Reasons of INflation

Gasoline could inflame inflation Gasoline prices could soar as high as $7 a gallon this summer thanks to supply threats stemming from Middle East unrest as well as OPEC policy, says real estate mogul Donald Trump. Iran has already cut off supply to France and to the U.K. to protest sanctions from the west, who accuse Tehran of developing a nuclear weapons program. U.S. military officials have said they feel they can ration with Iran, although fears are growing that Israel may consider a unilateral strike on Iran anyway, which is sending crude oil skyrocketing. Higher oil prices lead to high gasoline prices, which have prompted some U.S. refineries to close up shop when people buy less fuel, which further exacerbates supply issues. The result: pain at the pump — prices are soaring and well earlier
than they should be. Prices commonly peak in spring and summer due to seasonal factors like the price of refinery feedstocks and the arrival of the U.S. summer driving season. "We are going to have a crisis, a crisis on energy like you've never seen before, and if you see gasoline is going to be at $4 and it already is at $4 — the highest it's ever been in history at this time of the year," Trump tells CNBC.
"Oil continues to go up, gasoline is going to be at $5 or $6 or maybe $7 a gallon in the summer when they really have the demand. And it's going to really be destructive to this country." Don't blame speculators on rising prices either. OPEC countries are ensuring prices stay high by regulating output, Trump said. "OPEC is the one that's setting the prices and OPEC is laughing at us like nobody's ever laughed before," Trump says, adding swings in energy prices threaten the U.S. more than big banks, which continue to receive blame
from politicians, regulators and the Occupy Wall Street movement for the economy's woes.
"Energy as you know is a tremendous factor and when we had our last — call it a mini depression, that's really what it was — you know, everybody was blaming the banks and the bankers. And certainly the banks had something to do with it, but I always felt that energy had more to do with it than the banks," Trump says.
"I consider oil to be the blood of the nation and the blood of the world. And that blood was so high, and I really believed that had more to do with our depression/major recession, whatever you want to call it, than interest rates or banks or problems or mortgages or home loans or anything." Gasoline prices are currently averaging $3.53 a gallon, and some experts see that figure hitting a record $4.25 a gallon by
April, well before the peak season.
"You're going to see a lot more 'staycations' this year," says Michael Lynch, president of Strategic Energy & Economic Research, according to the Associated Press. "When the price gets anywhere near $4, you really see people react."

Exemption to Specified Persons

NOTIFICATION NO 9/2012,
dated - February 17, 2012

Exemption to specified persons from furnishing a return of income U/s 139(1) for AY 2012-13

Class of persons.
-An individual whose total income does not exceed 5 lakh rupees and consists of income only chargeable to following head,-
(A) "Salaries";
(B) "Income from other sources",
by way of interest from a saving account in a bank, not exceeding ten thousand rupees.

Income Tax Update Information

No filing of tax return for salary and interest income up to Rs 5 lakh

NEW DELHI: As many 85 lakh salaried tax payers whose taxable income, including salary and interest income, is up to Rs 5 lakh, are not required to file income-tax return from now onwards..

Treatment of Interest on borrowed loan taken for construction or purchase of House Property

