Recent important tax caselaws / judgements

SECTION 36(1)(vii)

BAD DEBTS

Conditions precedent : Deduction on account of bad debts was allowable to assessee since debts were outstanding since long and assessee wrote off same as irrecoverable in its books - Radhu Palace v. Additional Commissioner of Income-tax (2014) 41 taxmann.com 281 (Delhi - Trib.)     SECTION 37(1) BUSINESS EXPENDITURE - ALLOWABILITY OF Bad debt : Where trade advances becoming unrealizable, provision was made and profit was loss account was debited in earlier year, same was to be allowed when written of in subsequent year - Commissioner of Income-tax v. Indian Explosives Ltd. (2014) 41 taxmann.com 264 (Calcutta) SECTION 41(1) REMISSION OR CESSATION OF TRADING LIABILITY Time-barred liabilities : Where assessee had outstanding creditors for goods and Assessing Officer made addition in income of assessee under section 41(1) on basis that with respect to 14 creditors liability was outstanding for more than three years, Assessing Officer was not justified in his view - Commissioner of Income-tax v. Puridevi Mahendrakumar Chaudhary (2014) 41 taxmann.com 329 (Gujarat)       SECTION 54F CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE Construction : Where consideration received on transfer of property had been invested by assessee in construction of residential house, merely because construction was not complete in all respects within stipulated period, benefit of section 54F, should not be rejected - Income-tax Officer v. Smt. B.S. Shanthakumari (2014) 41 taxmann.com 325 (Bangalore - Trib.)       SECTION 251 COMMISSIONER (APPEALS) - POWERS OF Power to admit additional evidence : Where assessee was prevented by sufficient cause in not appearing before Assessing Officer while framing assessment due to confusion relating to jurisdiction of Assessing Officer, in such circumstances, Commissioner (Appeals) as well as Tribunal relying upon additional evidence produced by assessee were justified in deleting a part of addition made by Assessing Officer - Commissioner of Income-tax v. Safari Bikes Ltd. (East) (2014) 41 taxmann.com 282 (Punjab & Haryana)       SECTION 271(1)(c) PENALTY - FOR CONCEALMENT OF INCOME Surrender of income : Where Assessing Officer had conducted enquiries into matter of sale of shares prior to surrender made by assessee and duly established on record that said share transactions were sham and bogus, he was justified in levying penalty under section 271(1)(c) in respect of addition made for those transactions - Deputy Commissioner of Income-tax v. Mukesh Kumar Agarwal, (HUF) (2014) 41 taxmann.com 269 (Agra - Trib.)    Source : Taxmann

WHETHER HINDU UNDIVIDED FAMILY (HUF)/ITS KARTA CAN BECOME PARTNER/DESIGNATED PARTNER (DP) IN LIMITED LIABILITY PARTNERSHIP (LLP)

SECTION 5 OF THE LIMITED LIABILITY PARTNERSHIP ACT, 2008 - PARTNERS - WHETHER HINDU UNDIVIDED FAMILY (HUF)/ITS KARTA CAN BECOME PARTNER/DESIGNATED PARTNER (DP) IN LIMITED LIABILITY PARTNERSHIP (LLP)

GENERAL CIRCULAR NO. 13/2013 [F.NO. 1/13/2012-CL-V], DATED 29-7-2013

It has come to the notice of the Ministry that some Hindu Undivided Families (HUFs)/Kartas of such families are applying to become partner/ Designated partner (DP) in LLPs and a question has arisen whether a 'HUF' or a karta can be allowed to do so. The matter has been examined in consultation with Ministry of Law.

2. As per section 5 of LLP Act, 2008 only an individual or body corporate may be a partner in a Limited Liability Partnership. A HUF cannot be treated as a body corporate for the purposes of LLP Act, 2008. Therefore, a HUF or its karta can not become designated partner in LLP.

3. This issues with the approval of Secretary, MCA