been paid - Exemption allowed - Decided in favour of assessee. Bad debts written off - the AO has misdirected herself in treating the claim of the assessee under s. 36(1)(viia)(c) of the Act, whereas it was a claim made under s. 36(1)(vii) of the Act. - the claim of the assessee made under s. 36(1)(vii) is required to be examined in the context of provisions contained in s. 36(2)(i) of the Act. Therefore, to this extent, we set aside the order of the CIT(A) and direct the AO to examine as to whether the conditions specified under s. 36(2)(i) of the Act are satisfied or not. Revenue succeeds for statistical purposes. Bifurcation of amount received from defaulters into principal and interest - A sum of Rs. 2,06,22,367 was found credited under the head 'Current liabilities' in the balance sheet. - This amount was received from various parties against pending settlement of their cases - Held that:- the AO has made generalized observations without pointing out any reasons to interfere with the regular accounting system followed by the assessee. There is no material to establish as to in what manner the system of accounting followed by the assessee with respect to the impugned amounts, does not lead to proper deduction of income. The CIT(A), in our view, is correct in observing that till the final settlement of accounts with the defaulting borrowers, it is not possible for the appellant to bifurcate interim payments made by the defaulting borrowers between principal and interest till such time the settlement is finally reached. Dividend income - exemption u/s 10(34) - AO disallowed the claim on the ground that the assessee was engaged in financing industrial units and therefore, dividend earned on shares was related to its business activity and hence the same is to be treated as income from business. The exemption was thus denied. - Held that:- AO erred in denying the exemption on facts and in law.- the shares were held as investment and the same were not acquired in the course of financing industrial units - exemption u/s 10(34) allowed.
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