Income Tax officers searched the residence-cum-office of SRK under warrant of authorization dated 17.12.1996 on 18.12.1996 and continued till 19.12.1996. Certain papers, files and two locker keys were seized under Panchanama . Thereafter two warrants of authorization were issued on 23.12.1996 with regard to each of the lockers for which the keys were seized on 19.12.1996. One locker was found empty whereas from the other locker jewellery worth Rs. 6.99 lakhs was found and inventorised under Panchanama dated 23.12.2006. In his statement dated 23.12.2006, SRK explained that most of the jewellery was gifted by his wife's parents and some jewellery was purchased after 31.03.1996 for which time was sought to produce the purchase bills. There was however no mention of said statement in the Panchnama drawn at the residence-cum-office on 23.12.1996. However, he requested the search party not to seize the jewellery and voluntarily offered Rs 4 lakhs as income on account of jewellery over and above his earlier offer of Rs 20 lakhs. Panchanama was drawn on 30th January 1997 and it was mentioned that the search was finally concluded.
ITAT observed that :-
The copy of the authorizations clearly show that the authorization dated 17.12.1996 was in respect of the residence-cum-office of SRK and it was used on 18.12.1996, 23.12.1996 and on 30.01.1997. The copy of the authorizations dated 23.12.1996 clearly shows that the same were used only once for the purpose of searching the lockers on 23.12.1996.
The last of the authorizations issued in the case of SRK dated 23.12.1996 was executed on that day itself. The assessment was required to be concluded within one year from the end of the month in which last of the authorizations were executed. Meaning thereby that as per the provision of section 158BE the assessment was required to be completed by 31st December 1997. Hence the assessment order passed u/s.158BC on 23.01.1998 was barred by time limitation and therefore quashed.
Fidelity case: Profits arising from sale of portfolio investments by FII in India , is not business income - Advance Ruling
THIS is a bunch of 40 cases - all with common questions, a representative sample being the case of Fidelity Hastings Street Trust. The applicant is a scheme of investment fund organized as a Massachusetts Business Trust under the laws of Commonwealth of Massachusetts (USA). It is set up to provide investors a continuous source of managed investments in securities. It is registered under the investment Company Act 1940 of USA and is treated as a Corporation for purposes of taxation in USA . It is registered with the Securities Exchange Board of India (SEBI) as a sub-account of Fidelity Management and Research Company (FMR). On these facts the applicant seeks advance ruling on the following questions:
Whether the profits arising to the "Applicant" from the sale of portfolio investments in India will be treated as business income of the Applicant
Whether the Applicant can be regarded as having a Permanent Establishment ("PE") in India in accordance with Article 5 of the Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income entered into between the Government of the Republic of India and the Government of the United States of America
The germane question in all these applications is : whether securities which are the subject matter of purchases and sales by the applicants, are held by the applicant by way of stock-in-trade so as to give rise to business income or investment in capital assets so as to yield capital gains.
The AAR further observed,
"The circumstances and the framework of the plethora of legislative provisions unmistakably point out that a Fll is not registered for carrying on trade in securities; it can only invest in securities for the purpose of earning income by way of dividends and interest and realizing capital gains on their transfer."
On question no.: (1) on the facts and in the circumstances of the case, the profits arising to the applicants from the sale of portfolio investments in India could not be treated as business income of the applicant.
Question nos: (2) to (4): these are consequential to the ruling pronounced on the first question, so in view of that ruling, these questions do not survive.
Syndicated column by www.taxindiaonline.com