Deduction of Interest Paid on More Than One Loan Borrowed for Purchase or Construction of same House There is no bar in section 24 of the Income Tax Act regarding the number of loans on which interest is allowable simultaneously. In fact ,the simple rule of the deduction of interest u/s 24 of the Income Tax Act is that whatever be the interest paidor due on loan borrowed for purchase or construction of house is allowable as deduction. So, whether you take loan from one bank or five banks , all loan should be utilised for buying or constructing the house for allowance of interest paid to all the banks. However, as far as self occupied house is concerned, the allowanceof interest is limited to Rs 1,50,000 per owner.
How to determine share in property?
The documents of registration of the property is the main document in which proportion the house is registered along different co-owners. If nothing has been written specifically about share in which property is shared between two owners (Likeyou and your wife ) in the registration document , the ownership should be deemed to be 50 : 50.
Can owners claim RS 1.5 Lakh each on co-owned self occupied property?
Yes , each co-owner is assessed for income from house property separately . Therefore , allowance of interest u/s 24 is also given separately. But interest is deductible only if the same is borrowed by co-owners i.e even ifone is joint owner but not a borrower of the loan is not allowed any deduction of interest.Only the person borrowing the loan is allowed deduction.In case of joint loan , each co-owner gets 1.5 lakh of maximum interest deduction u/s 24 of the I T Act.
Question - I and my wife are both salaried employees. We are purchasing a house jointly. I am taking a loan of Rs 25 Lakhs from Govt and another loan of Rs.10 Lakhs from HDFC which is on joint name of both self and wife. Total interest outgo will be approx Rs. 2.5 Lakhs in initial years. My question is- can we split the total interest equally between self and wife for the purpose of claiming deduction under Sec 24 C or only the interest component from Rs 10 Lakhs loan (which is in joint name) can be shared ? Also how to determine the share of property between husband and wife for the purpose of claiming tax deduction ?
Answer – As , you and your wife have taken joint loan from HDFC only , therefore, both co-owner can claim interest 50 % each in case of interest paid to HDFC. You can additionally claim for interest on loan from govt. sources to the extent that aggregate can not exceed RS 1.5 lakh.

Case Laws

The assessee received lease charges and claimed a reduction towards “lease equalization charges” on the ground that reduction was in accordance with the Guidance Note dated 20.09.1995 issued by the ICAI in respect of Accounting for Leases and the Accounting Standard AS-1 notified u/s 145 which mandated that the accounting policy of the assessee should represent a true and fair view. The AO & CIT (A) rejected the claim on the ground that it was a “notional charge” and that the accounting guidelines could not override the Act. The Tribunal (38 SOT 412), however, allowed the claim. On appeal by the department, the appeal was dismissed.
CIT vs. Virtual Soft Systems Ltd (Delhi High Court)

Income tax update

Income Tax update:
No Penalty can be levied for wrong/non furnishing of PAN in TDS return if Asseee files later revised return with Correct PAN. The ITAT concluded that it is apparent from the record that the assessee deducted TDS correctly and revised the PAN and filed revised statement in Form No. 26Q, hence there was sufficient compliance of the provisions of section 139A of the Act. If there was reasonable cause for alleged failure, no penalty can be levied. -ITO (TDS) Panchkula v. Bharat Electronics Ltd. (ITAT Chandigarh)

Case Laws Judicial Update

Judicial update: (Important decision of SC)
"Under Clause (1) of Explanation (baa) to s. 80HHC, 90% of any receipts by way of brokerage, commission, etc “included in any such profits” have to be deductedfrom the profits & gains of business. The expression “included any such profits” meanssuch receipts by way of brokerage, commission, etc included in the profits & gains. Therefore, if any quantum of receipts by way of brokerage, commission, etc is allowed as expenses u/s 30 to 44D and is notincluded in the profits of business, 90% of such quantum of receipts cannot be reduced under clause (1) of Explanation (baa) to s. 80HHC. In other words, only 90% of the net amount of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining “profits of the business”. The High Court wronglyrelied on CIT vs. K. RavindranathanNair 295 ITR 228 (SC) & circular dated 19.12.1991 explaining the clauses of the Finance Bill, 1991 (Principle in Distributors (Baroda) 155 ITR 120 (SC) followed; Shri Ram Honda Power Equip 289 ITR 475 (Del) approved)"
Held recently by SC in case of ACG Associated Capsules P Ltd-vs-CIT

