Rosneft acquire Essar Oil 49.13% stake

A consortium led by Rosneft  announced the completion of a $12.9B deal to acquire Essar Oil, strengthening ties between the world's largest oil producer and the fastest growing fuel consumer. Rosneft will get a 49.13% stake in Essar, while the Trafigura-UCP consortium via Kesani Enterprises will get another 49.13% holding. The remaining 1.74% stake will be held by retail shareholders.

Moody downgrade China's rating

China's great wall of debt! Moody's has lowered the nation's credit rating to A1 from Aa3, citing Beijing's waning financial strength and rising liabilities. It marks the first time a major ratings agency has downgraded the country in more than 25 years. The move also received a backlash from China's finance ministry, which said the decision was "absolutely groundless" and was based on an "inappropriate calculation method."

President Trump's first budget proposal

President Trump's first full budget proposal lands on lawmakers' desks, with a proposed $3.6T in spending cuts over the next decade. Congress will still be allowed to spend $4.1T in 2018, including a big boost to defense, border security and infrastructure, while cutting Medicaid, food stamps and other social programs. The plan also calls for selling half of the nation's Strategic Petroleum Reserve and permitting drilling in the Alaska refuge.

S. 54/ 54F: There is no requirement that the investment in the new residential house should be situated in India prior to the amendment by the Finance (Nos.2) Act, 2014 w.e.f. 01/04/2015

ITO vs. Nishant Lalit Jadhav (ITAT Mumbai)

A similar situation, though in the context of section 54F of the Act, has been considered by the Hon’ble Gujarat High Court in the case of Smt.Leena J. Shah (supra); notably, so far as the impugned issue is concerned, the requirement of sections 54F & 54F of the Act is pari-materia, inter-alia, requiring the assessee to make investment in a new residential house in order to avail the exemption on the capital gains earned. As per the Hon’ble High Court, prior to the amendment the only stipulation was to invest in a new residential property and that there was no scope for importing the requirement of making such investment in a residential property located in India

S. 56(2)(vi): A HUF is a "group of relatives". Consequently, a gift received from a HUF by a member of the HUF is exempt from tax as provided in the Explanation to s. 56(2)(vi)

DCIT vs. Ateev V. Gala (ITAT Mumbai)

From a plain reading of section 56(2)(vi) along with the Explanation to that section and on understanding the intention of the legislature from the section, we find that a gift received from “relative”, irrespective of whether it is from an individual relative or from a group of relatives is exempt from tax under the provisions of section 56(2)(vi) of the Act as a group of relatives also falls within the Explanation to section 56(2)(vi) of the Act. It is not expressly defined in the Explanation that the word “relative” represents a single person. And it is not always necessary that singular remains singular. Sometimes a singular can mean more than one, as in the case before us. In the case before us the assessee received gift from his HUF. The word “Hindu Undivided Family”, though sounds singular unit in its form and assessed as such for income-tax purposes, finally at the end a “Hindu Undivided Family” is made up of ‘a group of relatives”

Transfer Pricing: Law explained as to when the “Resale Price Method” (RPM) can be used with respect to related parties under Rule 10B (1)(b) + Law on determining arm’s length rate of the corporate guarantee commission/fee explained

Zee Entertainment Enterprises Ltd vs. ACIT (ITAT Mumbai)

The Transfer Pricing Officer has selected RPM as most appropriate method for determining the arm’s length price of the transaction of sale of programmes and film rights to ATL in contrast to the TNM method selected by the assessee. The first controversy is as to whether the Transfer Pricing Officer was justified in selecting the RPM as most appropriate method. Section 92(1) of the Act provides that the arm’s length price in relation to the international transaction shall be determined by any of the methods prescribed therein, being the most appropriate method. Notably, the phraseology of section 92C(1) of the Act makes it clear that the selection of the most appropriate method is to be made “having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors………………..”. Further, Rule 10B of the Rules enumerates the various methods to determine the arm’s length price of an international transaction and for the present purpose, what is relevant is clause(b) of Rule 10B(1) of the Rules, which prescribes the manner in which the RPM is to be effectuated.

