TaxTMI 
TaxTMI 
2016 (12) TMI 444
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....ities Limited. 2. The learned Commissioner of Income Tax (Appeals) erred in holding that because shares were allotted against a loan given and that the purchase was ratified by the board, the investment cannot be treated as stock in trade of the appellant. 3. The learned Commissioner of Income Tax (Appeals) has presumed that the companies in which investments are made are sister concerns of the appellant. This is factually incorrect. 4. The appellant has made an investment for furtherance of its business. The intention of making the investment is clear. 5. The appellant has no representation on the Board of the companies in which the shares have been allotted nor do they have majority control. 6. The assumptions of the assessing officer that the transaction is colorable device is not based on any facts or findings. The assessing officer has not bought to record any direct nexus between investing and sale of the said shares to deem it a colorable device. 7. The fact the transaction was genuine and carried out in an arms length manner, thought admitted have not been appreciated. The transaction is carried out in the course of business of the appellant. 8. The appellant craves ....
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....under these facts, there is no dispute that assessee had incurred loss on account of its purchase and sale of shares and the only objection of CIT (Appeals) is this, that it is capital loss and not business loss but at the time of acquisition of shares itself, the shares were purchased as stock-in-trade and in view of the Board Circular No. 4/2007 dated 15.2.2007, it should be accepted that the loss is a business loss and not a capital loss. 4. At this juncture, a query was raised by the Bench that even if it is held that loss in the present case is a business loss, then also, the assessee will be hit by Explanation to Section 73 (1) and in that situation, the loss has to be treated as speculation loss which cannot be set off against normal business income and it can be set off only against the speculation income. In reply, it was submitted by the learned AR of the assessee that on this aspect, the matter is covered in favour of the assessee by the Tribunal's order rendered in the case of M/s. Laxmi Feeds & Export Ltd. vs. ACIT as reported in 62 ITD 315 (Mum). He submitted that in that case, it was held by the Tribunal that there is difference in purchase of shares and acquisition....
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....lar business transaction. Further as rightly pointed out by the A.O there is no object in the Memorandum of Association of the appellant company regarding the purchase and sale of shares. The appellant showed the shares of the said company under current assets in schedule 5 of the balance sheet as on 31.03.2009 as stock in trade. It is also seen from the profit and loss account for the year ending 31.03.2009 the appellant showed certain transactions of purchase/sale of shares. Mere disclosure of the shares as a stock in trade under current assets is not enough for claiming the said asset as a trading asset. The transactions recorded in the books is one of the indicators for deciding the issue and the same can not be taken as a sole reason for supporting the appellants view. The intention behind the acquisition of the shares is a dominant factor in the instant case. The appellant had not acquired the shares under normal business transactions so that the same can be taken as stock in trade. It is as per the decision of the Boards' of the Asianet TV Holdings L td. and the appellant company, the advances were converted into shares of the appellant company. Such a transaction can be....
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....Hon'ble Apex Court rendered in the case of Sri Gopal Jalan & Co. vs. Calcutta Stock Exchange (Supra). As per this judgment, it was held by the tribunal that if the shares are acquired by the assessee on application and allotment and not by way of purchase, the said acquisition of shares is not a purchase of shares because on application of shares, whether the assessee will get allotment of shares or not is not certain and as per Explanation to section 73(1), only that business is hit by this Explanation which consists of purchase and sale of shares. Since acquisition of shares in the present case is not by way of purchase, but is by way of allotment on application, loss on sale of such shares which are acquired by application and allotment are not hit by Explanation to section 73(1). The tribunal in this case has applied and followed the Ratio of the judgment of Hon'ble apex Court rendered in the case of Sri Gopal Jalan & Co. vs. Calcutta Stock Exchange (Supra) wherein it was held that the word "Purchase" cannot be applied to the legal transaction under which a person by the machinery of application and allotment becomes a share holder in the company. In the present case, the facts....
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....ls) erred in allowing the appeal on the issue of disallowance under sec 36(1) (iii) holding that where there were interest free funds by way of capital or reserve or by way of interest free deposits from customers, there is an inference that borrowed funds are not diverted for non-buisness purposes without appreciating the fact that the funds from ICDS were diverted for non business purposes 7. The learned CIT (Appeals) erred in allowing the appeal on the issue of disallowance of managenment consultancy fee of Rs. 6,89,59,600 holding that there is no finding by the AO that the expenditure is excessive or unreasonable in relation to anyone of the three requirements prescribed in sec 40A(2) without appreciating the fact that the AO had given a finding that the AR of the company was asked to give exact details of the consultancy provided and the AR had preferred not to produce any further evidence relating to the same. 8. The learned CIT (Appeals) erred in allowing the appeal on the issue of disallowance of managenment consultancy fee of Rs. 6,89,59,600 holding that as there was no material on record to show that the expenditure was in the nature of capital expenditure or not for th....
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....ted that in view of this fact that no exempt dividend income was earned by the assessee in the present year, no disallowance can be made u/s. 14A in the present year and in support of his contention, reliance was placed by her on the judgment of Hon'ble Delhi High Court rendered in the case of Cheminvest Ltd. Vs . CIT as reported in 378 ITR 33 (Del). 13. We have considered the rival submissions. We find that as per the profit & loss account of the assessee for the present year available on pages 11 of PB, there is no income earned by the assessee under the head 'dividend' which is exempt u/s 10. In the case of Cheminvest Ltd. (supra) cited by the ld. AR of assessee, it was held by the Hon'ble Delhi High Court that where the assessee had not earned any exempt income, no disallowance can be made u/s. 14A. Since there is no actual receipt of exempt income by the assessee in the present year, we are of the considered opinion that no disallowance can be made u/s. 14A as per this judgment of Hon'ble Delhi High Court rendered in the case of Cheminvest Ltd. (supra). Respectfully following this judgment of Hon'ble Delhi High Court, we decline to interfere in the order of CIT(Appeals) on th....
