TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 1233
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....ction of Learned Assessing Officer in making an addition u/s.68 of the Income Tax Act, 1961 of Rs. 93,240/- by treating the labour charges as bogus, without considering the facts and circumstances of the case. 3. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in considering the various statement of parties without granting an opportunity to the appellant, to comment on such statement. 4. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in considering the reports of JClT, Range 1 which was prepared without any jurisdiction and authority of law. 5. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in making an addition u/s.68 of the Income Tax Act, 1961 by treating the Share capital & Share premium of Rs. 16,84,24,300/- (1,30,86,000/- plus 15,53,38,300/-) as alleged Unexplained Cash credit, without considering the facts and circumstances of the case. 6. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in enhancing the appellant income by Rs. 81,75,700/- by ....
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....TR 688 and the decision of Hon'ble Bombay High Court in the case of Ahmedabad Electricity Company reported in 199 ITR 351. 5. After hearing both the sides we admit the additional ground for adjudication since the same is a legal ground and no new facts are required to be investigated. 6. In ground of appeal No.1 the assessee has challenged the order of the CIT(A) in confirming the disallowance of Rs. 1,08,81,171/- u/s.14A by the AO. 7. Facts of the case, in brief, are that the assessee company is a subsidiary of M/s. Ram Infrastructure Pvt. Ltd. (RIL) of Jalgaon in which it has shown to have invested in share of Rs. 17,74,50,000/- as on 31-03-2008 and Rs. 24,37,38,850/- as on 31-03-2009. Besides the above the assessee had invested Rs. 5,25,00,000/- in the equity shares of M/s. Pranjal Infrastructure Pvt. Ltd. (PIPL), another group concern in A.Y. 2009-10. Hence, the total investment of the assessee company in shares of RIL and PIPL comes to Rs. 29,62,68,850/- as on 31-03-2009. From the various details furnished by the assessee the AO noted that assessee company has shown secured loan of Rs. 25,83,83,442/- from Federal Bank Ltd. as on 31-03-2009. The assessee had paid total inter....
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....s is not the business of the assessee and dividend whether earned or not is not taxable under the I.T. Act. Hence, provisions of section 14A r.w. Rule 8 D is clearly applicable. In view of the above, the AO disallowed an amount of Rs. 1,08,81,171/- u/s. 14A of the I.T. Act. 11. Before CIT(A) it was submitted that the working of disallowance referred to in the assessment order was done at the instance of the AO. However, in absence of any exempt income earned by the assessee the question of disallowance u/s.14A r.w. Rule 8D does not arise at all. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Delight Enterprises and the decision of the Mumbai Bench of the Tribunal in the case of Avshesh Mercantile Pvt. Ltd. Vs. DCIT and various other decisions it was submitted that no disallowance u/s.14A can be made in the instant case. 12. However, the CIT(A) was also not satisfied with the explanation given by the assessee and upheld the disallowance made by the AO. While doing so, he noted that the assessee had made investment in the shares of group companies out of the borrowed funds and paid interest on the said borrowed funds. According to the CIT(A) earni....
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....y India Ltd. Vs. CIT reported in 317 ITR 218 and various other decisoins. He accordingly submitted that in case the disallowance u/s.14A r.w. Rule 8D is upheld, then a direction may be given to the AO to increase the deduction u/s.80IA(4) to that extent. 16. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the Ld.CIT(A) has given cogent reasons while upholding the order of the AO in disallowing an amount of Rs. 1,08,81,171/- u/s.14A of the Act. The assessee has diverted its interest bearing funds towards share capital of sister concern, i.e. the holding company. Merely because they have not received any dividend the same cannot be a ground not to make disallowance u/s.14A of the Act. He accordingly submitted that the order of the CIT(A) be upheld and the ground raised by the assessee on this issue should be dismissed. 17. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO on the basis of his finding that interest bearing funds have been....
