TaxTMI 
TaxTMI 
2010 (10) TMI 664
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....ase, the learned CIT(A) has erred in deleting the addition of Rs. 39,09,536 despite the fact during the course of assessment order the assessee has failed to furnish any evidence or details with regards to the assessment year in which the amounts were shown as income by the assessee and the basic condition for claiming this deduction has not been fulfilled. III. Whether on the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 2,06,23,367 made by the AO by treating the deposits received by the assessee against settlement pending as income of the assessee despite the fact the assessee is maintaining its accounts on cash basis. IV. Whether on the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 1,66,040 despite the fact that AO had clearly held that the dividend income is incidental to business activity and thus business income of the assessee. V. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed of." 2. In this case, respondent assessee is an undertaking of the Government of Haryan....
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....is regarding addition of Rs. 1,76,61,492 by treating the long-term capital gains on sale of shares as business income. The AO has mentioned in the order that the appellant has claimed the profit on sale of shares as exempt. The AO mentioned that the profit has been earned by the appellant on sale of shares which were acquired by the appellant by way of equity participation for financing industrial units. These transactions were purely financial transactions since the main objective of the appellant for which it has been set up is to finance the industrial units. The AO also observed that the appellant itself has not claimed the income as capital gains but has shown the same as business income. The AO relied on the Hon'ble Supreme Court decisions in the Calcutta Bank Ltd. case, Sardar Indra Singh and Sons case and Brooke Bond case. The counsel for the appellant in his written submissions stated that the appellant did not invest in shares of the industrial units in collaboration and the shares were not sold as per the buy back arrangement and these shares do not represent equity participation of the appellant. The counsel argued that the appellant purchased these shares for the purpo....
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....ot exempt under s. 10(38)(b) of the Act. The CIT(A) has referred to the details of shares which have been sold by the assessee to generate the impugned profit. As per the CIT(A), the profit has been earned by the assessee on sale of shares which have been held as investment and the AO is wrong in presuming that the profit has been earned on sale of shares acquired by the assessee by way of equity participation in terms of collaboration agreements. This factual finding has not been controverted by the Revenue in any manner, rather the detail of shares sold clearly support the inference of the CIT{A). The CIT(A) has specifically noticed that the aforesaid contention of the assessee has also not been controverted by the AO in his remand report submitted to the CIT(A). Under these circumstances, in our view, the CIT(A) made no mistake in allowing relief to the assessee in terms of s. 10{38)(b) of the Act. Sec. 10(38)(b) provides exemption to an income arising from the transfer of a long-term capital asset being equity share in a company where such transaction is chargeable to securities transaction tax. In this case, assessee contended before the CIT(A) that it had sold shares through ....
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....is allowed." 11. Before us, learned CIT-Departmental Representative has submitted that the requirements of s. 36(2)(i) of the Act have not been verified by the CIT(A) before allowing the claim of the assessee. Therefore, according to her, the matter may be sent back to the file of the AO for verification in this regard. In this context the learned CIT-Departmental Representative has not disputed the factual matrix, that the claim in question represents amounts actually written off in the books of account. The learned counsel for the respondent assessee submitted that the CIT(A) has correctly appreciated the claim of the assessee in terms of s. 36(1)(vii) of the Act and with regard to the plea of the learned CIT-Departmental Representative for verification of the tests contained in s. 36(2)(i) of the Act, it was stated by the learned counsel that he has no objection and the matter may be suitably examined by the AO. 12. We have carefully examined the rival contentions and perused the orders of the authorities below. It is apparent from a perusal of assessment order that the AO has failed to appreciate the claim of the assessee in its proper perspective. On one ha....
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....wards interest and brought to tax. Accordingly, an addition of Rs. 2,06,23,367 has been made. The addition has been deleted by the CIT(A) against which, Revenue is in appeal before us. 14. Before us, learned CIT-Departmental Representative has reiterated the reasonings taken by the AO, which have already been noted by us in the earlier para and are not being repeated for the sake of brevity. 15. On the other hand, learned counsel for the respondent assessee vehemently argued that assessee being a financial institution has large number of borrowers who default in repayment of loans and interest thereon. In order to recover such loans, policies are formulated by the Government from time to time in terms of which certain concessions/ reliefs are allowed to the borrowers who deposit the outstanding amounts in instalments and thereafter the amount is bifurcated between interest and principal at the time of final settlement as per the scheme. In this regard, the accounting policy regularly followed by the assessee was that the bifurcation of interest and principal was done only at the time of final settlement of the account. The impugned amount reflected the total out....
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....ers, it is not possible for the appellant to bifurcate interim payments made by the defaulting borrowers between principal and interest till such time the settlement is finally reached. Considering the totality of circumstances, we hereby affirm the order of the CIT(A) and find no justification for the addition made by the AO. Accordingly, ground of appeal raised by the Revenue is dismissed. 17. In the last ground, the dispute relates to the dividend income of Rs. 1,66,040 earned by the assessee. The assessee claimed dividend income received on shares as exempt in terms of s. 10(34) of the Act. The AO disallowed the claim on the ground that the assessee was engaged in financing industrial units and therefore, dividend earned on shares was related to its business activity and hence the same is to be treated as income from business. The exemption was thus denied. 18. In appeal before CIT(A), assessee contended that the AO erred in denying the exemption on facts and in law. As per the assessee, the shares were held as investment and the same were not acquired in the course of financing industrial units. As per assessee, there was no material to establish that the d....