S.14A disallowance has to be made also with respect to dividend on shares and units on which tax is payable by the payer u/s 115-O & 115-R. Argument that such dividends are not tax-free in the hands of the payee is not correct. S. 14A cannot be invoked in the absence of proof that expenditure has actually been incurred in earning the dividend income. If the AO has accepted for earlier years that no such expenditure has been incurred, he cannot take a contrary stand for later years if the facts and circumstances have not changed

Godrej & Boyce Manufacturing Co Ltd vs. DCIT (Supreme Court)

While it is correct that Section 10(33) exempts only dividend income under Section 115-O of the Act and there are other species of dividend income on which tax is levied under the Act, we do not see how the said position in law would assist the assessee in understanding the provisions of Section 14A in the manner indicated. What is required to be construed is the provisions of Section 10(33) read in the light of Section 115-O of the Act. So far as the species of dividend income on which tax is payable under Section 115-O of the Act is concerned, the earning of the said dividend is tax free in the hands of the assessee and not includible in the total income of the said assessee. If that is so, we do not see how the operation of Section 14A of the Act to such dividend income can be foreclosed. The fact that Section 10(33) and Section 115-O of the Act were brought in together; deleted and reintroduced later in a composite manner, also, does not assist the assessee. Rather, the aforesaid facts would countenance a situation that so long as the dividend income is taxable in the hands of the dividend paying company, the same is not includible in the total income of the recipient assessee. At such point of time when the said position was reversed (by the Finance Act of 2002; reintroduced again by the Finance Act, 2003), it was the assessee who was liable to pay tax on such dividend income. In such a situation the assessee was entitled under Section 57 of the Act to claim the benefit of exemption of expenditure incurred to earn such income. Once Section 10(33) and 115-O was reintroduced the position was reversed. The above, actually fortifies the situation that Section 14A 44 of the Act would operate to disallow deduction of all expenditure incurred in earning the dividend income under Section 115-O which is not includible in the total income of the assessee.

Article 5 India-UK DTAA: Entire law on what constitutes a "permanent establishment" in the context of the 'Formula One Grand Prix of India' event explained after extensive reference to case laws, OECD Model Convention and commentary by Philip Baker, Klaus Vogel and other experts

Formula One World Championship Limited vs. CIT (Supreme Court)

The term “place of business” is explained as covering any premises, facilities or installations used for carrying on the business of the enterprise whether or not they are used exclusively for that purpose. It is clarified that a place of business may also exist where no premises are available or required for carrying on the business of the enterprise and it simply has a certain amount of space at its disposal. Further, it is immaterial whether the premises, facilities or installations are owned or rented by or are otherwise at the disposal of the enterprise. A certain amount of space at the disposal of the enterprise which is used for business activities is sufficient to constitute a place of business. No formal legal right to use that place is required. Thus, where an enterprise illegally occupies a certain location where it carries on its business, that would also constitute a PE. Some of the examples where premises are treated at the disposal of the enterprise and, therefore, constitute PE are: a place of business may thus be constituted by a pitch in a market place, or by a certain permanently used area in a customs depot (e.g. for the storage of dutiable goods). Again the place of business may be situated in the business facilities of another enterprise. This may be the case for instance where the foreign enterprise has at its constant disposal certain premises or a part thereof owned by the other enterprise. At the same time, it is also clarified that the mere presence of an enterprise at a particular location does not necessarily mean that the location is at the disposal of that enterprise.

China's 2017 outlook brightened as export rose 16.4% Y/Y

China's 2017 export outlook brightened after the government reported better than expected trade growth for March and as U.S. President Trump suddenly declared China is not a currency manipulator. China's exports rose at the fastest pace in more than two years in March, up 16.4% Y/Y, while import growth remained strong at 20.2%; the country's crude oil imports hit a record high of nearly 9.2M bbl/day. Analysts said the stronger trade data reinforces the growing view that economic activity in China has remained resilient and that global manufacturing is improving.

