CPT V24P7-Art1 (Content).pmd - Taxmann

The High Court held in favour of assessee -
It was held that it is place of first receipt of
income which is material for purposes of
determining place of accrual under section
5(1)(i). Therefore, place of receipt of an income
is place where it is received by assessee in its
character of income; mere transfer of said amount
thereafter from one bank account to another
bank account cannot be considered as receipt
of income, because one cannot receive income
from himself. Therefore, income arising to
assessee from sale of property in the UK could
not be brought to tax in India.
No Section 11 exemption if trust invests
funds to buy shares of founder’s associated
company
In ITO v. KAS Foundation [2012] 23
taxmann.com 292 (Chennai - Trib.), main object
of assessee-trust was micro-financing of rural
people. Assessee borrowed ` 20 lakhs on interest
from a bank and invested same in a private
company ‘J’. Assessee was paying interest on
money borrowed but received no benefit from
company ‘J’. Assessee’s investment in company
‘J’ was found to be approximately 10 per cent
of subscribed and paid-up share capital of ‘J’.
Further, founders of assessee-trust had substantial
interest in company ‘J’. On noticing it, the AO
held that assessee had violated provisions of
sections 13(1)(d)(iii) and 13(2)(h) and, therefore,
was not eligible for exemption under sections
11 and 12.
The Tribunal held in favour of revenue - It
held that as per the facts of the case assessee
borrowed money and instead of financing in
rural areas he invested the same in the company
‘J,’ where the founders of the assessee-trust
were having substantial interest, which was
contrary to the object of which the registration
was granted to the assessee under section 12AA.
Apart from the above, the assessee was paying
interest on money borrowed without receiving
any benefit from ‘J’. It was evident that contrary
to its objects assessee invested the borrowed
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funds in private company ‘J,’ where the founders
had a substantial interest. Therefore, the assessee
had violated the provisions of section 13(1)(d)(iii).
The AO was correct in holding that assessee
was not eligible for exemption under sections
11 and 12.
Supply of news by agencies to a newspaper
co. is ‘professional service’ and invites
section 194J and not section 194C
In Asstt. CIT v. Ushodaya Enterprises (P.)
Ltd. [2012] 23 taxmann.com 258 (Hyderabad
- Trib.), assessee-company was engaged in
publishing of newspapers. It made payments
to various news service agencies and deducted
TDS under section 194C from said payments.
During assessment the AO held that those
payments would fall under section 194J and
not under section 194C. Consequently, he raised
demand to extent of difference of tax liable
to be deducted under section 194J and that
under section 194C. On appeal, the CIT(A)
upheld the order passed by the AO.
The Tribunal held in favour of revenue - It was
held that work carried out by newspaper agents
required professional qualifications and skills
and, therefore, TDS had to be deducted from
aforesaid payments under section 194J and
not under section 194C. Therefore, payments
made by newspaper company to news agencies
were liable for deduction of tax at source under
section 194J. In the result, the Tribunal upheld
the demand.
Income from transfer of shares by a
promoter along with ‘not to compete’
agreement with the transferee is taxable
as business income
In Sumeet Taneja v. Addll. CIT [2012] 23
taxmann.com 403 (Chd. - Trib.), assessee was
a promoter/MD of a company ‘E’, which carried
on business of running a call centre. Assessee
had sold all his shares to another company ‘P’
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 73
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