TaxTMI 
TaxTMI 
2016 (6) TMI 210
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....t, we take up the Revenue's appeal in ITA No.2023/Mds/2014 and C.O. No.100/Mds/2014 for the assessment year 2004-05. 3. The ground raised by the Revenue in this appeal is that the Commissioner of Income-tax (Appeals) erred in directing the Assessing Officer to allow the loss of Rs. 10,53,12,695/- to be set off against the other capital gains. The assessee has filed the Cross-objection in supportive of the order of the CIT(Appeals). 4. The facts of the case are that the assessee, during the financial year 2003-04 relevant to the asst. year 2004-05 purchased 17,338,188.397 units of ING Vysya Income Fund Regular Bonus Option (Mutual Fund) for Rs. 27 crores on 19.11.2003. Subsequently, the assessee received 10,456,440.524 bonus units, at a cost of Rs. nil. After receiving the bonus units, the assessee sold (redeemed) the original 16,338,188.397 units for Rs. 16,46,87,305/-. Since the cost of the bonus shares was nil, the assessee computed the capital loss (short term) on the sale of the original 16,338,188.397 units at Rs. 10,53,12,695/- (i.e. Rs. 27,00,00,000-Rs. 16,46,87,305).The assessee claimed these losses as set off against other long term capital gains from the sale of shares ....
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....of generating loss for setting off against other income under the head "Capital Gains". 5. The decision at the Panjab & Haryana High Court in the case of Vaneet Jain vs CIT 294 ITR 432 is to be applied in this case. The primary motive of the assessee is to avoid the incidence of Capital Gains which resulted by sale of shares of M/s.Shri Vijaya Gimpex Mining Ltd. The entire loss booked by the assessee in respect of sale of ING Vysya Bank issue is disallowed. This has been further strengthened by the fact that the Section 94 of the Income Tax Act, 1961, itself was amended subsequently. Disallowance Rs. 10,53,12,695" Aggrieved, the assessee went in appeal before the CIT(Appeals), who allowed the ground of appeal. Against this, the Revenue is in appeal before us. 5. We have heard both the parties and perused the material on record. The CIT(Appeals) has given relief in this case on the reason that the provisions of sec.94(8) was came into effect from 1.4.2005 by the Finance Act (No.2) 2004. As such, it is applicable from the asst. year 2005-06 onwards and in the present case, the assessment year involved is 2004-05. Accordingly, he deleted the addition. 5.1 The provisions of ....
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....10-11 claimed foreign sales commission of Rs. 88,53,677/- and Rs. 1,28,44,758/- respectively. The Assessee has not deducted any TDS while remitting the said amounts abroad. The Assessing Officer in his order disallowed the foreign commission u/s.40(a)(i) of the Act for nondeduction of TDS. The Assessing Officer in his order noticed that the assessee company, during the financial years 2009-10 and 2010-11 made export sales commission of Rs. 88,53,677/- and Rs. 1,28,44,758/- to non-resident agents, without deduction of any TDS. Hence, the AO opined that the said payments of 'foreign commission' was a violation u/s.40(a)(i) r.w.s.195 of the Act. Accordingly, the AO disallowed the said 'foreign commission' payments for violation of the provisions of sec.40(a)(i) r.w.s. 195 of the Act and added to the total income. Against this, the assessee went in appeal before the CIT(Appeals), who deleted the addition made by the AO. Aggrieved, the Revenue is in appeal before us. 8. We have heard both the parties and perused the material on record. The primary contention of the ld. AR is that the payment was made to non-resident agents towards sales commission and non-resident agents were not havin....
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....propriate to remit the entire issue back to the file of the Assessing Officer with direction to the assessee to prove that it was sales commission towards procurement of orders from abroad. In the result, the appeal of the revenue is allowed for statistical purposes." 8.1 In view of the above, we are inclined to remit the issue back for both the assessment years to the file of the Assessing Officer with similar direction. Accordingly, this ground of appeal is allowed for statistical purposes, for both the assessment years. 9. The next common issue in all the three appeals is with regard to deletion of addition made u/s.40(a)(i) on the payment of foreign service charges. 10. The facts of the case are that the AO in his order noticed that the assesse, during the financial years 2007-08, 2008-09 and 2009-10, relevant to the A.Ys 2008-09, 2009- 10 and 2010-11 paid 'foreign service charges' of Rs. 32,24,612/-, Rs. 74,25,790/- and Rs. 50,14,290/- to nonresidents without making any TDS. Hence the AO opined that the said payments of 'foreign service charges' was a violation u/s.40(a)(i) r.w.s.195 of the Act. Accordingly, the AO disallowed the said 'foreign service charges' payments ....
