TaxTMI 
TaxTMI 
TaxTMI 
2010 (10) TMI 1075
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....es and enhancement of the disallowance by the CIT(A). Ground No. 7 is in respect of miscellaneous expenses and Ground No. 8 is disallowance of general & administrative expenses. 2.3 After considering the grounds of appeal of the assessee, first we would like to deal with ground No. 2. 3. Briefly, the facts of this ground NO 2 are that during the course of assessment proceedings, the AO while examining the details noticed that the assessee company took secured loan and paid financial charges. The AO examined the section 36(1)(iii) of the Act in the light of the facts of the case and noticed that the assessee company has utilized the borrowed capital for investing in securities. He noticed that the assessee company is not engaged in business of investments. The company was incorporated to provide online payment solutions to the retails and corporate segments which were transferred to ICICI Bank Ltd. During the year, the assessee company did not give any such sort of business and the business income earned by the assessee company is on account of settlement made on transfer of mutual fund which was not transferred to the transferee on record date as per the agreement, for which the ....
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....d that the provisions of section 14A, r.w. rule 8D would apply to the instant case. I am also convinced that the interest expenditure is directly attributable to the earning of dividend income. In the circumstances, the entire interest expenditure, amounting to ₹ 42058219/- would have to be disallowed under Rule 8D(2)(i). This would bring us to the question of balance general and administrative expenses, amounting to ₹ 64,47,011/-. As I have already held that the appellant is having no business in the current year, and no business income, hence, this expenditure would also need to be disallowed as being not for the purpose of business. Even under Rule 8D(2)(iii), the disallowance would work out to ₹ 35,23,933/-. Hence, this ground of appeal is dismissed and the income enhanced, as indicated." 4.1 The CIT(A) while confirming the action of the AO after rejecting assessee's contention that investment is business activity. 5. The learned AR submitted that the assessee company is engaged in the business activity in investment of shares, securities, including strategic investments and it had procured strategic controlling stake in Tata Info media Ltd. of more 51% of ....
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....nd elucidate the concept of what is a 'business' for the purpose of taxation of income under the I.T. law. The statutory definition has been explained and the words used in the definition have been interpreted in a wider sense and not in a restricted sense. The shares and securities are acquired and held as investments in such case, in order that, income can be brought to tax under the head 'profit and gains of business or profession' it is essential that the activities of the person must constitute the carrying on of a business. In this regards we would like refer one judgment of Madras High court cited by the learned AR in the case of CIT Vs. Amalgamations (P.) Ltd 108 ITR 895(Mad) Which has been affirmed by the Supreme Court in the case of CIT V Amalgamation Pvt Ltd 226 ITR (SC). Some relevant facts and finding of the Court are as under:- " The only point to be considered is whether the respective amounts could be said to be expenditure incurred wholly or exclusively for the purpose of the assessee's business. The first aspect to be examined would, therefore, be whether the assessee is carrying on any business at all. The learned counsel for the Department submitted that th....
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....tion, the Supreme Court observed at page 554 as follows : "It seems to us that on principle before dividends on shares can be assessed under s. 10, the assessee, be it an individual or a company or any other entity must carry on business in respect of shares ; that is to say, the assessee must deal in those shares. It is evident that if an individual person invests in shares for the purpose of earning dividend he is not carrying on a business. The only way he can come under s. 10 is by converting the shares into stock-intrade, i.e., by carrying on the business of dealing in stocks and shares ...... .. " The decision of Rowlatt J. was not brought to the notice of the Court. Lower down in the same page it was stated as follows : "Apart from showing mere investment, no facts have been brought out in this case to show that the company was in any way carrying on business in respect of shares. Its position, on the facts placed before us, is in no way different from an individual merely buying shares with a view to holding them for the purpose of earning dividends." That was a case where a company purchased shares and sat back on its investments so that it was a cas....
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....r organised course of activity of investment carried on by an assessee for a set purpose such as earning Profits" (Underlining ours). The learned counsel for the Department wanted us to confine this decision to the language of s. 23A, as in his submission, holding of investments was taken to be a business only by reason of some statutory fiction. We have looked into s. 23A and we do not find in it any words importing a fiction. It considered two kinds of businesses: one is dealing in investments and the other is holding of them and holding of investment in appropriate cases would, in the view of Parliament, equally be a business as dealing in them. The only requirement is that there must be a real substantial and systematic or organised course of activity or conduct with the set purpose of earning profit which is the test for a business. Examined in this light it would be found that the assessee is not a mere investor in a single company. It has investments in 16 companies. It had taken active interest in the business of these companies as is clear from the services that had been rendered in the shape of export promotion, liaison office at Delhi and internal audit. It also re....