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....ted have been given as a part of the larger business strategy in the ordinary course of business. The appellant's submission that these advances are given for business purpose, therefore, are justifiable. Further, in the absence of specific findings / evidence on record that the borrowed funds have diverted for non business purpose it is difficult to reject the assessee's submission. 6.6. Even otherwise, where the appellant had interest-free funds by way of capital and reserves or by way of interest-free deposits from customers, there is an inference that borrowed funds are not diverted for non-business purpose. In such circumstances, there can be no disallowance. This is the ratio laid down by the Hon'ble High Court of Allahabad in the case of Prem Engineering Pvt. Ltd. [285 ITR 554]. A similar view has been expressed by the High Court of Bombay in the case of Reliance Utilities & Power Ltd. [313 ITR 340]. It was held that, where there were funds available both interestfree and interest-bearing, a presumption could arise that investments could be out of interest-free funds generated or available with the company if the interest-free funds were sufficient to meet their....
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...." 16. In the above paras reproduced from the order of CIT(Appeals), we find that a categorical finding has been given by the CIT(A) that the advances given to M/s. Asianet T.V. Holding (P) Ltd. of Rs. 79.40 crores and to M/s. India Radio Ventures of Rs. 10.2 crores and Rs. 3.23 crores and the remaining advances given to M/s. Azure Services Pvt. Ltd. and some more advance to other group companies were all given as part of larger business strategy in the ordinary course of business and hence these advances were given for business expediency and therefore, as per judgment of Hon'ble Apex Court rendered in the case of S.A. Builders as reported in 288 ITR 1, no disallowance of interest in respect of this interest free advance is justified. Since this finding of act of ld. CIT (Appeals) could not be controverted by the ld. DR of revenue and in view of the facts of the present case, this issue is covered in favour of assessee by judgment of Hon'ble Apex Court in the case of S.A. Builders (supra) and we find no justification to interfere in the order of ld. CIT(Appeals) on this issue also. Accordingly, grounds Nos. 5 & 6 are also rejected. 17. Ground Nos. 7 & 8 of Revenue's appeal are in....
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....shing. 2. Assistance in liasoning with Banks, Financial Institutions, Statutory and Government agencies and any international business that JEVL may set up at a future date. 3. The services in accordance with the terms of this Agreement and as necessary to meet the Requested Service Standards as set out in this agreement., the administrative processing requirements and 4. Any incidental services., functions and responsibilities not specifically described in this Agreement., but which are required for the performance and delivery of the Services (1) and (2) collectively. In the absence of any contrary evidence it is difficult to reject the above as the appellant had discharged its onus. The appellant has very limited employees as can be seen from the employees cost debited to the Profit and Loss account hence, the argument that the payment made to M/s. HIPE for managing its affairs cannot be rejected. A plain reading of s. 40A(2) reveals that where an assessee incurs any expenditure in respect of which payment is required to be made or has been made to any person referred to in cl. (b) of s. 40A(2) and the AO is of the opinion that such expenditure is excessive or unreasonabl....
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...., the AO has stated that this expenditure was not incurred exclusively for the business or profession, no basis or reason has been indicated by the AO for saying so. On this issue also, we find no infirmity in the order of CIT (Appeals). Accordingly, grounds Nos. 7 & 8 of revenue's appeal are also rejected. 22. Regarding ground Nos. 9 & 10 in respect of deletion of disallowance of Rs. 1,79,88,838 made by the AO u/s. 37 by holding that this expense is capital in nature, the ld. DR supported the assessment order, whereas the ld. AR of assessee supported the order of CIT(Appeals). In particular, our attention was drawn to para 8.4 of the order of ld. CIT(Appeals). It was submitted that a categorical finding has been given by CIT(Appeals) that there was nothing in the invoices submitted by the assessee to show the payments for acquisition of shares and decision was taken by the AO on this basis that this payment is towards acquisition of shares without any basis. 23. We have considered the rival submissions. First of all, we reproduce para 8.4 from the order of ld. CIT(Appeals) which is available on page 35 of his order:- "8.4 I have considered the facts and submissions made by the ....
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....e CIT (Appeals) that assessee had neither purchased nor sold any shares. In this connection, this fact was brought to the notice that in fact, the subsidiary company had held certain shares and assessee company had received non-compete fee and fees paid by the assessee is relating to negotiating non-compete agreement and related transaction. If an effort is made for a joint venture and the same is aborted, then the expenses incurred for the joint venture has to be allowed as revenue expenditure. In the present case, expenses were incurred in relation to joint venture with Star Group and categorical finding of AO is that no such venture has taken place and therefore, we find no reason to interfere in the order of CIT(Appeals) on this aspect of the matter also. Hence grounds Nos.9 & 10 are also rejected. 26. Regarding ground Nos. 11 to 13 of revenue's appeal which are related to issue in respect of deletion of addition made by the AO of Rs. 25,59,43,380 as deemed dividend u/s. 2(22)(e) of the Act, the ld. DR supported the assessment order whereas the ld. AR of assessee supported the order of ld. CIT(Appeals). She also placed reliance on the judgment of Hon'ble Karnataka High Court r....