The yuan climbed to its biggest one-day advance vs. the dollar in nearly three months after President Trump abandoned his earlier pledge to name China a currency manipulator and said the dollar was too strong. China equities are higher, also enjoying a boost from news of stronger than expected growth in exports. But Japan’s Nikkei average lost as much as 1.3% to its lowest level since December, as the yen hit five-month highs against the dollar. European bourses also are lower in the early going as the euro strengthens vs. the dollar.

Though Explanation 2 of s. 147 authorizes the AO to reopen an assessment wherever there is an "understatement of income", the AO is not entitled to assume that there is "understatement of income" merely because the assessee's income is "shockingly low" and others in the same line of business are returning a higher income. The invocation of the jurisdiction u/s 147 on the basis of suspicions and presumptions cannot be sustained

Rajendra Goud Chepur vs. ITO (AP & T High Court)

Without any concrete facts, reopening cannot be ordered merely on the presumption that the returned income is very shockingly lower than the total gross receipts. Therefore, we are of the considered view that the Assessing Officers completely erred in reopening assessments on the basis of either a suspicion that there is suppression of income or on the basis that persons in the same line of business are returning a higher income. Without even mentioning the comparables, no initiation of proceedings under Section 147 can be made

A disallowance u/s 14A & Rule 8D has to be made even in respect of securities that are held as stock-in-trade by the assessee. However, the disallowance has to be computed by taking into consideration only those shares which have yielded dividend income in the year under consideration

Kalyani Barter (P) Ltd vs. ITO (ITAT Kolkata)

The object of s. 14A is to disallow the direct and indirect expenditure incurred in relation to income which does not form part of the total income. There is no dispute that part of the income of the assessee from its business is from dividend which is exempt from tax whereas the assessee was unable to produce any material before the authorities below showing the source from which shares were acquired. The mere fact that those shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest is payable by the assessee for acquiring those old shares.

Bogus share capital/ premium: The proviso to s. 68 (which creates an obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. Prior thereto, as per Lovely Exports 317 ITR 218 (SC), if the AO regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit

CIT vs. Gagandeep Infrastructure Pvt. Ltd (Bombay High Court)

The proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced “for removal of doubts” or that it is “declaratory”. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso.

CBDT Clarifies Imp Law On Cash Transaction Limits Imposed By Sections 269ST And 271DA

The CBDT has issued a press release dated 5th April 2017 by which it has provided important clarification regarding the restriction imposed on cash transaction by sections 269ST & 271DA inserted by the Finance Act 2017 to the Income-tax Act. These sections provide that no person (other than those specified therein) shall receive an amount of two lakh rupees or more (a) in aggregate from a person in a day; (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.The CBDT has clarified that the said cash transaction limit of Rs 2 lakh will not apply to withdrawal from banks, cooperative bank and post offices

Trump Requests Cuts To Medical Research

New media reports indicate the Trump administration is seeking to cut funding for the National Institutes of Health (NIH) this fiscal year. Proposed fund would go into the construction of border wall and military spending.

Earlier in the month, President Donald Trump had released his budget for next year, in it, NIH saw cuts of close to 20 percent in funding for medical research.

Now it appears the president is asking congress to cut $1.2 billion from research grants within the agency for this fiscal year, which ends in October. Bloomberg and Politico reported on the $18 billion in cuts to “discretionary spending bills.”

S. 35D: Premium collected by a company on subscribed share capital is not “capital employed in the business of the Company" within the meaning of s. 35D so as to enable the claim of deduction of the said amount as prescribed u/s 35D

Berger Paints India Ltd vs. CIT (Supreme Court)

Capital employed in the business of the company is the aggregate of three distinct components, namely, share capital, debentures and long term borrowings as on the dates relevant under sub-clauses(i) and (ii) of Clause(b) of the explanation extracted above. The term ‘long term borrowing’ has been defined in clause (c) to the explanation. It is nobody’s else that the premium collected by the Company on the issue of shares was a long term borrowing either in fact or by a fiction of law. It is also nobody’s case that the premium collected by the Company was anywhere near or akin to a debenture. What was all the same argued by the counsel for the appellant was that premium was a part of the share capital and had therefore to be reckoned as ‘capital employed in the business of the company’. There is, in our view, no merit in that contention.

