759/CBDT. - Income Tax - 759/CBDT

Instruction No: 759/CBDT Date of Issue: 19/9/1974 In an instant case of a managing agency company, investment in shares by it in the managed company was included as "fixed assets" for purposes of computation of "statutory percentage" within the meaning of section 109(iii)(4) II of the I.T. Act, 1961, for determining liability to additional tax u/s 104. As such inclusion was not free from doubt, the issues involved have been examined in detail and the Board are advised that the character of an asset as fixed asset or a floating asset would depend upon the person who holds in, the nature of his business and the character in which it is held. If these were applied and the question is also raised as to whether the shares held in the managed company resulted in production of goods and services, it would appear that the shares held in the managed company did not constituted "fixed assets". 2. As statutory audit had raised an objection to the inclusion of investment in shares of the type considered above as "fixed assets" for purpose of computation of "statutory percentage" and in the light of the examination of the extant position in law, as set out, such objection has been accepted, the Board desire that the current position in law may be circulated to all Income-tax Officers working in your charge. 3. In the light of the interpretation now accepted, Board further desire that a review of all such cases where action u/s 104 has been passed, be carried out and rectificatory action, wherever possible, be taken. A report incorporating. (i) No. of cases reviewed; (ii) No. of cases where mistakes have been noticed; (iii) NO. of cases where rectificatory action has been taken; (iv) tax effect be sent the Board by 15th October, 1974. 4. Receipt of this letter may please be acknowledged.