Income TaxTax Planning Exotic Tax PlanningV

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The Tax Publishers Income Tax--Tax Planning Exotic Tax Planning--V Srivatsan Ranganathan The learned author presents some domestic innovative/exotic tax planning derived from case law. 1. Claiming interest paid on the loans under Section 57(ii) against the interest on the fixed deposit receipt Chandrakant R. Agrawal v. PCIT/ITA No. 380/Mum/2020/A.Y. 2016-16/Mumbai ITAT/Against the Assessee/dated 22-1-2021 : 2021 TaxPub(DT) 0521 (Mum-Trib), was a case where the Assessees over exuberance to do tax planning bombed in the box office. Assessee had certain fixed deposits which he pledged and took some loans for investing in certain business requirements. He claimed the interest paid on the loans under Section 57(ii) against the interest on the fixed deposit receipt on the contention that they were inextricably connected to the earning of interest thus on real income concept only the net income ought to have been taxed. This plea was accepted by assessing officer in favour of the assessee in a scrutiny assessment under Section 143(3). Subsequently the case was reopened by the PCIT under Section 263 on grounds that allowing such interest expense was erroneous and prejudicial to the interests of the revenue. This reopening under Section 263 was questioned by assessee before ITAT -- Held against the assessee that the assessing officer by not considering a confirmed decision of the Apex Court the order was definitely erroneous and prejudicial to the interests of the revenue so the reopening was held to be correct. Referred -- n CIT v. Dr. V.P Gopinathan (2001) 248 ITR 449 (SC) : 2001 TaxPub(DT) 1197 (SC). 2. Disallowance under Section 40A(3) : Whether applies to depreciation Application or use cash payments hit by Section 40A(3) for acquiring fixed assets was the topic of interest in Daawat Foods Ltd. v. ACIT/ITA No. 4158/Del/2013 (for A.Y. 2008-09)/Del ITAT/Favour of the Assessee : 2021 TaxPub(DT) 397 (Del-Trib). The CBDT Circular No. 34 (F. No 13A/92/69-IT(A-II) dated 5-3-1970 was read into the decision where in only expenditure which is claimed or an allowable spend was in the realm of Section 40A(3). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Tax Planning

Exotic Tax Planning--V

Srivatsan Ranganathan

The learned author presents some domestic innovative/exotic tax planning derived from case law.

1. Claiming interest paid on the loans under Section 57(ii) against the interest on the fixed deposit receipt

Chandrakant R. Agrawal v. PCIT/ITA No. 380/Mum/2020/A.Y. 2016-16/Mumbai ITAT/Against the Assessee/dated 22-1-2021 : 2021 TaxPub(DT) 0521 (Mum-Trib), was a case where the Assessees over exuberance to do tax planning bombed in the box office.

Assessee had certain fixed deposits which he pledged and took some loans for investing in certain business requirements. He claimed the interest paid on the loans under Section 57(ii) against the interest on the fixed deposit receipt on the contention that they were inextricably connected to the earning of interest thus on real income concept only the net income ought to have been taxed. This plea was accepted by assessing officer in favour of the assessee in a scrutiny assessment under Section 143(3). Subsequently the case was reopened by the PCIT under Section 263 on grounds that allowing such interest expense was erroneous and prejudicial to the interests of the revenue. This reopening under Section 263 was questioned by assessee before ITAT --

Held against the assessee that the assessing officer by not considering a confirmed decision of the Apex Court the order was definitely erroneous and prejudicial to the interests of the revenue so the reopening was held to be correct.

Referred --

n CIT v. Dr. V.P Gopinathan (2001) 248 ITR 449 (SC) : 2001 TaxPub(DT) 1197 (SC).

2. Disallowance under Section 40A(3) : Whether applies to depreciation

Application or use cash payments hit by Section 40A(3) for acquiring fixed assets was the topic of interest in Daawat Foods Ltd. v. ACIT/ITA No. 4158/Del/2013 (for A.Y. 2008-09)/Del ITAT/Favour of the Assessee : 2021 TaxPub(DT) 397 (Del-Trib). The CBDT Circular No. 34 (F. No 13A/92/69-IT(A-II) dated 5-3-1970 was read into the decision where in only expenditure which is claimed or an allowable spend was in the realm of Section 40A(3).