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This is about tax on 'advances' already received
under JDA ;
Taxation whereof, -aseesee (s) having been a willing party and
conceded,- has been left
undisturbed.
undisturbed.
Leaving one thoroughly confused; as the conclusion
reached, if read with / having regard the host of observations and crucial
findings, is incomprehensible, being
prima facie incongruent.
In short, the
already prevailing controversies galore, in the matter of CGT on JDA in general, seems to have been
further muddled up.
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Transfer Pricing: Even if the loan to the 100% subsidiary
is intended to be a long term investment in the subsidiary and it has a crucial
role to play in the assessee's business plans, it cannot be treated as
"quasi capital". The ALP of the loan has to be determined on the
basis of LIBOR interest
The expression ‘quasi capital’ is relevant from the point
of view of highlighting that a quasi-capital loan or advance is not a routine
loan transaction simplictor. The substantive reward for such a loan transaction
is not interest but opportunity to own capital. As a corollary to this
position, in the cases of quasi capital loans or advances, the comparison of
the quasi capital loans is not with the commercial borrowings but with the
loans or advances which are given in the same or similar situations
Development Agreement: Tax implications of entering into
a development agreement in respect of land held as stock-in-trade explained
What the assessee has got today is only a right to sell
the 1,28,940.26 fts of constructed area in the Alexandria project and the
profits, howsoever certain they may appear to be, will only fructify and be
realized, and can even be quantified, only when this right is exercised- in
part or in full. That stage has not yet come, and until that stage comes, such
profit cannot be taxed
S. 56(2)/ 68: Old liabilities, even if treated as genuine
in earlier years and even if on capital account, are liable to be assessed as
"income" in year of write-back if assessee is unable to provide
confirmations and substantiate genuineness of liabilities
When an amount, which is stated, claimed and accepted as
a payable, is no longer so, the assessee gains to that extent. There is nothing
unreal or notional about this gain. What is admitted though is that there has
been remission/cessation of liability in-as-much as these are no longer
payable. Why? No reason is advanced. It is under these circumstances that the
law permits the A.O. to draw an adverse inference of it as representing the
assessee’s income. As regards the year, there can again be little doubt in the
matter
S. 80-IB(10): To be the "developer" of a
housing project, the assessee has to undertake the entrepreneurship risk in
execution of the project. He need not be the owner of the land. S. 40(a)(ia):
The amendment is clarificatory and retrospective w.e.f. 01.04.2005
In order to answer the question as to whether the
condition precedent for deduction under section 80IB has been satisfied
inasmuch as whether or not the assessee is engaged in “developing and building
housing projects”, all that is material is whether assessee is taking the
entrepreneurship risk in execution of such project. When profits or losses, as
a result of execution of project as such, belong predominantly to the assessee,
the assessee is obviously taking the entrepreneurship risk qua the project and
is, accordingly, eligible for deduction under section 80IB(10) in respect of
the same. The assumption of such an entrepreneurship risk is not dependent on
ownership of the land
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