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.... in respect of the assessment year 2008-09. The issue before the Tribunal, which is also an issue before us, was whether in the facts and circumstances of the case the Commissioner of Income Tax (Appeals) had erred in restricting the disallowance under section 14A of the Income Tax Act, 1961 to 2% of dividend income of Rs. 20,27,812/-. It was the contention of the revenue that Rule 8D of the Income Tax Rules, 1962 had not been applied properly in respect of the assessment year 2008-09. This aspect has been considered by the Tribunal in detail and it has observed as under: - 6.3 We have carefully considered the submissions and perused the records. We find that Ld. Commissioner of Income Tax (Appeals) has given a finding that only interest of Rs. 2,96,731/- was paid on funds utilized for making investments on which exempted income was receivable. Further, Ld. Commissioner of Income Tax (Appeals) has observed that in respect of investment of Rs. 6,07,775,000/- made in subsidiary companies as per documents produced before him, they are attributable to commercial expediency, because as per submission made by the assessee, it had to form Special Purpose Vehicles (SPV) in order to obt....
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....onal ground raised by the assessee are accordingly allowed. 20. In grounds of appeal No.2 to 7 the assessee has challenged the order of the CIT(A) in treating the entire share capital of Rs. 17.66 crores as bogus share capital and further enhancing the income by Rs. 35,32,000/- on account of alleged commission paid for obtaining bogus share capital. 21. Facts of the case, in brief, are that the assessee is a Private Limited Company and is engaged in Infrastructure Development activity mainly construction of Roads and Bridges on Built, operate and Transfer (BOT) basis. The assessee filed the return of income on 19-092009 declaring total income at NIL after claiming deduction u/s.80IA at Rs. 20,62,716/-. 22. During the course of assessment proceedings the AO noted that the assessee has shown receipt of share capital from the following parties : S. No. Name of the Allottee in Full Address of the Allottee Occupation Number of share Allotted Nominal Amount as per share Total nominal amount Equity Pref. 1 Amicitia Infrastructure Pvt. Ltd. Bhusawal Dist. Jalgaon Business 75000 ....
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.... letter dated 30-11-2011 asked the assessee to show cause as to why the amounts, as appearing in the above-mentioned accounts, shall not be added to the total income of the assessee. He noted that suddenly at 5.01pm on 05-12-2011 a letter from the above 6 parties was received through Fax stating thereunder as under : "RE : Information require u/s.133(6) in case of Hari Infrastructure Pvt. Ltd. submission of information A.Y. 2009-10. Sub : Requested to give a week time. We are in receipt of your office letter, mentioned above. In this respect we are submitting the relevant papers within a week time so please do the needful and obliged. Thanking you, Yours faithfully, ..." 25 He observed that out of the above 6 parties, 5 parties are having common address at 85, N.S. Road, Kolkata 700 001 and the other one, i.e. Maple Mercantile Pvt. Ltd. at 18A, Ramakant Bose Street, Kolkata - 700 003. The AO noted that when the notices u/s.133(6) were received back unserved in the month of July 2011, it is not understood as to how they are now requesting for time and how they came to know that information u/s.133(6) has been called for. On being confronted the assessee vide letter date....
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.... Anasuya Tradelink Pvt. Ltd. 56/1/1, Kings Road, Howara (W.B. 701101) AAGCA4402K Co. Reg. No. 1250 Pan Card Proof ROC Inspection Receipt (35-36) 2 Kalash Advertising Pvt. Ltd. Bhandari Bunglow, Subhash Lane, Malad (West) Kumbai 400097 AADCK1331L Co. Reg.No. U22110MH2007PT C171358 1293 Pan Card, Co. Reg. Certificate ROC Inspection Receipt (37-39) 3 Countship Commoditie s Pvt. Ltd. 85 Netaji Subhas Road P.S. hare Street Kolkata (W.B.) 700001 0 1250 0 4 Ziwani Bartec Pvt. Ltd. 85 Netaji Subhas Road P.S. hare Street Kolkata (W.B.) 700001 AAACZ1935 Co. Reg. Co. 1250 Pan Card Proof, Financial statements 31.3.2009, 23AC ROC Inspection Receipt (40-51) 5 Punya Leather Pvt. Ltd. 85, N.S. Road, Kolkata (W.B.) 700001 AABCP5690F Co. Reg. No.U61909WB199 5P C067641 500 Pan Card Proof, Balance sheet 31.3.2009 (52-53) 6 Giltedee Vincon Pvt. Ltd. 85, Netaji Subhas Ro....