High Stakes for HealthCare Votes

The odds of getting an Obamacare replacement bill passed by the House improved late Wednesday as the White House reportedly offered to get rid of the set of minimum benefits health insurers are now required to provide customers. That could win over some members of the Freedom Caucus ahead of today's crucial health care vote, which investors see as a litmus test for President Trump's broader plans and trade on Wall Street.

S. 32: Title to immovable property cannot pass when its value is more than Rs.100/- unless it is executed on a proper stamp paper and is also duly registered with the sub-Registrar. Accordingly, a lessee cannot be said to be the "owner" for purposes of claiming depreciation. Under Explanation 1 to s. 32, the lessee is entitled to depreciation on the cost of construction incurred by him but not on the cost incurred by the owner and reimbursed by the lessee

Mother Hospital Pvt. Ltd vs. CIT (Supreme Court)

We are in agreement with the view taken by the High Court. Building which was constructed by the firm belonged to the firm. Admittedly it is an immovable property. The title in the said immovable property cannot pass when its value is more than Rs.100/- unless it is executed on a proper stamp paper and is also duly registered with the sub-Registrar. Nothing of the sort took place. In the absence thereof, it could not be said that the assessee had become the owner of the property. As is clear from the plain language of the Explanation, it is only when the assessee holds a lease right or other right of occupancy and any capital expenditure is incurred by the assesee on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension of or improvement to the building and the expenditure on construction is incurred by the assessee, that assessee would be entitled to depreciation to the extent of any such expenditure incurred. In the instant case, records show that the construction was made by the firm. It is a different thing that the assessee had reimbursed the amount. The construction was not carried out by the assessee himself. Therefore, the explanation also would not come to the aid of the assessee

S. 41(1)/ 115JB: Entire law explained whether remission of a loan can be assessed as income u/s 41(1) and if not whether the same can be added to "book profit" for purposes of MAT tax u/s 115JB

JSW Steel Ltd vs. ACIT (ITAT Mumbai)

Waiver of loan taken for acquisition of a capital asset and on capital account cannot be taxed u/s 41(1), as it is neither on revenue account nor a remission of a trading liability so as to attract tax in the year of remission. A capital surplus thus, in respect of waiver of loan amount cannot be regarded as being amount available for distribution through the profit & loss account. This follows from the very definition of expression ‘capital reserve’ that it must be accounted directly to the credit of the capital reserve account instead of being credited to the profit & loss account so as to ensure that it is not left for being distributed through the profit & loss account

S. 9(1)(i): The capital gains arising on transfer by a foreign company of shares in another foreign company holding assets in India is liable to tax in India. The argument that the transfer is a mere re-organisation of assets within the group and that there is no “real income” is not acceptable. The argument that the India-UK DTAA should be given a “static” interpretation and that the retrospective amendment to s. 9 by the Finance Act 2012 should be ignored is also not acceptable. Where the DTAA provides that the income shall be chargeable to tax in accordance with the provision of the domestic law, the said domestic law has to be the amended law

Cairn UK Holdings Ltd vs. DCIT (ITAT Delhi)

Coming to the decision of the Hon’ble Delhi High Court in case of DIT Vs. New Skies Satellite BV wherein the Hon’ble High court has held that in relation to applicability of Article 3(2) of the relevant DTAAs, that it can apply only to terms not defined in the DTAA. Since the relevant DTAAs in the case before them defined ‘royalty’, Article 3(2) could not be applied. For terms which are defined under the DTAA, there is no need to refer to the laws in force in the Contracting States, especially to deduce the meaning of the definition under the DTAA. Further, the court has held that neither act of parliament supply or alter the boundaries of DTAA or supply redundancy to any part of its. Similarly, according to us, the provisions of DTAA where it simply provides that particular income would be chargeable to tax in accordance with the provisions of domestic laws, such article in DTAA also cannot the limit the boundaries of domestic tax laws. In view of this, we do not find any force in the argument of the assessee and dismiss ground No. 3.12 of the appeal

Real Interest rates on the rise

The record high stock market, trend of rising inflation and encouraging jobs numbers add up to future interest rate increases by the Federal Reserve.

