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India: Lessee equalisation charge as deduction; redemption of stock appreciation

India: Lessee equalisation charge as deduction

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).


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  • Lessee equalisation charge as deduction: The Supreme Court of India allowed a deduction of a lease equalisation payment relating to the lease (rental) income in accordance with a guidance note from the Institute of Chartered Accountants of India. The Supreme Court agreed with the guidance note, particularly when there was no express bar under the provisions of the Income-tax Act, 1961. The case is: Virtual Soft Systems Ltd. Read a May 2018 report [PDF 730 KB]
  • Redemption of stock appreciation rights not taxable: The Supreme Court held that an amount received on redemption of “stock appreciation rights” prior to the amendment of section 17(2) of the Income-tax Act, 1961 is not taxable. However, since the transaction in this case pertained to period prior to the amendment, that transaction is not covered under the clause, absent an express provision of retrospective effect. The case is: Bharat Patel. Read a May 2018 report [PDF 745 KB]
  • Lump-sum allowance paid an employee without proof of accommodation expenses: The Hyderabad High Court held that in order for an allowance to qualify as not taxable, it must have been specifically made related to the performance of office duties. Mere reimbursement to meet the high cost of accommodation and other personal expenditures while on assignment would not qualify as not taxable under the Income-Tax Act, 1961. The case is: Sun Outsourcing. Read a May 2018 report [PDF 723 KB]
  • Waiver of loan as capital asset not taxable as business income: The Supreme Court held that waiver of a loan made for the purchase of a capital asset is not taxable as income under section 28(iv) of the Income-tax Act, 1961, because the benefit or perquisite arising from the business are in the form of cash or money. In order to invoke the provision of section 28(iv), the benefit that is received must be in some other form than money. The case is: Mahindra and Mahindra Ltd. Read a May 2018 report [PDF 758 KB]
  • Reassessment proceedings cannot be on basis of change of opinion: The Supreme Court held that the initiation of reassessment proceedings by the Assessing Officer is not allowed if it was based on a “change of opinion” and under the same facts and circumstances that were already known during the original assessment proceedings. Accordingly, the reassessment proceedings were set aside. The case is: TechSpan India Private Limited & Anr. Read a May 2018 report [PDF 721 KB]
  • Expenditure excluded from “export turnover” also excluded from “total turnover”: The Supreme Court held that expenditures such as freight, telecommunication, and insurance attributable for delivery of software excluded from the “export turnover” must also be excluded from the “total turnover” for computing deduction under section 10A of the Income-Tax Act, 1961. Similarly, the expenditure incurred in foreign exchange for providing the technical services outside India are also to be excluded from the “total turnover.” The case is: HCL Technologies Ltd. Read a May 2018 report [PDF 568 KB]

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