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.... 31-03-2009 and noted that the assessee during the year under consideration has allotted shares to Ram Infrastructure Ltd. without any premium and those shares were held by M/s. Pranjal Infrastructure Pvt. Ltd.. According to the AO if the premium of Rs. 1900/- per share were received from strangers, then why not the same were charged by Pranjal Infrastructure Pvt. Ltd. from Ram Infrastructure Ltd. Therefore, he was of the opinion that no premium was actually received and just to introduce own money the share premium in the name of others has been introduced. He observed that there is no immovable asset in the fixed assets shown by the assessee in the balance sheet. There is no reserve available except the share premium of Rs. 16,77,70,000/-, plus accumulated profit u/s.80IA of Rs. 2,07,22,822/-. The share premium has been shown to have been received during the year under consideration and if the share premium is reduced the net worth of the company is only Rs. 26,70,24,273/- divided by total no. of shares 8,38,300. Thus, the value per share comes to only Rs. 318.53, i.e. the share value in real terms have come down from Rs. 362.39 as on 31-03-2008 to Rs. 318.53 as on 31-032009. Whe....
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....the parties have confirmed the transactions the AO following the decision of Hon'ble Supreme Court in the case of CIT Vs. Sumati Dayal reported in 214 ITR 801 (SC) and CIT Vs. Durga Prasad More reported in 82 ITR 540 (SC) and the decision in the case of Mcdowell reported in 154 ITR 148 did not add the face value of shares as income of the assessee. However, he passed on the information to the respective Assessing Officers to take necessary actions in their cases by adding back the share premium which they have received back in cash from the assessee. 31. Before CIT(A) the assessee made elaborate submissions and filed certain details based on which the Ld.CIT(A) called for a remand report from the AO. After considering the remand report of the AO and the rejoinder of the assessee to such remand report the Ld.CIT(A) not only upheld the addition made by the AO but also enhanced the income of the assessee by Rs. 1,17,07,700/- being the face value of Rs. 100/- each for 81757 shares and commission of Rs. 35,32,000/- for arranging such bogus share capital. The relevant finding given by the CIT(A) at Para 36 of the order read as under : "36. After taking into consideration the facts of ....
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....ady added by A.O.) Hence, total addition on account of bogus share capital, share premium and commission comes out to be Rs. 18,01,32,000/-. Hence the appellant's income is enhanced by Rs. 1,17,07,700/- (Rs.81,75,700/- + Rs. 35,32,000/-). Since the entire share capital including premium of Rs. 15 crore shown to have been received from M/s. Arnicitia Infrastructure (P) Ltd. has been added u/s 68 of the Act, no separate addition of unexplained cash amounting to Rs. 15 core, is being made u/s 69 of the Act in the hands of the appellant. AO is directed to initiate penalty proceedings u/s 27l(1)(c) of the Act on enhanced income also for furnishing of inaccurate particulars and concealment of income (bogus share capital and unexplained expenses in the form of commission paid). AO is also directed to take follow up action in the case of M/s. B.C. PBiyani Projects (P) Ltd., M/s. Amicitia Infrastructure (P) Ltd., M/s. Ram Infrastructure (P) Ltd. and M/s. Pranjal Infrastructure (P) Ltd. in the light of the revelations made by various persons in regard to cash deposits, bogus TDS certificates and bogus payments by M/s. Pranjal Infrastructure (P) Ltd. to M/s. B.C. Biyani Projects (P) Ltd. ....
