Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (6) TMI 352 - AT - Income TaxLTCG treated as STCG – Sale of deep discount bonds – Claim of deduction u/s 54EC of the Act not allowed - Held that:- The holding period has to be counted form the date of allotment till the date of sale and if the same is more than 12 months then, it has to be accepted that it is a LTCG and the assessee is entitled to deduction u/s 54EC also - the period of holding was more than 12 months from the date of allotment i.e. 23.09.2000 till the date of sale i.e. 18.03.2002, the resulting gain has to be assessed as LTCG and the assessee should be held as eligible for deduction u/s 54EC also because there is no other objection of the revenue regarding allowability of deduction u/s 54EC except that the income in question is not a LTCG – Decided in favour of Assessee. LTCG treated as STCG - Sale of principal strip - Claim of deduction u/s 54EC of the Act not allowed – Held that:- Board’s Circular dated 15.02.2002 is applicable only to DDBs acquired on or after 15.05.2002 and since Judicial Member was also having the same view, the matter was decided in favour of the assessee without referring the same to the Third Member although the Accountant Member was having some reservations about the view of the Judicial Member on some other aspects - Board’s Circular No.2 dated 15.02.2002 is applicable only on those bonds which were acquired on or after 15.02.2002 - the strip of TATA Finance Ltd. were acquired by the assessee on 23.03.2000 i.e. much prior to 15.02.2002, it has to be accepted that the board’s Circular No.2 dated 15.02.2002 is not applicable - the gain has to be assessed as LTCG and the assessee has to be allowed deduction u/s 54EC – Decided in favour of Assessee. Method of accounting – Use of Cash System instead of Mercantile system – Held that:- The method of accounting being followed by the assessee is cash and not mercantile - As per sub-section (1) of Section 145, the assessee can follow either cash or mercantile system of accounting regularly in respect of determination of income chargeable under the head 'profits & gains of the business and profession' or 'income from other sources' - the assessee can very much follow cash method of accounting for the purpose of declaring income in respect of DDBs/NCD if the assessee is regularly following cash method of accounting - No Board's circular can override the provisions of the Act and the Board's circular is not an accounting standard notified by the Central Government in the official gazette as required u/s 145(2) of the Income tax Act, 1961 to make out an exception in respect of Section 145(1) - the assessee is following cash method of accounting - the income of the assessee cannot be assessed on the basis of hybrid method of accounting by following mercantile method for assessing income in respect of DDBs/NCD and the remaining income on the basis of cash method of accounting – Decided in favour of Assessee. Addition of notional accrued interest – Optionally fully convertible premium notes – Held that:- The assessee is following cash system of accounting, the additional ground raised by the assessee has to be allowed because once it is held that the assessee is following cash system of accounting, no income on account of interest of OFCPNs can be taxed in the present year on accrual basis and this is admitted fact that no such interest income was received by the assessee in the present year - the rider that the interest income should be taxed in the year in which the same is received by the assessee - Decided partly in favour of Assessee. Addition of accrued interest – Investment in bonds of Rural electrification corporation – Held that:- In the computation of income, it is specifically stated by the assessee as per note that assessee is following cash method of accounting - From the audited accounts and computation of income filed by the assessee along with the return of income, the method of accounting being followed by the assessee is cash and not mercantile - No Board’s circular can override the provisions of the Act and since the Board’s circular is not an accounting standard notified by the Central Government in the official gazette as required u/s 145(2) of the Income tax Act, 1961 to make out an exception in respect of Section 145(1) – there was no merit in the contention of the AO that even if the assessee is following cash method of accounting, the assessee is bound to follow mercantile method of accounting for the purpose of declaring income from DDBs/NCD - assessee is following cash method of accounting – Decided in favour of Assessee.
|