Federal Reserve Chairman's Monetary Policy

Federal Reserve Chairman Ben Bernanke is running the economy in such a heavy-handed manner that he more resembles a socialist strongman reminiscent of the Soviet Union than the head of the world's largest and most iconic of capitalist economies, former GOP presidential hopeful and publisher Steve Forbes writes. By swelling the Fed's balance sheets via massive purchases of Treausrys and mortgage-backed securities from banks and by controlling interest rates and money supply with various monetary policy tools, Bernanke has become a "supreme socialist" who dictates how Americans manage their money. "Our central bank tries to manipulate our economy in ways befitting a Soviet commissar. Take interest rates. Fixing the price of money is a form of price control, pure and simple," Forbes writes in a column in the magazine that bears his name. "Until Ben Bernanke, our central bank was content to fix short-
term interest rates, which he announced would be kept at virtually zero through 2014. But in the aftermath of the financial crisis Bernanke is, in effect, dictating the price of all money, regardless of duration." Bernanke claims his ultra-loose monetary policies, which include keeping interest rates low through 2014, were necessary to steer the economy from the edge of deflationary collapse and to spur job creation. Critics say the tactics have distorted portions of the economy while sapping the dollar of most of its strength and pushing up inflationary pressures in the process. "All of this means the government is picking winners and losers. And in this case the losers are savers. Bernanke & Co. want to effectively force Americans to put their cash in riskier assets, such as stocks," Forbes writes.
"You thought socialism was dead, other than in miserable countries such as North Korea and Cuba? Think again. It’s alive and well at the Federal Reserve, and we and the world are paying a price for it." Bernanke, meanwhile, tells Congress his policies are going nowhere. Even though unemployment rates are falling, they still remain a big problem for the economy. The unemployment rate measures the percentage of those who are out of work but are actively looking. Those workers who have lost their jobs and have given up looking aren't counted as part of the labor force. Factor them in as well as younger workers entering the work force and the unemployment picture becomes a lot bleaker. "It's very important to look not just at the unemployment rate, which reflects only people who are actively seeking work," Bernanke told a Senate hearing recently, according to the Associated Press. "There are also a lot of people who are either out of the labor force because they don't think they can find work. ... There are also a lot of people who are working part-time, and they'd like to be working full-time but they can't find full-time work.

THREATS TO THE GLOBAL OIL SUPPLY

A report from Deutsche Bank says the potential threats to the global oil supply — especially Iran's vow to close the Strait of Hormuz — haven't been this great since the Iranian Revolution and Iran-Iraq War three decades ago, CNBC reports. “In our view, not since the late 1970s/early 1980s has there been such a serious threat to oil supply,” wrote Soozhana Choi, Deutsche Bank’s head of Asia commodities research, in a note to clients. “Our assertion is in part because of the Iranian threat to close the Strait of Hormuz.” “We view potential Iranian disruption of shipping in the Strait as a low probability given the high damaging impact it would have
on Iran itself,” said Choi. “However, the mere utterance of such a threat is a grave concern for the oil market given the
strategic importance of the Strait on a global scale.” Though Deutsche Bank stopped short of predicting what could happen to oil prices if this or military action against Iran comes to pass, the bank’s report did note that the last four major oil disruptions (Gulf War I, Gulf War II, Iran-Iraq War, Iranian Revolution) caused Brent oil prices to jump 38 percent, on average, during these events. According to trader Dennis Gartman, author of The Gartman Letter, the world is facing an over-supply of energy, not an undersupply. “There may be trouble in the Persian Gulf or one of the other ‘hot spots’ around the world, but there is no tightness of supply given the huge new finds of oil and nat-gas,” says Gartman.

SECTION-37 OF INCOME TAX INDIA

TAX LAWS
Know the powerful section 37 of the income tax act, 1961 it provides deduction of any EXPENDITURE not covered by section 30 to 36.
following conditions must be satisfied:-
1) expenditure must not be covered by the sec. 30 to 36
2) expenditure wholly and exclusively for the business purpose
3) it should not be nature of capital expenditure
4) it should not personal expenditure of the assessee
5) expenditure must not be an offence or is prohibited by law Satisfy these and enjoy the deduction.