Just a moment...

⚠✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Keyword Search :
AI Tools : New
Ask tax questions in natural language. Powered by AI trained on the TaxTMI legal database. Use AI Tools ➞
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
    6. Text Search
  6. The system will try to fetch results that contains ALL your words.
  7. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
    8. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search ❯
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----❯
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ---- ❯
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    ManualsIncome Tax
    What is the taxability of opening balance as on 1st day of April 2016 of Foreign Currency Translatio...
    ManualsIncome Tax
    Since section 43A is applicable for a foreign currency liability in respect of an asset acquired fro...
    ManualsIncome Tax
    How to recognise the exchange difference In respect of transactions that are settled beyond the end ...
    ManualsIncome Tax
    How are foreign exchange differences to be recognized.
    ManualsIncome Tax
    What is the manner in which foreign currency transactions are to be recorded.
    ManualsIncome Tax
    What is the treatment of expenditure incurred on test runs.
    ManualsIncome Tax
    What is the value at which fixed assets are to be recorded as per ICDS V relating to tangible fixed ...
    ManualsIncome Tax
    If the taxpayer sells a security on the 30th day of April 2017. The interest payment dates are Decem...
    ManualsIncome Tax
    Does ICDS-IV apply to interest received by an assessee on compensation or on enhanced compensation.
    ManualsIncome Tax
    Whether ICDS is applicable to revenues which are liable to tax on gross basis like interest, royalty...
    ManualsIncome Tax
    The condition of reasonable certainty of ultimate collection is not laid down for taxation of intere...
    ManualsIncome Tax
    How revenue from leases and hire purchase transactions will be recognised.
    ManualsIncome Tax
    Since there is no specific scope exclusion for real estate developers and Build -Operate- Transfer (...
    ManualsIncome Tax
    Whether the costs incurred for securing the contract would have to be claimed in the year of incurre...
    ManualsIncome Tax
    What is the treatment of incidental income that arises from construction contract.
    ManualsIncome Tax
    Does proviso to section 36(1)(iii) apply on construction contract i.e. interest paid on capital borr...
    ManualsIncome Tax
    whether the recognition of retention money, receipt of which is contingent on the satisfaction of ce...
    ManualsIncome Tax
    What is the manner of recognizing contract revenue during the early stages of a contract.
    ManualsIncome Tax
    What is the manner of recognition of revenue and expenses from construction contracts under ICDS III...
    ManualsIncome Tax
    How to deal with a case where contract revenue is not recorded in the books of account, but offered ...
❮
❯
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Open Link
    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    ManualsIncome Tax
    What is the taxability of opening balance as on 1st day of April 2016 of Foreign Currency Translatio...
    Show AI Summary
    Taxability of foreign currency translation reserve: opening FCTR to be included in income unless previously recognised, requiring professional judgment.
    The opening balance of the Foreign Currency Translation Reserve (FCTR) as on 1 April 2016 relating to exchange differences on monetary items for non integral foreign operations shall be recognised in the relevant previous year as income to the extent not previously included in income computation; the correctness of this recognition is debatable and requires appropriate professional judgment because conversion does not create real income and ICDS treatment may not apply to earlier years.
    ManualsIncome Tax
    Since section 43A is applicable for a foreign currency liability in respect of an asset acquired fro...
    Show AI Summary
    Foreign currency liabilities treatment: exchange differences on monetary items hit profit or loss; non monetary differences not taxable or deductible.
    Section 43A does not apply to foreign currency liabilities for purchase of assets in India; such liabilities are governed by ICDS VI. Per ICDS VI para 5(i), exchange differences on monetary items are recognised in the profit and loss account, whereas exchange differences on non monetary items are neither taxable nor deductible.
    ManualsIncome Tax
    How to recognise the exchange difference In respect of transactions that are settled beyond the end ...
    Show AI Summary
    Exchange difference recognition requires periodic recognition until final settlement, treated as income or expense for monetary items.
    Exchange differences on monetary transactions settled after the end of the previous year must be recognised in each intervening period up to final settlement, with exchange gain or loss on settlement treated as income or expense, except for items relating to nonintegral foreign operations.