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....herefore, these could not be produced before the lower authorities. So far as the assessment order passed u/s.143(3) for A.Y. 2009-10 in case of M/s. Pranjal Infrastructure Pvt. Ltd. and M/s. B.C. Biyani Projects Pvt. Ltd. he submitted that these orders were obtained by the assessee after the completion of the order of the CIT(A). Since these documents are of vital importance to decide the appeal, therefore, the same should be accepted and the matter may be decided accordingly. 37. He submitted that the AO in the re-assessment proceeding in the case of Amicitia Infrastructure Pvt. Ltd. has accepted the investment in purchase of shares in Hari Infrastructure Pvt. Ltd. at a premium of Rs. 1,900/- per share. The order dated 08-03-2013 passed u/s.143(3)/147 is after the date of the order of the CIT(A) which is dated 18-02-2013. Therefore, the addition to this extent has to be deleted. 38. So far as the investment by the other parties are concerned (8 No.) he submitted that the AO had made the addition only in respect to the share premium on the ground that no unknown party would give such a hefty premium and accepted the amount of face value of shares received by the company from the....
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....iri Ram Syal Hydro Power Pvt. Ltd. - 196 Taxmann 441 (Delhi) 5. Bhav Shakti Steel Mines Pvt. Ltd. Vs. CIT - 320 ITR 619 (Delhi) 6. CIT Vs. Dwarkadhish Financial Services - 197 CTR (Del) 202 7. CIT Vs. Winstral Petrochemicals Pvt. Ltd. - 333 ITR 603 (Delhi) 8. CIT Vs. M/s. Value Capital Services Pvt. Ltd. - 307 ITR 334 (Delhi) 9. CIT Vs. Makhni and Tyagi Pvt. Ltd. - 267 ITR 433 (Delhi) 10. CIT Vs. Antarctica Investment Pvt. Ltd. - 262 ITR 493 (Delhi) 11. CIT Vs. Dolphin Canpack Ltd. - 283 ITR 190 (Delhi) 12. CIT Vs. Achal Investment Ltd. - 268 ITR 211 (Delhi) 13. A-One Housing Complex Ltd. Vs. ITO - 110 ITD 361 14. Hindusthan Tea Treading Co. Ltd. Vs. CIT - 263 ITR 289 (Calcutta) 15. CIT-Vs. Namastey Chemicals Pvt. Ltd. - 33 Taxmann.com 271 (Gujarat) 16. Hindustan Inks & Resins Ltd. Vs. Dy.CIT - 60 DTR 18 (Karnataka) 17. CIT & Anr Vs. Arunananda Textiles Pvt. Ltd. - 333 ITR 116 (Karnataka) 18. CIT Vs. Electro Polychem Ltd. - 294 ITR 661 (Madras) 19. CIT Vs. Gobi Textiles Ltd. - 294 ITR 663 (Madras) 20. CIT Vs. Stl Extrusion Pvt. Ltd. - 333 ITR 269 (Madhya Pradesh) 21. CIT Vs. Shree Barkha Synthetics Ltd. - 270 ITR 477 (Rajasthan) 22. CIT Vs. First....
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..../- per share on a face value of Rs. 100/- charged by the assessee from shareholders who are not known to it. He submitted that on being confronted by the AO the assessee surrendered the share capital received from 6 calcutta based companies. However, for the remaining companies the assessee was unable to conclusively prove such huge amount charged as share premium. He submitted that the Ld.CIT(A) has given cogent reasons while sustaining the addition made by the AO as well as by enhancing the income of the assessee to the extent of share premium charged by it. The various decisions relied on by the Ld. Counsel for the assessee are not applicable to the facts of the present case and are distinguishable. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee on this issue be dismissed. 42. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has issued 88300 shares of Rs. 100/- each with premium of Rs. 1,900/- per share, the details ....
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.... only confirmed the share premium amount added by the AO but also enhanced the income of the assessee to the extent of the face value of the share capital in respect of 81750 shares of the face value of Rs. 100/-, i.e. Rs. 81,75,700/-. He also enhanced the income of the assessee to the extent of Rs. 35,32,000/- being the commission paid for arranging the share capital. In effect the CIT(A)enhanced the income by Rs. 1,17,07,700/-. 45. It is the case of the Ld. Counsel for the assessee that in the case of Amicitia Infrastructure Pvt. Ltd. from whom the assessee has obtained share capital of Rs. 15 crores, the AO in the order passed u/s.143(3)/147 dated 08-03-2013, which is after the date of order of the CIT(A), has accepted such investment in shares with premium of Rs. 1,900/- per share of the face value of Rs. 100/-. So far as the shares invested by the other companies are concerned, it is the submission of the Ld. Counsel for the assessee that since the voluminous details filed by the assessee have not been properly appreciated by the lower authorities and since the statements recorded at the back of the assessee were not confronted to the assessee, therefore, no addition can be m....
