AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 905
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....rants and (iii) the ld. Commissioner of Income Tax (Appeals) erred in confirming the additions of Sec. 14A r.w.r. 8D while computing the Book profit u/s.115JB of the Act. 3. The Brief facts of the case are that the assessee is in the business of dealing in shares and stocks and filed Return of income on 15.10.2010 admitting total income of :2,53,25,000/- after setting off of brought forward business loss of :1,95,76,595/-. The assessee filed revised Return of income on 29.09.2011 admitting total income of :1,10,92,230/- after claiming set off of brought forward business of earlier years. The Return of income was processed u/s.143(1) of the Act and case was selected for scrutiny and notice u/s.142(1) and 143(2) of the Act were issued. In compliance to notices, the ld. Authorised Representative of assessee appeared from time to time and filed the information. The ld. Assessing Officer on perusal of financial statements found that the assessee company has received dividend income of :3,34,37,502/-,interest income of :4,49,00,729/- and other income of :866/-. The dividend income earned on equity shares are claimed as exempted, whereas interest income accrued on the fixed deposits with....
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.... found that the assessee has filed original Return of income on 15.10.2010 with disallowance of expenditure under Rule 8D :1,42,83,989/-. Subsequently, the assessee filed Revised return on 29.09.2011 and reduced disallowance under Rule 8D to :51,220/-. The expenditure claimed is directly related to the investments earning dividend income. During the financial year 2009-2010, the assessee received dividend income of :3,34,37,502/- but the assessee company suo motu disallowed expenditure u/sec. 14A r.w.r 8D :51,220/-. The ld. Assessing Officer issued letter dated 17.12.2012 with reasons for disallowance of expenditure under Rule 8D r.w.s. 14A. In compliance, the assessee company filed detailed explanations and ld. Authorised Representative argued on methodology and expenditure is purely business expenditure and same be allowed. The ld. Assessing Officer referred at page 5, para 4.1 of the order. But the ld. Assessing Officer has worked out disallowance under Rule 8D(2) under three limbs relying on the Tribunal decision in the case of ITO vs. Daga Capital Management (P) Limited 117 ITD 169 (Mumbai) were it was held that were the assessee engaged in the business of dealing in shares an....
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....and Escrow Management fees paid to Standard Chartered Bank and DSP Merrill Lynch in respect of open offer of shares of Shriram City Union Finance Limited. Further, the advisory fees paid to Ernst & Young Pvt. Ld is for restructuring and takes the characteristic of business expenditure and the assessee company has not incurred any expenditure for receiving the dividend income of :3,34,37,502/- and the assessee has disallowed :.51,220/-. Further, the ld. Assessing Officer has disallowed :6,84,284/- in addition to above disallowances made in the assessment order. The ld. Commissioner of Income Tax (Appeals) has confirmed the order of the ld. Assessing Officer. The ld. Authorised Representative submitted that the dividend income is incidental to assessee's business who is a dealer in shares and securities. The acquisition shares shall not be considered for disallowances u/sec. 14A of the Act. In the present case, the major three expenditures pertains to acquisition of shares in open offer of Shriram City Union Finance Limited and prayed for deletion of addition made by the ld. Assessing Officer. 6. Contra, ld. Departmental Representative relied on the orders of Commissioner of Income ....
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....in conformity with the statutory provisions contained under the Act. Therefore, the impugned orders are not sustainable and require to be set aside. We have considered the business activities, financial statements and judicial decisions, there seems to be a realistic approach on acquisition of shares by the assessee company and the above expenditure was incurred purely on the investment strategies of the Business. Therefore, the ld. Assessing Officer should have considered the expenditure from the assessee business objects and activities and the calculate the disallowance under Sec. 14A Rule 8D. We, therefore are of the opinion that the disputed issue has to be re-examined in line with the investment activity by the ld. Assessing Officer and we set aside the order of the Commissioner of Income Tax (Appeals) to the file of the ld. Assessing Officer for examination and the assessee shall be provided adequate opportunity of hearing before passing the orders on merits and the ground of the assessee is allowed for statistical purpose. 8. The next ground that the ld. Commissioner of Income Tax (Appeals) erred in confirming the action of ld. Assessing Officer in rejecting the assessee'....
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....eedings, the ld. Commissioner of Income Tax (Appeals) on the basis of the arguments of the ld. Authorised Representative on the grounds and findings of the ld. Assessing Officer and written submissions and other materials in the appellate proceedings observed at page 18 to 22 of his order at para 5.3.2 as under:- ''I have considered the findings of the AO and also the submissions of the AR of the appellant carefully. There is no dispute about the factual position brought by the AO in the order of assessment. The stand of the AR of the appellant that the consideration received on forfeiture of warrants to be taken as NIL is not acceptable. The appellant has not exercised the option and the warrants were lapsed and the assesee has not got any amount on account forfeiture of warrants. On the facts of the case, I am of the confirmed view that the appellant has not received any consideration on account of forfeiture of warrants. However, the AR of the appellant relied on the ratio of the decision of the Hon'ble Delhi High Court in the case of CIT v. Chand Rattan Bagri [329 ITR 356] and ratio of the decision of the Kanataka High Court in the case of DCIT v. BPL Sanyo Finance Ltd. [....
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....rrant for non payment of money because of failure to pay is allowable as Short Term Capital Loss even though there is no transfer and relied on the judicial decisions of Karnataka High Court of DCIT vs. BPL Sanyo Finance Limited (312 ITR 63) and supported the case with decision of CIT vs. Chand Ratan Bagri 329 ITR 356 (Delhi High Court) and the Co-ordinate Bench decision of the Tribunal on forfeiture of shares in the case of K.P.D. Sigamani, Shri. K.P. Ramasamy and Shri. P Nataraj vs. ACIT in ITA No.412/Mds/2010 in assessment year 2007-2008, dated 30.07.2010 were the Tribunal held and gave a finding that the assessee is entitled to claim Short Term Capital Loss, on account of forfeiture of shares, if it is not sham or colourable device. We perused the assessment order and Commissioner of Income Tax (Appeals) orders on the transaction of forfeiture of share warrants of the Group company. The ld. Authorised Representative drew our attention to the Audited financial statements of the Shriram City Union Finance Limited as on 31.03.2010 and share warrant certificate. The fact of the share warrant conversion forfeiture was referred in the Directors report at page 11 as under:- ''As app....
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....or re-examination based on the information submitted on warrants and financial statement of Shriram City Union Finance Limited and the Assessing Officer shall pass the order on merits after providing opportunity of being heard in accordance with law. The ground of the assessee is allowed for statistical purpose. 9. The last ground raised by the assessee is that the ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance u/s.14 while computing Book profit u/s.115JB of the Act. 9.1 The ld. Assessing Officer while calculating Book profits u/s.115JB of the Act found that the assessee received dividend income of :3,34,37,502/- and disallowance u/sec. 14A r.w.s. Rule 8D was calculated at :1,42,83,969/- was added while calculating Book Profits and assessee company. Aggrieved the assessee has filed an appeal before Commissioner of Income Tax (Appeals). 9.2 The ld. Commissioner of Income Tax (Appeals) confirmed the action of the ld. Assessing Officer of disallowance of Sec 14A expenditure while calculating Bok profits. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 9.3 Before us, the ld. Authorised Repr....