    ManualsIncome Tax
    How are foreign exchange differences to be recognized.
    Show AI Summary
    Foreign exchange differences: monetary item gains and losses recognised as income or expense, non-monetary conversion differences excluded.
    Exchange differences on monetary items (cash and assets or liabilities receivable or payable in fixed or determinate amounts of money) arising on settlement or on the last day of the financial year must be recognised as income or expense of that year. Exchange differences on non-monetary items arising on conversion at the last day of the year are not to be recorded as income or expense for that year.
    ManualsIncome Tax
    What is the manner in which foreign currency transactions are to be recorded.
    Show AI Summary
    Foreign currency transaction recording: use transaction-date exchange rate or a stable weekly/monthly average when fluctuations are insignificant.
    Under ICDS VI, a foreign currency transaction must be initially recorded in the reporting currency using the exchange rate on the transaction date; if rates do not fluctuate significantly from actuals, a weekly or monthly average rate may be used instead.
    ManualsIncome Tax
    What is the treatment of expenditure incurred on test runs.
    Show AI Summary
    Capitalization of test-run and commissioning expenditure: pre-commercial costs capitalized, post-commercial costs treated as revenue excluding general overheads.
    Expenditure on start-up and commissioning, including test runs and experimental production, must be capitalized as part of the cost of the tangible fixed asset until commercial production begins; expenditure after commercial production is revenue expenditure. Administration and general overheads not relating to a specific tangible fixed asset are excluded from asset cost and treated as revenue expenditure.
    ManualsIncome Tax
    What is the value at which fixed assets are to be recorded as per ICDS V relating to tangible fixed ...
    Show AI Summary
    Valuation of tangible fixed assets requires recording at actual cost including nonrecoverable taxes and directly attributable expenditures.
    Valuation of tangible fixed assets under ICDS V requires recording assets at actual cost, comprising purchase price, duties and taxes that are not recoverable, and other directly attributable expenditure necessary to bring the asset to its intended use; recoverable taxes are excluded.
    ManualsIncome Tax
    If the taxpayer sells a security on the 30th day of April 2017. The interest payment dates are Decem...
    Show AI Summary
    Accrual basis interest recognition: interest taxed on accrual must be included when computing capital gain from subsequent sale.
    Where interest has been accounted as income on an accrual basis before the sale of a security, the amount already taxed as interest income on accrual basis shall be taken into account for computation of income arising from such sale.
    ManualsIncome Tax
    Does ICDS-IV apply to interest received by an assessee on compensation or on enhanced compensation.
    Show AI Summary
    Interest on compensation taxed as Income from Other Sources when received; accounting standard ICDS does not displace the statute.
    Interest received on compensation or enhanced compensation is taxable in the year of receipt and must be reported under Income from Other Sources, regardless of whether the assessee uses mercantile or cash accounting; where ICDS IV conflicts with the Act the statute prevails.
    ManualsIncome Tax
    Whether ICDS is applicable to revenues which are liable to tax on gross basis like interest, royalty...
    Show AI Summary
    ICDS applicability to gross-basis incomes confirms ICDS governs computation of taxable interest, royalty and fees for technical services.
    ICDS IV (Revenue Recognition) applies to incomes taxed on a gross basis, including interest, royalty and fees for technical services payable to non-residents, and such receipts must be computed and recognized under ICDS principles for determining the amount chargeable to tax.
    ManualsIncome Tax
    The condition of reasonable certainty of ultimate collection is not laid down for taxation of intere...
    Show AI Summary
    Accrual-based revenue recognition: interest and royalty must be recognised despite collection uncertainty; statutory provisions prevail.
    Interest is recognised on a time basis and royalty according to contractual terms; later non recovery may be claimed as a deduction under the amended deduction provisions, and applicable statutory provisions prevail over ICDS IV.
    ManualsIncome Tax
    How revenue from leases and hire purchase transactions will be recognised.
    Show AI Summary
    Revenue recognition for leases: lease treated as income not sale; lessor taxed on rent and entitled to depreciation.
    ICDS IV recognises revenue when risk and rewards transfer, so leases are not sales: lease rent is taxable income and the lessor may claim depreciation. Under hire purchase, both parties cannot claim depreciation on the same asset; substance-over-form principles indicate the owner giving the asset on hire should recognise sale while the hirer is entitled to depreciation.
