Explanation 5 to Section 32 was specifically made applicable w.e.f. April 1, 2002 and was, therefore, prospective in nature.
| (i) | Commissioner of Income-Tax v. Kerala Electric Lamp Works Ltd. & Anr. [2003] 261 ITR 721, | |
| (ii) | Commissioner of Income Tax v. Sree Senhavalli Textiles P. Ltd. [2003] 259 ITR 77 and | |
| (iii) | Shri Ram Nath Jindal and Shri Jaghjiwan Ram v. The Commissioner of Income-Tax, Haryana, Rohtak [2001] 252 ITR 590 |
Declaratory amendments like “explanation “ inserted to a section are retrospective in nature
(i) CIT, Bombay v. M/s Gwalior Rayon Silk Manufacturing Co. Ltd. [1992] 3 SCC 326
(ii) Commissioner of Income Tax v. M/s Alps Theatre AIR 1967 SC 1437 = [1967] 3 SCR 181
(iii) Commissioner of Income Tax-I, Ahmedabad v. Gold Coin Health Food Private Limited [2008] 9 SCC 622
For Computation of profit linked deductions under Chapter VI-A, depreciation has to be mandatorily reduced even for assessment years prior to Finance Act 2001 inserting Explanation 5 to Section 32
Supreme Court’s own judgment in Mahindra Mills 243 ITR 56 which was sought to be nullified by above amendment can not help assesse in escalating profits because
(Para 18)”………….. Mahendra Mills was rendered while construing the provisions of Section 32 of the Act, as it existed at the relevant time, whereas we are concerned with the provisions of Chapter VI-A of the Act. Marked distinction between the two Chapters, as already held by this Court in the judgments noted above, is that not only Section 80-IA is a code by itself, it contains the provision for special deduction which is linked to profits. In contrast, Chapter IV of the Act, which allows depreciation under Section 32 of the Act is linked to investment. This Court has also made it clear that Section 80-IA of the Act not only contains substantive but procedural provisions for computation of special deduction. Thus, any device adopted to reduce or inflate the profits of eligible business has to be rejected. The assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years. This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits and if the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided under Section 80-IA of the Act which cannot be permitted………………”
Plastiblends India Ltd. [2017] 86 taxmann.com 137 (SC) 09-10-2017
In order to entitle the assessee to earn exemption, it is not enough to allege or show that the land was once an agricultural land at the time of its acquisition and that the assessee should further prove that it was agricultural land at the time of transfer.
Kalpetta Estates Ltd. v. Commissioner of Income Tax [1990] 185 ITR 318
Having obtained Permission to sell the land not cultivated for 4 years and agreements with housing societies the Apex Court accepted the contention of the Revenue that the land was not an agricultural land when it was sold.
Smt. Sarifabibi Mohmed Ibrahim and others v. Commissioner of Income Tax, Gujarat [1993] 204 ITR 631 (SC)]
Sale proceeds of agricultural land and conversion of land by cutting trees into housing plots, brought asset in as stock-in-trade attracts capital gain being transfer u/s 2(47)(iv) rws 45(2)
Synthite Industrial Ltd.[2017] 86 taxmann.com 138 (Kerala)
Where assessee whose business included real estate development purchased a rubber estate to utilize land for non-agricultural purpose and converted said land by cutting trees into housing plots, thus, brought asset in as stock-in-trade and sold those plots to several people for construction of villas, it was held that though property was once an agricultural land, its acquisition was for non-agricultural purposes, assessee did not carry on any agricultural activity in land and at relevant date, viz. date of sale, land had ceased to be an agricultural land, if that be so, assessee could not have claimed that income gained from sale of land was from sale of agricultural land entitling it to exemption from levy of capital gains
There can be no STCG u/50 if assesse is having balance in the block of assets
“……There is no dispute that even after the transfer of the said assets the assessee was still having balance in the block of assets of plant and machinery. Therefore the conditions as stipulated under Section 50 of the Act have not been satisfied so that any capital gain arising in the hand of the assessee can be deemed as per the provisions of Section 50 of the Act. ……….”
ITAT Banglore Bench in Makino India (P.) Ltd. [2017] 86 taxmann.com 139 (Bangalore – Trib.)
Amalgamation taking place retrospectively before transfer of assets to amalgamated company by amalgamating company, No capital gains u/s 50 arise in hands of amalgamating co.
Para 6“…………..though the transfer of block of assets by the erstwhile entity Makino Asia Pte Limited had resulted STCG in the hand of the said entity but it exists only so long there was no merger/amalgamation. Once the merger / amalgamation was effected from 1.4.2002 (vide High Court order dated 19-12-2003)ail the transactions thereafter would be treated as transactions of the new entity post amalgamation. Thus when there is no extinguishment of block of assets of plant and machinery in the hand of the assessee then the transfer of assets in question after 1.4.2002 would not result in deemed capital gain under Section 50 of IT Act. “
Hence with drawl of income offered for STCG pre amalgamation through revised return was held valid by ITAT Banglore Bench in Makino India (P.) Ltd. [2017] 86 taxmann.com 139 (Bangalore – Trib.)