The real yield on a 10-year TIPS has risen 29 basis points in recent weeks.At the same time, the inflation breakeven rate has declined - slightly.The driving force? A rise in nominal rates, which will nearly always pull the TIPS yield higher.

The rate hikes in 2017 would bring the Fed's Federal Funds Rate - a key short-term rate across financial markets - at least to 1.50% from the current 0.75%. A comparable increase in the 10-year nominal Treasury would bring its yield up to 3.35%. At that point a 10-year TIPS would be yielding somewhere around 1.10% to 1.20%.

Of course, it's possible that a higher short-term rate won't result in higher yields for TIPS. But in an environment of rising short-term rates, rising inflation, rising employment and higher asset prices, TIPS yields should also rise. I'd consider a yield above 1.00% on a 10-year TIPS a pretty good investment in 2017.

Health Care sector of the S&P closed lower yesterday

On Tuesday morning President Donald Trump continued his campaign to bring down drug prices in the United States by tweeting he was now working on a new system for the market. “There will be competition in the Drug Industry,” 

As reported by Reuters shares of Pfizer (NYSE:PFE) and Merck (NYSE:MRK) shed 1.1 percent, and Amgen (NASDAQ: AMGN) dropped 1.4 percent. While the Nasdaq Biotechnology index (INDEX NASDAQ:NBI) was 1.4 percent lower, while the NYSE Arca Pharmaceutical index (INDEX NYSE GIS:DRG) fell 1.2 percent.

The tweet comes on the heels of the announcement of the Republican bill set to dismantle and replace the Affordable Care Act, commonly referred as Obamacare,the proposal would create a new tax credit tied to a person's age and income for those who cannot get insurance through their employer, and would restructure the country's Medicaid program. The healthcare sector of the S&P 500 closed 0.4% lower yesterday, but over the last three months it's up more than 10%.

Capital gains: While s. 2(42A) uses the term "held", the other provisions use the terms "acquired", "purchased" and "owner". Accordingly, for considering whether an asset is a "long-term capital asset", the period of holding must be computed on a de facto basis. The letter of allottment, even though not "ownership", must be taken as the date of holding the asset

Anita D Kanjani vs. ACIT (ITAT Mumbai)

Perusal of the definition of the term “short-term capital asset” in section 2(42A) shows that the legislature has used the expression ‘held’. It is further noted by us that in various other allied or similar sections, the legislature has preferred to use the expression ‘acquired’ or ‘purchased’ e.g. in section 54 / 54F. Thus, it shows that the legislature was conscious while making use of this expression. The expressions like ‘owned’ has not been used for the purpose of determining the nature of asset as short term capital asset or long term capital asset. Thus, the intention of the legislature is clear that for the purpose of determining the nature of capital gain, the legislature was concerned with the period during which the asset was held by the assessee for all practical purposes on de facto basis. The legislature was apparently not concerned with absolute legal ownership of the asset for determining the holding period. Thus, we have to ascertain the point of time from which it can be said that assessee started holding the asset on de facto basis

Snap will price its IPO

Snap will price its IPO after today's market close in the most eagerly awaited tech offering since Alibaba (NYSE:BABA) went public in 2014. Reports suggest pricing could be $1-$2 above its $14-$16 marketing range, which would result in a valuation of $19.5B-$22.3B from listing on the NYSE. In September, the company changed its name to Snap (Pending:SNAP) from Snapchat to reflect its intent to branch out into myriad products, like Spectacles and a recently reported drone.

Apple (NASDAQ:AAPL) will soon start assembling the 4-inch iPhone SE at its new Bengaluru plant, a facility that's being set up by contract manufacturer Wistron (OTC:WICOF). The company is targeting an initial production of 300K-400K units, according to the Economic Times, and will go ahead with the plan without waiting for the government’s nod on a list of tax concessions.