    ManualsIncome Tax
    Since there is no specific scope exclusion for real estate developers and Build -Operate- Transfer (...
    Show AI Summary
    Revenue recognition under ICDS IV applies to real estate developers and BOT operators absent a specific exclusion.
    In the absence of any specific ICDS notified for real estate developers, BOT projects and leases, the relevant provisions of the Income tax Act and applicable ICDS (including ICDS III and ICDS IV) apply to revenue recognition, income computation and disclosure for those transactions.
    ManualsIncome Tax
    Whether the costs incurred for securing the contract would have to be claimed in the year of incurre...
    Show AI Summary
    Work-in-progress treatment: costs to secure construction contracts must be capitalised and not deducted until related work is performed.
    Precontract costs to secure construction contracts must be treated as an asset and characterised as work-in-progress, representing amounts due from customers, and therefore should not be claimed as a deduction in the year of incurrence but carried forward and recognised when the related construction or installation work is performed.
    ManualsIncome Tax
    What is the treatment of incidental income that arises from construction contract.
    Show AI Summary
    Incidental income in construction contracts: deduct from contract costs; investment returns taxed separately under income provisions.
    Incidental incomes arising from construction contracts are not part of contract revenue and must be reduced from contract costs; examples include sale of surplus materials and disposal of plant and equipment. Income in the nature of interest, dividends and capital gains is excluded from incidental income and is taxed separately under applicable law.
    ManualsIncome Tax
    Does proviso to section 36(1)(iii) apply on construction contract i.e. interest paid on capital borr...
    Show AI Summary
    Proviso to section 36(1)(iii) inapplicable to construction contracts; interest on contract borrowings is deductible for execution purposes.
    Proviso to section 36(1)(iii) does not apply to borrowings by contractors for executing construction contracts because such borrowings are not for acquisition of an asset; therefore interest on capital borrowed attributable to a construction contract is not barred by the proviso and is allowable as a deduction under ICDS III.
    ManualsIncome Tax
    whether the recognition of retention money, receipt of which is contingent on the satisfaction of ce...
    Show AI Summary
    Retention money recognition: recognise as revenue only when reasonable certainty of ultimate collection exists under ICDS construction rules.
    Retention money within a construction contract is part of contract revenue and should be recognised as revenue on billing only when there is reasonable certainty of its ultimate collection, based on the contract's performance criteria and para 9 of ICDS on construction contracts.
    ManualsIncome Tax
    What is the manner of recognizing contract revenue during the early stages of a contract.
    Show AI Summary
    Contract revenue recognition: recognize only costs incurred when outcome is not reliably estimable; early-stage limit applies.
    When the outcome of a construction contract cannot be estimated reliably, revenue is recognized only to the extent of costs incurred, subject to an early-stage completion limit specified in the Income Computation and Disclosure Standard on Construction Contracts.
    ManualsIncome Tax
    What is the manner of recognition of revenue and expenses from construction contracts under ICDS III...
    Show AI Summary
    Percentage of completion method recognizes construction contract revenue, expenses and profit by proportion of work completed.
    Recognition of revenue and expenses for construction contracts under ICDS III is governed by the percentage of completion method, whereby revenue, costs and profit are recognized by reference to the stage of completion of contract activity on the reporting date and reported in proportion to work completed.
    ManualsIncome Tax
    How to deal with a case where contract revenue is not recorded in the books of account, but offered ...
    Show AI Summary
    Bad debt deduction available without book write off when previously taxed income becomes irrecoverable under the statutory proviso.
    If contract revenue was offered to tax under ICDS but not recorded in the books and later becomes irrecoverable, it cannot be written off in the absence of a book entry; instead, deduction may be claimed under the statutory proviso allowing bad debt deduction without book write off where the amount was taken into account in computing income in the previous year in which it became irrecoverable or an earlier year.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Home› TMI Notes › Bills › News › Category › This
      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters
      Bills

