A recent post here discussed the decision of the ITAT Special Bench at Kolkata in Shree Capital Services v. ACIT, commenting on its relevance for derivative transactions in India. Another detailed examination of the decision, and of the legal issues surrounding the taxation of derivatives, is now available here. In sum, the author argues- “[a] Firstly, prior to the insertion of clause [d] by...
Accounting Standards under the New Companies Bill
Recent posts have discussed the issue of ‘true and fair view’ and whether compliance with accounting standards necessary translated into meeting this standard laid down in the Companies Act. This makes it interesting to note that the new Companies Bill, apart from specifically stating that Accounting Standards are mandatory (proposed section 117(1)), also provides for them being incorporated in...
Capital Gains and the Cost of Acquisition
A recent post examined the decision of the Bombay High Court in Techno Shares which adopted a new stance on the law of depreciation. Soon after this decision, the Mumbai Bench of the Income Tax Appellate Tribunal seems to have marked another point of departure in relation to the taxation of capital assets, this time on the issue of capital gains tax. The issue before the Tribunal in Bomi S...
True and Fair Accounting
Recent events like Satyam and the economic recession have thrown up several issues about appropriate accounting and auditing practices, discussed here and here. In this context, it is interesting to note a decision of the United Kingdom Queen’s Bench in Macquarie Internationale Investments Ltd. v. Glencore UK Ltd., [2009] EWHC 2267 (Comm). Macquarie Internationale Investments had acquired an...
A Change in the Law of Depreciation
A recent decision of the Bombay High Court in CIT v. M/s Techno Shares & Stocks Ltd. seems to have greatly narrowed down the scope of depreciation under the Income Tax Act. Although the issue before the Court was only whether depreciation can be granted on a Bombay Stock Exchange Membership Card, the rationale of the decision is likely to have significant implications for the law of...
The Revival of Housing Derivatives
An article in the latest issue of the Economist discusses the revival of housing derivatives, and its close connection with the recent financial meltdown. The idea first surfaced in 2006, when housing derivatives were available as futures contracts on the Chicago Mercantile Exchange. However, the housing bubble, and the fact that these were available only for sophisticated investors, reduced...
Scope of Deductions under the Income Tax Act
Two recent decisions of the Income tax Appellate Tribunals have provided important guidelines on the scope of the deductions under the Income Tax Act. One deal with what expenditures cannot be deducted on grounds of being ‘prohibited by law’, and the other dealt with the extent to which foreseeable losses could be allowed as deductions prior to their crystallisation. The first of these was a...
A Dubious Interpretation of Dharmendra Textile
Three earlier posts have discussed the decision of the Supreme Court in Dharmendra Textile v. Union of India, and how two benches of the ITAT, in Pune and Bombay, have attempted to narrow down the scope of the decision. This reading down has been done in cases where the fact scenarios did not come strictly within the scope of Dharmendra, and involved a stretching of the principles laid down in...
Service Tax on Renting Immovable Property
A recent decision of the Delhi High Court in Home Solution Retails v. Union of India has caused some interesting issues concerning service tax to resurface. Admittedly, the law laid down by the Court is not new. However, the factual backdrop of the decision, and the debate it has given rise to, make the decision potentially significant. The question before the Court was whether the renting of...
Obama’s ‘Taxing’ Proposals
On Monday (4th May, 2009), the United States President, Barrack Obama announced the proposed implementation of another one of his election promises, targeted towards improving the domestic economic climate, and freeing up financial resources for investment in areas of pressing importance. The proposal is to withdraw the scheme of deferred tax for foreign income, currently in place in the U.S...
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