Eurozone Finance Ministers and the IMF seem likely to miss next week's deadline to agree on a €7B bailout for Greece. The two sides remain at loggerheads over an IMF demanded that Athens be granted debt relief and easier surplus targets, meaning a pact may now be months away. While Greece won't face bankruptcy trouble until July, eurozone officials were racing to strike a deal so the drama wouldn't be forced into the upcoming Dutch and French elections.

More trouble,meanwhile,as Spain's public debt rose by €6.3B in December. According to Reuters' calculations using National Statistic Institute data for gross domestic product, that increase meant debt as a percentage of economic output stood at 100% at the end of 2016. The government said in a statement it estimated the year-end rate at 98.98%, using its latest GDP forecasts.

Transfer Pricing - Meaning of “Associated Enterprises”: The fact that an enterprise can “influence prices and other conditions relating to sale” does not make it an “associated enterprise” of the assessee if it does not participate in the (a) capital, (b) management, or (c) control of the assessee and thus does not fulfil the basic rule u/s 92A(1). S. 92A(2)(i) has to be read with s. 92(A)(1). Even if the conditions of s. 92A(2)(i) are fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of s. 92A(1) are not fulfilled

Orchid Pharma Limited vs. DCIT (ITAT Chennai)

The definition of ‘associated enterprise’, as the above academic analysis shows, has two approaches- wider approach and narrow approach. A narrow approach to the concept of associated enterprises takes into account only “de jure” association i.e. though formal participation in the capital or participation in the management. A wider approach to the concept of ‘associated enterprises’ takes into account not only the de jure relationships but also de facto control, in the absence of participation in capital or participation in management, through other modes of control such as commercial relationships in which one has dominant influence over the other. This wider concept is clearly discernible from the principles underlying approach to the definition of ‘associated enterprises’ in the tax treaties and has also been adopted by the transfer pricing legislation in India in an unambiguous manner. There is no other justification in the Indian transfer pricing legislation, except the participation in capital of an enterprise, management of an enterprise or control of an enterprise, which can lead to the relationship between enterprise being treated as ‘associated enterprises’. What essentially follows is that clause (i) of Section 92A(2) has, at its conceptual foundation, de facto control by one of the enterprise over the other enterprise, on account of commercial relationship of its buying the products, either on his own or through any nominated entities, from such other enterprise and in a situation in which it can influence the prices and other related conditions. The wordings of clause (i), however, do not reflect this position in an unambiguous manner inasmuch as it does not set out a threshold of activity, giving de facto control to the other enterprise engaged in such commercial activity, in percentage terms or otherwise- as is set out in clause (g) and (h) or, for that purpose, in all other operative clauses of Section 92A(2)

The Fed kept Interest rate on hold.

The Fed kept interest rates on hold at its January policy meeting, its first since Donald Trump assumed the presidency, but said "measures of consumer and business sentiment have improved of late." The FOMC's next policy meeting will take place on March 14,Meanwhile, the market is now trapped in another rate decision session, this time at the Bank of England, which will release its policy statement, minutes and inflation. 

India is a " bright spot'' in the world economy

The Finance Minister Arun Jaitley said as he unveiled his annual budget, adding that the impact on growth from the government's cash crackdown would wear off soon. Still, the finance ministry forecasts that growth could dip to as low as 6.5% in the current fiscal year to March, before picking up slightly in the coming fiscal year to between 6.75%-7.5%.

The Federal Reserve is expected to keep interest rates unchanged today in its first policy decision since President Trump took office, as the central bank awaits greater clarity on his economic policies. Trump has promised greater infrastructure spending, tax cuts, less regulations and a renegotiation of trade deals, but has offered few details or a timeline for their roll out.

The IMF believes that Greece debt is "explosive" and "highly unsustainable," reaching 275% of GDP by 2060 unless the country's loans are significantly restructured. The assessment, prepared ahead of an IMF board meeting on Feb 6, is significantly more pessimistic than that of Greece's eurozone creditors and underscores the difficulty of the fund moving ahead with a bailout.

More Quantitative Easing on table, as Japan's economy is struggling to maintain its inflation target.

