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Define Tax
Mathew v Chicory Marketing Board – Latham CJ of HC, Australia
Characteristics of Tax
1. Compulsion
2. No Quid pro quo
3. Tax is payable in money
4. Public Purpose
Cannons of Taxation
1. Equality and Ability – Adam smith- every state, Equals should be alike
2. Certainty
3. Convenience
4. Economy- expenditure in collecting < Tax
Distinction Between Tax and Fees
S T Swamiar v Commissioner H R & C E – Levy is fees not tax
M/s Krishna lal Lakashmi Chand v State of Haryana- quid pro quo is an ess element of fees
P Kanadasa v State of Tamil Nadu – quid pro quo is irrelevant case of regulatory fees
State of UP v Sitapur packing Wood Suppliers –SC, levy or fee quid pro quo is necessary
By virtue of 96 - List I – Parliament enact Fees
By virtue of 66- List II – parliament enact Fees
By Virtue of 47 of List II – Concurrent List- Both can enact Fees
Surcharge on taxable income- 10% - 50 lac or more up to 1 crore, 15% more than 1 crore,
Edu cess- 3%
Local Authority / Partnership Firm – 30% , 12%surcharge if Taxable income above 1 crore,
3% Edu Cess
Companies
• Domestic – 25% turn over below 50 crores, 30% if above, Sur 7% above on
taxable income, above 10 crore then 12% and Edu cess 3%
• Foreign companies- Royalty -50% of taxable income, Fees for technical -
50%,other earned income -40%, Sur 2% exceeds 1 crore, 3% exceeds 10
crore, 3% edu cess
Cooperative society
Computation
Capital Income and Revenue Income & Capital Expenditure and Revenue Expenditure
Capital Income/ Receipts and Revenue Income
Decided cases
Sharajudeen v CIT – compensation from one partner – capital receipt
Shamseher printing press v CIT- suspension of export license ,capital receipt
MB Tyres v CIT – government acquire building, compensation capital receipt
Raja Giri Rubber and Produce v CIT- subsidy from board is capital receipt
( earlier it was receipt Malayalam Manorama plantation v CIT)
Travancore Rubber and tata Tea company v CIT – advance, old rubber tree sale,
capital receipt
Bikaner Gypsum v CIT – land mining, railway station moved , revenue expenditure
Hindusthan Commercial bank v CIT – Cost of advertisement is revenue expenditure
Ambika mills v CIT – new machinery installation , expense, capital
Sitalpur Sugar works v CIT – shifting machinery , office, capital expenditure
CIT v karandura Development – refitting of plant new premise, revenue expenditure
CIT v Aluminium Corporation – foreign technician , revenue expenditure
Residential Status – sec 6 to 9
1. Taxable entities
a. Individual
b. HUF
c. A firm or association of person
d. Joint Stock companies
e. Every other person
2. An individual and Hindu undivided family either be
a. Resident and ordinarily resident
b. Resident and not ordinarily
c. NRI
3. All other Assesses
a. RI
b. NRI
4. Residential Status of assess is determined from respective previous year
Resident and Ordinarily Resident in India
1. Basic condition ( any one)
a. In India previous 182 days or more
b. In India for period of 60 days or more during the previous or 365 days or more
for the 4 preceding previous year
2. Resident and ordinarily resident in India (both conditions should satisfy)
a. He has been India for at least 2 /10 previous year preceding the relevant
previous year
b. He has been India for total of 730 days or more for 7 years preceding the
relevant previous year
Tax Holiday - 80IA provides income deduction for enterprises in business of developing,
operating or maintaining:
• Infrastructure Facilities
• Telecommunication Services
• Industrial Parks
• Reconstruction of Power Plant
• Distribution of Natural Gas
up to 40K Nil
40k to 60 K 10%
60K to100K 20%
above 100K 30%
Firm – 35%
Foreign company – 80%
Domestic company or co-operative society
up to 25K 35%
25K to 100K 40%
1lac to 3 lac 45%
above 3 lac 50%
Deductions
• Land Revenue
• Local taxes , cess, municipal tax
• Rent paid for land
• Expense incurred for maintenance
• Machinery repair
• Interest paid on loan
Agriculture Income Tax authorities – sec 24
Appellate Tribunal sec 73
V S Nayak v CWT – Title in legal case, but still liable to pay tax
Deemed asset – sec 4
Assets expected from Tax – sec 5