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....sallowance made by the AO Disallowanceu/s.14A confirmed now Relief granted to the assessee 2008-09 Rs. 6,87,014 Rs. 7,43,362 Enhanced 2009-10 Rs. 1,70,45,052 Rs. 14,24,646 Rs. 1,56,20,406 2010-11 Rs. 1,97,20,306 Rs. 15,03,265 Rs. 1,82,17,041 Against this, the Revenue is in appeal before us for the assessment years 2009-10 and 2010-11. 15. We have heard both the parties and perused the material on record. Similar issue came for consideration before this Tribunal in the case of M/s. Marg Ltd. v. JCIT in ITA Nos.344 to 346/Mds/2016 dated 6.4.2016, wherein following its earlier order in the case of M/s. Lakshmi Ring Travellers in ITA No.2083/Mds/2011 dated 2.3.2012, held as under: "6. We considered the arguments of both the sides in detail. Sec.14A(1) declares the law that the expenditure incurred by the assessee in relation to the income which does not form part of the total income under the Act shall not be allowed as a deduction in computing the taxable income of the assessee. Sec.14A(2) provides for determining the quantum of such expenditure which shall not be allowed as a deduction. That is the machinery provision as far as sec.14A is concerned. In that ....
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.... and urged the grounds in support of the same. Smt. Anuradha, learned counsel for the appellant relied upon the decision reported in CIT Vs. Rajendra Prasad Moody [1978] 115 ITR 519 wherein, it is held that interest paid on money borrowed for investment in shares is deductible under section 57(iii) of the Income-tax Act, which requires that the expenditure must be laid out or expended wholly and exclusively for making or earning income. She also relied upon another decision in the case of CIT Vs. Smt. Sushila Devi Khadaria [2009] 319 ITR 413 (Bom); [2009] TIOL 171 HC (Mum-IT) and submits that the orders passed by the assessing authority and the Tribunal are erroneous and contrary to the aforementioned decisions. Therefore, she submits that substantial questions (i) and (ii) framed in the appeal memorandum arise for consideration of this court and requested to set aside the order passed by the Tribunal. The substantial questions of law framed in the appeal are extracted as hereunder. "(i) Whether or not the Tribunal was right in not allowing the interest incurred by the assessee as expenditure in computing income of the assessee? (ii) Whether or not the Tribunal was right i....
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.... relied upon by the assessee does not apply to the assessee's case." Therefore, the dividend income is exempted from the tax liability under section 10(33) of the Act. Under section 14A of the Act, expenditure relating to exempted income is not allowable. The assessing authority has considered the above relevant factor and disallowed the claim of the assessee. The first appellate authority reversed the order of the assessing authority by applying the decision in Rajendra Prasad Moody's case [1978] 115 ITR 519 (SC), referred to supra, which was rendered prior to introduction of section 14A of the Act and which has no application to the fact situation. The Tribunal has rightly set aside the order of the first appellate authority. It cannot be disputed that dividend income is exempted under section 10(33) of the Act from the tax liability and the same cannot be computed for income under the head "Other sources". Exempted income is not allowable for deduction in view of section 14A of the Act. In view of these two provisions, the claim of the assessee is wholly untenable and the decisions relied upon by the learned counsel on behalf of the appellant are not applicable to ....
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....disallowance of Rs. 2 lakhs, i.e., by applying section 14A, squarely applied to the interest paid on the borrowed funds because it was on record that the entire funds borrowed were utilised for the acquisition of shares by the assessee in the company. The assessee would be entitled to deduction of interest under section 36(1)(iii) of the Act on the borrowed funds utilised for the acquisition of shares only if shares were held as stock-intrade and that would arise only if the assessee was engaged in trading in shares. So far as the acquisition of shares was in the form of investment and the only benefit the assessee derived was the dividend income which was not assessable under the Act, the disallowance under section 14A was squarely attracted and the Assessing Officer rightly disallowed the claim." In view of the above, we allow this ground of appeal of the Revenue. 16. In ITA No.2024/Mds/2014, the Revenue has raised one more ground, which is as follows: "3. The ld. CIT(A) erred in deleting the addition of Rs. 16,37,262/- made on account of difference in the sales turnover shown in the tax returns and the sales shown in the return of income" 17. After hearing both the partie....