MLM / Chain Money
TMC MP arrested in chit fund scam
Trinamool Congress MP Sudip Bandyopadhyay was on Tuesday arrested by the CBI in the Rose Valley Chit Fund scam, an official said.
 
He was summoned by the Central Bureau of Investigation (CBI) and was arrested at the agency's regional office after questioning, an agency official said.
 
According to CBI sources, this was the Trinamool leader's third summoning for questioning in connection with his alleged role in the scam.
 
Bandyopadhyay, who was summoned twice in December last year by the CBI, skipped the meeting, pleading his engagement at the parliamentary session.
 
The agency that is investigating the ponzi scheme scam has already interrogated another Trinamool Congress MP, Tapas Paul for his alleged involvement in the case.
 
Paul was arrested on December 30 and later shifted to Bhubaneswar for further interrogation.
 
TMC national spokesperson Derek O'Brien said Trinamool MPs will protest against the Centre in New Delhi on Wednesday.
 
"Some MPs will reach Delhi Parliamentary Party Office tomorrow (on Wednesday) at 2.30 p.m. to protest against this financial emergency, this complete emergency and political vendetta started by the central government," Derek said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  

 

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Segregating transactions in cash and futures segment against taxation law: ITAT
In a landmark decision, the Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that provisions of the Income-tax Act cannot be interpreted to the disadvantage of the assessee and segregating transactions in cash and future segment is against the spirit of the taxation law.
 
"...the peculiarity of the business of the assessee is such that the transactions carried out by the assessee in cash segment and in future segment cannot be segregated. The business of the assessee survives on the ultimate resultant figure arrived at after setting off/adjusting of the profit and loss from each segment. It cannot be said that the transactions in each segment done by the assessee are independent of each other," the ITAT Bench of GS Pannu and Sanjay Garg said in on order dated 28 December 2016.
 
ITAT was hearing a case related with JM Financial Services Ltd and the Joint Commissioner of I-T for Assessment Year 2009-10. The Assessing Officer (AO) has refused to allow deemed speculation loss of Rs25.96 crore saying that JM Financial has wrongly set off a speculation loss against a non-speculative income. The Commissioner of Income Tax (Appellate) (CIT (A) had asked the AO to delete the addition of this deemed speculation loss. 
 
During the course of assessment proceedings, the AO had asked JM Financial to give a break up of cash and future arbitrage, which was duly furnished by JM Financial. The AO thereafter sought an explanation as to why the loss from cash segment should not be disallowed as per Explanation to section 73. 
 
JM Financial vide letter dated 19 December 2011 submitted that the activity of buying and selling of shares in cash segment and future segment was a composite activity carried out by it. The transactions are so managed that if there is a loss in one segment, there is a profit in the other segment. However, after netting off of the corresponding losses and profits from both the segments, the resultant figure will be a positive figure. That is, in the end, JM Financial will get profits, it added. 
 
JM Financial also filed 20 samples of cash and future arbitrage with the AO. The AO was of the view that futures and option transactions were non-speculative as per section 43(5). However, he considered loss on purchase and sale of shares as speculative loss as per Explanation to section 73 of the Act. After considering direct expenses incurred for the said activity, the AO held the loss of Rs25.96 crore as speculation loss. Being aggrieved by the above order of the AO, JM Financial filed an appeal before the CIT (A).
 
JM Financial filed additional evidences under Rule 46 A showing that in respect of the sale in derivative segment, an equal number of shares were purchased in cash segment. JM Financial also filed details of corresponding sale in cash segment and purchase in derivative segment.
 
The AO vide letter dated 16 January 2013 submitted Remand Report and informed the CIT(A) that transactions cannot be considered to be arbitrage transactions as ‘arbitrage’ means buying or selling in the same commodity in different markets to take advantage of price difference. But in cash segment and futures & options (F&O) segment, the scrip of same company will have different character. One is delivery based and another is non-delivery based.
 
The AO vide letter dated 12 March 2014 stated that there were many instances where purchase and sale were not squared off on the same date. JM Financial submitted that there were instances when a scrip was purchased in the cash segment but the required quantity was not available on futures segment or vice versa. In such circumstances, the purchase was squared off to match the purchase in cash segment against sale in futures segment. It was also submitted that at times, purchase of huge quantity may not be available either in cash segment or futures segment on the same day. Accordingly, purchase/sale had to be done in instalments carried on to the next day/days, JM Financial said.
 
After considering the submissions of JM Financial, the CIT (A) held that arbitrage transactions were excluded from the definition of speculation as per clause (d) of section 43(5). It also held that the said clause did not refer to delivery or non-delivery based transactions. He further observed that the AO had applied the proviso (d) to section 43(5) only to a part of jobbing/ arbitrage activity i.e. ‘F&O’ segment, and that such selective application was not permissible.
 
However, this matter then reached the ITAT Bench. 
 
According to the appellate bench, if JM Financial manages its transactions of sale and purchase of shares in the cash segment and in the futures segment as a composite business, the transactions cannot be segregated to arrive at profit or loss in each segment separately. 
 
It noted that JM Financial is in the arbitrage business and purchases shares in one segment and simultaneously sells the same shares in the other segment and when the price parity reduces, the transactions is reversed in both the segments, which is a normal hedging practice. "All the four legs of the transaction have to be consolidated arid then only the profit/loss can be derived which is the essential ingredient of the arbitrage/ jobbing transactions," the Bench observed.
 
"...certain exceptions have been carved out under section 43(5) vide which certain transactions in derivative named as ‘eligible transactions,’ done on a recognised stock exchange, subject to fulfilment of certain requirements, are deemed to be non-speculative. The said provisions have been inserted in the Act for the benefit of the assessees keeping in view the fact that in such type of transactions on recognised stock exchange, the chance of manipulating and thereby adjusting the business profits towards speculative losses by JM Financial is negligible because such transactions are done on recognised stock exchange and there are less chances of manipulation of figures of profits and losses." 
 