      Rationalisation of provision of transfer of capital asset to partner on dissolution or reconstitution

      1 February, 2021

      Contents
      Plus +
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      Print Options

      Budget 2021-22 + FINANCE Bill, 2021

      Rationalisation of provision of transfer of capital asset to partner on dissolution or reconstitution

      The existing provisions of section 45 of the Act inter alia, provides that any profits or gains arising from the transfer of a capital asset shall be chargeable to income-tax under the head Capital gains and shall be deemed to be the income of the previous year in which such transfer takes place. Further sub-section (4) of the said section, provides that the profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society)or otherwise, shall be chargeable to tax as the income of such firm or other association of persons or body of individuals of the previous year in which the said transfer takes place. Further, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration for the purposes of section 48.

      In this regard, it has been noticed that there is uncertainty regarding applicability of provisions of aforesaid sub-section to a situation where assets are revalued or self- generated assets are recorded in the books of accounts and payment is made to partner or member which is in excess of his capital contribution.

      Hence, it is proposed to substitute the existing sub-section (4) of section 45 of the Act with a new sub-section (4) and also insert a new sub-section (4A) to this section.

      New proposed sub-section (4) of section 45 of the Act applies in a case where a specified person who receives during the previous year any capital asset at the time of dissolution or reconstitution of the specified entity. The capital asset represents the balance in the capital account of such specified person in the books of the specified entity at the time of its dissolution or reconstitution. In this situation, the profit and gains arising from the receipt of such capital asset by the specified person shall be chargeable to income-tax as income of the specified entity under the head “capital gains” and shall be deemed to be the income of such specified entity of the previous year in which the capital asset was received by the specified person. For the purposes of section 48 of the Act, the fair market value of the capital asset on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. The balance in the capital account of the specified person in the books of account of the specified entity is to be calculated without taking into account increase in the capital account of the specified person due to revaluation of any asset or due to self-generated goodwill or any other self-generated asset.

      New proposed section sub-section (4A) of section 45 of the Act applies in a case where a specified person receives during the previous year any money or other asset at the time of dissolution or reconstitution of the specified entity. The money or other asset is required to be in excess of the balance in the capital account of such specified person in the books of accounts of the specified entity at the time of its dissolution or reconstitution. In this situation, the profits or gains arising from the receipt of such money or other asset by the specified person shall be chargeable to income-tax as income of the specified entity under the head "Capital gains" and shall be deemed to be the income of such specified entity of the previous year in which the money or other asset was received by the specified person. For the purposes of section 48 of the Act,

      • value of the money or the fair market value of other asset on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset; and

      • the balance in the capital account of the specified person in the books of accounts of the specified entity at the time of its dissolution or reconstitution shall be deemed to be the cost of acquisition.

      The balance in the capital account of the specified person in the books of account of the specified entity is to be calculated without taking into account increase in the capital account of the specified person due to revaluation of any asset or due to self- generated goodwill or any other self-generated asset.

      For the purposes of these two sub-sections,-

      • specified person” is proposed to be defined as a person who is partner of a firm or member of other association of persons or body of individuals (not being a company or a cooperative society), in any previous year;

      • “specified entity” is proposed to be defined as a firm or other association of persons or body of individuals (not being a company or a cooperative society);and

      • “self-generated goodwill” and “self –generated assets” are proposed to be defined as goodwill or asset, as the case may be, which has been acquired without incurring any cost for purchase or which has been generated during the course of the business or profession.

      Consequential amendment is also proposed in section 48 of the Act to provide that in case of specified entity, the amount included in the total income of such specified entity under sub-section (4A) of section 45 which is attributable to the capital asset being transferred, shall be reduced from the full value of the consideration to compute income charged under the head “capital gains”. This is to be calculated in the manner to be prescribed later. This is to mitigate the double taxation which may have happened but for this provision in a situation where an asset which was revalued and for which income under the proposed sub-section (4A) of section 45 of the Act was brought to tax is transferred subsequently by the specified entity.

      These amendments will be effective from the 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.

      [Clauses 14 and 16]

       

      Full Text:

      Budget 2021-22 + FINANCE Bill, 2021

      Topics

      ActsIncome Tax
      Next ➔