Originally posted by : Ashish
	My Answer for Q4 c) The Land was held by assessee as stock in trade and not as Capital Assets. so Capital Gain..... It will be under PGBP, as stock is sold/ Transfered. Now relating to year of taxability. The transfer in nature of Sec53A of Transfer of Immovible Property Act.... So it'll be Charge in AY 20010-11.

but i think power of attorney is enough. i have read it some where in singhania book.......

Here the asset is held as Stock.... so question of Capital Gain. Sale of aStock is charged under PGBP.

Question no.4(c) The question is not happily worded.The questions asks the students to state the assessment year in which the capital gain is chargeable to tax, though it is stated that land was held by Ram as stock-in-trade for 10 years. This must have created confusion to the students. If the land was held by Ram as his stock-in-trade, then the provision of section 2(47) shall not apply. Section 2(47) defines transfer in relation to capital asset only and not transfer in relation to stock-in-trade. Transfer of stock falls within the scope of Chapter IV-d (profits and gains of business and profession). Therefore the provision of section 2(47) i.e.transfer includes transaction involving allwoinf of the possession of any immovable property to be taken or retained in part performance of contract referred to in section 53A of the Transfer of Property Act is not applicable at all. Therefore, if the property was held as stock, the sale is complete on registration of the property in the name of the buyer. In that case the profit ( and not capital gain) is taxable in assessment year 2011-12 as the registration took place in April, 2010. It is, however, possible to argue that on the basis of principle of substance over form, profit should be charged to tax in the assessment year 2010-11 as the risk and reward of ownership was transferred on handing over the possession.In the case of CIT vs. Realset Builders & Services Ltd 307 ITR 202(SC) the Supreme Court held that the method of accounting regularly followed by the seller should be considered.

my friend car is not a asset see vinod gupta sirs amendment module on taxation of Gift 

Amit,

The case law CIT vs.Larsen & Toubro 313 ITR 1(SC) is available in the Select Cases 2009 published by Board of Studies of ICAI for students.

However, citing case law is not necessary. If your answer is correct you shall be awrded full marks even if case law is not cited.

In case the car was received in July 2009, it is a case of capital receipt not liable to tax.

Even if the car was received in December 2009 (i.e. after amendment of section 56(2) by the Finance (No.2) Act, 2009), the position does not change. Section 56(2) as amended provides that where movable property is received without consideration or for inadeuate consideration from any person other than specified relatives, etc., then the fair market value of the property or excess of fair market value over the actual consideration is cherged to tax under the head "income from other sources". Ther moveable properties specified in section 56(2) are shares and securities, jewellery, archaeological collections, drawings, paintings, scupture and any work of art. Motor car is not included within the scope of section 56(2). Hence, no tax liabilty would arise to Mr.Pervez.

Question 4(a)

Section 92C as amended with effect from 1st October, 2009 by the Finance (No.2) Act, 2009 provides that where more than one price is determined by the most appropriate method, the amrm's length price shall be taken to be the arithmetical mean of such prices. However, if the variation between the ALP so determined and the transaction price does not exceed 5% of the transaction price, then the transaction price shall be deemed to be the ALP.

In this case two prices i.e Rs.48 and Rs.56 have been found by using the most appropriate method. The trnsfer price is Rs.50. The arithmetic mean of the prices found is Rs.52. The variation between the arithmetic meand and the transfer price is (52 - 50) /50 x 100 i.e 4%. Thus the trannsfer price of Rs.50 is to be taken as ALP.

Question 7(c)

As per section 194C as amended from 1st October, 2009 the term "work" does not include manufacturing or supplying a product according to the requirement or specificatin of a customer by using material purchased from a person, other than such customer. In such case TDS is not required under section 194C. Such transaction is merely a transaction of purchase of goods.

In this case Bharathi Cements Ltd. purchased jute bags with its logo and address printed on them from Raj Kumar & Co. But Raj Kumar & Co did not use any material supplied by Bharthi Cements Ltd. It used the materials supplied by third party. therefore the transaction is purchase of goods by Bharthi Cements Ltd from Raj & Co. Hence Bharthi Cements Ltd is not required to deduct tax at source under section 194C.

Question No.7(a)

Section 55A provides that with a view to asertaing the fair market value of a capital asset for the purposes of Chapter IV-E, the AO may refer the valuation to a valuation officer where the value of the asset as claimed by the assessee is as per the estimate made by a registered valuer and he is of the opinion that the value so claimed is less than fair market value and in any other case if he is of the opinion the fair market  value of the asset exceeds the value claimed by the assessee 15% or Rs.25,000.

It appears that the power under section 55A can be exercied by the AO to ensure that the consideration for transfer of capital asset is not understated i.e it should not be less than fair market value on the date of transfer. In this case the AO is of the opinion that FMV as on 1st April, 1981 is less than what is adopted by the assessee. It seems that on this ground the AO is not empowered to refer thevaluation as on 1st April, 1981 to the valuation officer. The FMV as on 1st April, 1981 as adopted by the assessee should be accepted by the AO.Moreover section 142A cannot be invoked as the same empowers the AO to refer the valuation to the valuation officer to estimate the value of the assets / articles referred to in sections 69, 69A and 69B.

GOOD TRY

Thanks dear Barun for your active Participation.anybody can explain about sec.14A question i.equs.7 (b)

Dear Barun  many of us have wrongly treated car as property and written the answer not taxable in first case n taxable in second case .is there any chance to get 2 marks out of 4.

Of course Amit. In that case 2 marks will be awarded if for that part 2 marks are allotted.

Question7(b)

Section 14A provides that for the purpose of computation of total income under Chapter IV (i.e the cpater dealing with computation of total income under five heads of income), no deduction shall be allowed in respect expenditure incurred by the assessee in relation to income which does not form part of the total income under the Income-tax Act. Deductions from gross total income are covered in Chapter VI-A.

There is difference between exemption under Chapter III (i.e sections 10 to 13B) and deduction under Chapter VI-A. If any income is exempted under section 10, such income does not enter into computation of total income. On the other hand, if any income qualifies for deduction under Chapter VI-A, such income is first included in gross total income and then deduction is to be allowed from gross total income. For example if income of a new industrial undertaking is deductible under section 80-IB, such income is first included in gross total income and thereafter dedcution under section 80-IB is allowed from gross total income.

In case income is exempted under section 10 , any expendture incurred in relation to such income is to be disallowed under section 14A, because the income is not included in total income at all.

In case of deduction under Chapter VI-A first income is to be included in gross total income. Such income is not exempted from tax under Chapter III. Such income is first to be computed under respective provisions after allowing all expenditure in earning such income. Finallly deduction under Chapter VI-A in relation to such income is to be allowed.

Therefore, section 14A cannot be applied to disallow expenses in relation to income which deduction is available under Chapter VI-A. Section 14A can be applied only to disallow expenditure incurred in relation to income which is exempted under Chapter III i.e section 10.

Dear Barun kindly clearify qus.3(d) & 6 (a)