"These provisions have been inserted for the benefit of the assessee so that the assessee may be able to set off and adjust his profit and losses from derivatives in commodities against the normal business losses. These provisions are intended to ease out the assessee from the difficulties faced due to the stringent provisions separating the speculative transactions from the normal transactions. However, these exclusions given to the assessee cannot be allowed to be so interpreted to the disadvantage of an assessee so as to give it a different meaning and thereby denying the assessee the set off of otherwise eligible business loss from one segment as against the other segment, especially when the activity done by the assessee is a composite activity and profit and loss in one segment not only depends but the very transaction is done taking into consideration not ‘expected’ but certain future profit or loss in other segment," the Bench said in its order.

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Income earned by seafarer overseas is not taxable in India: Calcutta High Court
In a landmark judgement, especially for the seafarer community, the Calcutta High Court has held that income earned by a marine engineer for services rendered for 286 days overseas is not liable to be taxed in India. 
 
In an order (WP No369 of 2014), dated 15 December 2016, Justice Debangsu Basak, says, "In the impugned order, the Commissioner notes that, the income received by the petitioner is in respect of services rendered for 286 days outside India. The Commissioner exercising powers under Section 264 of the Act of 1961 could have proceeded to grant appropriate relief to the petitioner by setting aside the intimation under Section 143(1) of the Act of 1961 and holding that, such income of the petitioner is not taxable in respect of the relevant assessment year. The Commissioner, however, did not do so. It has remanded the matter to the assessing officer to do the needful. ...therefore, the intimation under Section 143(1) of the Act of 1961 dated 7 December 2012 as well as the order under Section 264 dated 25 September 2013 are set aside."
 
The case is related to Utanka Roy, a marine engineer who worked a foreign shipping company during the assessment year 2011-2012. Giving his status as non-resident Indian (NRI), he filed his income tax returns for AY11-12, disclosing a remuneration of Rs5.63 lakh, received in US dollars. However, he was issued an assessment order-cum-intimation under Section 143(1). He did not file an appeal, but applied under Section 264 of the Income Tax Act claiming that he had worked as an engineer with a foreign company for 286 days during AY11-12.
 
During the hearing under Section 264, he claimed that he had received Rs27.92 lakh from his employer during AY11-12 instead of Rs5.63 lakh as stated earlier. On 25 September 2013, his appeal was disposed of. The order finds that Roy's income was assessable under the I-T Ac, but did not compute any tax liability. It also noted that Roy did not claim any exemptions, thus allowing the Assessing Officer to take necessary action.
 
Roy then filed an appeal in the High Court. He contended that under the present facts, he is exempt from payment of I-T. 
 
The scope of total income is laid down in Section 5 of the I-T Act. Sub-Section (1) deals with the income of a person who is resident in India while Sub-Section (2) deals with income of a person who is a non-resident. Roy was a non-resident during AY11-12. 
 
Section 5(2) of the Act of 1961 is as follows: 
 
“(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.- Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.- For the removal of doubts, it is hereby declared that income, which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India.” 
 
The Calcutta HC said it has to be found out where the income o the person concerned had accrued. "For the purpose of finding out the place of accrual of the income, the place where the services have been rendered becomes material. In fact, the place where the income gave rise is required to be considered to arrive at a finding whether the income was in India or outside India," it stated.
 
The HC said, "The question whether the petitioner has rendered services in India or not is a question of fact. It is not disputed that the petitioner as a marine engineer had rendered services outside India for the period of 286 days. He has received his remuneration for such work from a foreign company. Consequently, the income received by the petitioner for services rendered outside India has to be considered as income received out of India and treated as such."
 
There was an anomaly in the income received by Roy during AY11-12 as, in his ITR, he stated Rs5.63 lakh as his income, while in the proceedings under Section 264, he claimed to have received Rs27.92 lakh. The HC said, "In view of the finding that the petitioner has received the remuneration from a foreign company for services rendered outside India, the quantum that he claims to have received, namely, Rs27.92 lakh has to be considered as such."
 
The HC said powers conferred on the Commissioner under Section 264 are very wide. "The Commissioner has the discretion to grant or refuse reliefs. There is nothing in Section 264 which places any restriction on the Commissioner’s revision power to grant relief to the assessee in a case where the assessee detects a mistake on account of which he was over-assessed after the assessment was completed," it concluded while disposing off the petition.
 

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COMMENTS

D S Ranga Rao

5 months ago

Poor IT Dept. They have lost a big catch!! Big fry like Mallya, etc., in any way, is out of their reach; but, even this small fry is also off their hook! What to do now?

REPLY

Kishore Gopal

In Reply to D S Ranga Rao 5 months ago

Dear Mr. Rao,
One must note that seafarers spend a good amount of their time away from their family and are not land lubbers. It takes ages for them to get used to lawlessness in the country. Majority of the Seafarers are involved in lots of charity work which is never taken cognisance. The seaaring community is a very small community which does its best in representing the country in international waters . The amount of money earned by people on land are way more than an average seafarer earns and they all take exemptions under various sections of IT. If people and IT dept had so much to think of the nation, catch the corrupt and the corporate and leave the dying middle class alone.

D S Ranga Rao

In Reply to Kishore Gopal 5 months ago

My dear friend, sorry, you have missed the sarcasm in my comment and hence mistaken me. How can i hail the IT Dept. move to hammer the small fry like seafarers leaving the big scamsters and fraudsters scotfree, when my own son, D. Pawan is a Master Mariner(5693TSC)?

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