TaxTMI 
TaxTMI 
2016 (1) TMI 322
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....t the very same order of the CIT(A). 2. The Revenue has raised four elaborate grounds in its appeal; however the crux of the issues is concised herein below for adjudication;- (1) The learned CIT(A) erred in directing the AO to take only investments Rs. 7.72 Crores while working out average investment for the purpose of limb (iii). (2) The learned CIT(A) erred in deleting the investments made in the subsidiary companies while arriving at the average investments is not acceptable as such investments are capable of earning dividend income. (3) The learned CIT(A) erred in directing the AO to withdraw the addition made U/s. 2(22)(e) stating that the provisions of Sec.2(22)(e) are not attracted in the instant case. 2.1. The assessee h....
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....of Section 14A read with Rule 8D for having incurred the expenditure on interest of `74,39,591/- against the loan taken from the subsidiary company for Rs. 15 Crores and interest payment of Rs. 85,95,549 to M/s Igarashi Motors India Ltd., towards deferred settlement of dues for the purchase of the shares. Further the Ld.A.O also invoked Section 2(22)(e) of the Act since the assessee-company's subsidiary company Agile Electrical Sub Assembly Pvt. Ltd., from whom the assessee-company had obtained the loan of `15 Crores had reserves and surplus to the tune of `7,26,03,874/- and the assessee-company was the beneficial shareholder of Agile Electrical Sub Assembly Pvt. Ltd. 5.1 On appeal with respect to the disallowance u/s 14A of the Act, the L....
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....benefits. These facts are not disputed. In similar circumstance, Hon'ble Karnataka High Court in M/s Bagmane Constructions Pvt. Ltd. v. CIT dated 16th September, 2014 has held as under:- ""Deemed dividend - Trade advances - Receipt of advances from sister concern - Whether any payment by a company by way of advance or loan to a shareholder or to any concern made under Section 2(22) (e) of the Income Tax Act, 1961, to the extent to which the company possessed the accumulated profits includes a trade advance and constitutes deemed dividend - Held that: purpose of the insertion of sub-clause (e) of Section 2(22) of the Act was to bring within the tax net accumulated profits which are distributed by closely held companies to his sharehol....
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....tion 2(22)(e) of the Act as the object was not to pay the said amount to the shareholders after avoiding payment of dividend distribution tax under Section 115-0 of the Act. In that view of the matter, it is not possible to accept the interpretation sought to be placed by the revenue. Having regard to the plain words used in clause (e) 'to any concern', when the amount is paid or when any payment is made to a concern, the tax is levied on the concern and not on the shareholders. As far as this question is concerned, this Court following the judgment of the Bombay High Court in the case of Commissioner of income Tax vs Universal Medicare (P) Limited reported in [2010 (3) TMI 323 - BOMBAY HIGH COURT] has categorically held that when any payme....
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....concern is utilized for the very purpose of acquiring the shares of the sister concern itself in order to have a strategical edge over the competing business environment. The benefit of the entire transaction has flowed to the assessee's sister company also because the assessee had obtained the loan from its sister company in order to purchase the shares of the very same sister company and thus avoid the perils of those shares being held by two entities thus endangering its existence. Accordingly, this issue is decided in favour of the assessee. 7.2 In regard to applicability of Section 14A of the Act read with Rule 8D also; the above view will be applicable. Moreover in the case EIH Associated Hotels Ltd v. DCIT reported in 2013 (9) TMI 6....