The Bank of Japan is still ways away from its 2% inflation target. December's core consumer price index - which excludes fresh food - fell 0.2% on year, marking the 10th consecutive month of decline. The yen also came under downside pressure overnight, as the BOJ increased its buying in 5- to 10-year bonds, sending a message that a tapering of its asset purchase program isn't on the table.

S. 45/48: The AO is not bound to accept the consideration stated in the sale deed. In a case where property is sold between arm’s length parties at a gross undervaluation, the onus is on the assessee to explain and if there is no explanation, the AO is entitled to draw an inference. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. However, if the AO does not allege that the assessee received more consideration than is stated in the sale deed, he cannot made an addition to the stated consideration (George Henderson 66 ITR 622 (SC) & Gillanders Arbuthnot 87 ITR 407 (SC) explained)

Pr. CIT vs. Quark Media House India Pvt. Ltd (P&H High Court)

The judgments in CIT v. George Henderson & Co. Ltd. (1967)66 ITR 622, Commissioner of Income Tax, Calcutta v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407 undoubtedly hold that the expression “full value of the consideration” cannot be construed as the market value but as the price bargained for by the parties to the sale. It is necessary for the Assessing Officer to ascertain as to what was the price bargained for by the parties to the sale. The judgment, however, does not support the further submission of the assessee that the price stated in the sale-deed must irrespective of anything also be considered to be the sale price for the purpose of computing the capital gain. In our view this absolute proposition is not well founded. The Assessing Officer must determine whether the price stated in the agreement for sale is in fact the price bargained for by the parties thereto. In other words, the full value of the consideration is neither the market value nor necessarily the price stated in the document for sale but the price actually arrived at between the parties to the transaction. If therefore it is found that the price actually arrived upon between the parties is not the price reflected in the document, it is the price bargained for by the parties to sale that must be considered for determining the capital gain under section 48. The Supreme Court did not hold that inferences cannot be drawn by the Assessing Officer from the facts established. In fact in paragraph-5 the Supreme Court observed that there was no inferential finding that the shares were sold at the market price of ` 620/- per share. This read with the operative part of the order in paragraph-6 remanding the matter to record a finding as to the actual price received makes it clear that the finding can be based on inferences as well. In paragraph-6 the assessee is given an opportunity to explain the unusual nature of the transaction. It cannot be suggested that even if there was no explanation by the assessee, the Assessing Officer was bound not to draw an adverse inference

S. 9(1)(vi) 'Royalty' on transfer of software rights: There is a difference between sale of a 'copyrighted article' and the 'copyright' itself. S. 9(1)(vi) applies only to the latter and not the former. Explanation 4 inserted by FA 2012 w.r.e.f. 01.06.1976 has to be read and understood only in that context and cannot be expanded to bring within its fold transactions beyond the realm of the provision

CIT vs. Vinzas Solutions India Private Limited (Madras High Court)

The provisions of section 9(1)(vi) as a whole, would stand attracted in the case of the latter and not the former. Explanations 4 and 7 relied by the authorities would thus have to be read and understood only in that context and cannot be expanded to bring within its fold transaction beyond the realm of the provision. The Tribunal has relied on the decision of the Division Bench of the Delhi High Court in the case of The Principal Commissioner of Income Tax V. M.Tech India Pvt Ltd, which supports our view as above. It is brought to our notice that the decision of the Delhi High Court has not been accepted by the Department and an SLP is pending. Be that as it may, in view of the facts and circumstances as observed above, we have no hesitation in dismissing the Departmental Appeal answering the questions of law in favour of the assessee and against the Revenue

S. 92A Transfer Pricing: Important law explained on meaning of expression "associated enterprise". The mere fact that an enterprise has de facto participation in the capital, management or control over the other enterprise does not make the two enterprises "associated enterprises" so as to subject their transactions to the rigors of transfer pricing law

ACIT vs. Veer Gems (ITAT Ahmedabad)

If a form of participation in management, capital or control is not recognized by Section 92A(2), even if it ends up in de facto or even de jure participation in management, capital or control by one of the enterprise in the other enterprise, it does not result in the related enterprises being treated as ‘associated enterprises’. Section 92A(1) and (2), in that sense, are required to be read together, even though Section 92A(2) does provide several deeming fictions which prima facie stretch the basic rule in Section 92A(1) quite considerably on the basis of, what appears to be, manner of participation in “control” of the other enterprise. What is thus clear that as long as the provisions of one of the clauses in Section 92A(2) are not satisfied, even if an enterprise has a de facto participation capital, management or control over the other enterprises, the two enterprises cannot be said to be associated enterprises

India report below 7% growth for four consecutive quarters.

India seems set for four consecutive quarters of sub-7% growth for the first time since at least 2011, according to Societe Generale, as the government's demonetization drive triggers a shortage of cash. The program, introduced in November, impacted 86% of India's currency in circulation by replacing existing 500 ($7.35) and 1,000 ($14.70) rupee notes.

S. 37(1): Stock Options (appreciation rights) are intended to motivate employees and so the expenditure thereon is a deductible revenue expenditure. The discount (difference between market price and vesting price) is allowable upon vesting subject to reversal if the options lapse

Religare Commodities Ltd vs. ACIT (ITAT Delhi)

The discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act

Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were sham or bogus

ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad

Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions. When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee

S. 9(1)(vi)/ 9(1)(vii): Important law explained on whether payment for use of equipment can be assessed as "royalty" and whether payment for rendering of services can be assessed as "fees for technical services" in the context of s. 9(1)(vi) and 9(1)(vii) and Article 12 of the India-Canada DTAA

DCIT vs. Bombardier Transportation India Pvt. Ltd (ITAT Ahmedabad

Article 12(4) provides that, “The term “fees for technical included services” as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein”. In order to invoke article 12(4)(a) it is necessary that such services should “make available” technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design The services provided by BT Canada were simply management support or consultancy services which did not involve any transfer of technology. It is not even the case of the Assessing Officer that the services were such that the recipient of service was enabled to perform these services on its own without any further recourse to the service provider. It is in this context that we have to examine the scope of expression ‘make available’

S. 2(22)(2) Deemed Dividend: The argument that as the shares are issued in the name of the Karta, the HUF is not the “registered shareholder” and so s. 2(22)(e) will not apply to loans paid to the HUF is not correct because in the annual returns filed with the ROC, the HUF is shown as the registered and beneficial shareholder. In any case, the HUF is the beneficial shareholder. Even if it is assumed that the Karta is the registered shareholder and not the HUF, as per Explanation 3 to s. 2(22), any payment to a concern (i.e. the HUF) in which the shareholder (i.e. the Karta) has a substantial interest is also covered

Section 2(22)(e) of the Act creates a fiction, thereby bringing any amount paid otherwise than as a dividend into the net of dividend under certain circumstances. It gives an artificial definition of ‘dividend’. It does not take into account that dividend which is actually declared or received. The dividend taken note of by this provision is a deemed dividend and not a real dividend. Loan or payment made by the company to its shareholder is actually not a dividend. In fact, such a loan to a shareholder has to be returned by the shareholder to the company. It does not become income of the shareholder. Notwithstanding the same, for certain purposes, the Legislature has deemed such a loan or payment as ‘dividend’ and made it taxable at the hands of the said shareholder. It is, therefore, not in dispute that such a provision which is a deemed provision and fictionally creates certain kinds of receipts as dividends, is to be given strict interpretation. It follows that unless all the conditions contained in the said provision are fulfilled, the receipt cannot be deemed as dividends. Further, in case of doubt or where two views are possible, benefit shall accrue in favour of the assessee

With the first trading session of the year on deck, investors are sketching their market predictions for 2017. Which sectors will be hot? Will the oil rally continue? Is the IPO market poised for a comeback? More record M&A? Elections results in France and Germany? How will Brexit turn out? Other trade agreements? Tensions with China, North Korea, Russia, Mexico? Upcoming U.S. monetary policy? How will a Trump presidency shape the markets? Any other stock-related issues ?