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....ni Projects Pvt. Ltd. Bhusawal has stated that the cash deposited in their Nahata Bank account on 24-03-2009, 28-03-2009 & 30-03-2009 was not belongs to B.C. Biyani Projects Pvt. Ltd., Bhusawal, this cash was arranged by Mr. Pradeep Nehete Director of Hari Infrastructure Pvt. Ltd., Jalgaon, and there are accommodation entries made for the purpose of Hair Infrastructure Pvt. Ltd. Jalgaon. B.C. Biyani Projects Pvt. Ltd., Bhusawal company has issued the account payee cheques to our company and our company has paid the entire amount to Hari Infrastructure Pvt. Ltd. Jalgaon by account payee cheques only, which may please be accepted." 3) Considering the facts of the case of the statements made, it is observed that amount has been received as loan from B.C. Biyani Projects Pvt. Ltd., Bhusawal, which has been utilized for purchase of share in Hari Infrastructure Pvt. Ltd. at a premium of Rs. 1,900/- per share. Although, the sources of funds have been explained as funds having received from B.C. Biyani Projects Pvt. Ltd., at the same time the transaction of received funds from B.C. Biyani Projects Pvt. Ltd., cause applicability of provision of Sec.2(22)(e) of the I.T. Act, 1961 in the....
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....dicated by the AO or the CIT(A). We therefore remit this issue also to the file of the AO for fresh adjudication. Grounds of appeal No.2 to 7 by the assessee are accordingly allowed for statistical purposes. 50. Ground of appeal No.8 by the assessee relate to part relief given by the CIT(A) out of the addition of Rs. 6,11,00,000/- by the AO on account of rebate of interest and waiver of loan. 51. Facts of the case, in brief, are that the AO during the course of assessment proceedings noted that the assessee has taken loan for business purposes from Chandrakant Hari badhe Sir Credit Cooperative Society. The society after settlement with the assessee has waived interest of Rs. 3.78 crores and principal amount of Rs. 2.33 crores. The AO, therefore, asked the assessee to explain as to why the above-mentioned waiver of interest and principal amount should not be charged to tax. The assessee vide letter dated 07-12-2011 replied as under : "As regards waiver of loan of Rs. 2.33 cr. from Society Loan : a. As per the instruction of the Commissioner of Cooperative Society, Pune, the company has repaid in full Rs. 24.75 crores to Society against the principal outstanding balance of Rs. ....
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....thodology and directly debited from WIP, the same, according to the AO is not in order. According to the AO the same is a revenue receipt and hence taxable. He accordingly made addition of Rs. 6,11,00,000/- to the total income of the assessee being the waiver of loan and interest. 53. In appeal the Ld.CIT(A), based on the arguments advanced by the assessee, held that the principal amount of Rs. 2.33 crores waived off is taxable in the hands of the assessee company and the waiver of interest to the tune of Rs. 3.78 crores is not taxable since the same had not been claimed by the assessee as expenditure in its profit and loss account. He accordingly deleted the amount of Rs. 3.78 crores and sustained Rs. 2.33 crores only. The relevant observation of the CIT(A) at Para 37 of the CIT(A) read as under : "37. As regards appellant's ground nO.5 in regard to addition of Rs. 3.78 crore and Rs. 2.33 crore on account of waiver of interest and principal, respectively by Sahakar Mitra Shri Chandrakant Hari Badhe Sir Urban Cooperative Society, Varangaon, I find that the appellant had taken short term loan of Rs. 32 crore from Sahakar Mitra Shri Chandrakant Hari Badhe Sir Urban Cooperative....
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....ame as expenses in its P & L account. Since interest was not debited in books of account, waiver of interest will not lead to taxable income in the hands of the appellant. Hence addition of Rs. 3.78 crore is deleted. Addition to the extent of Rs. 2.33 crore is confirmed." 54. Aggrieved with such part relief given by the CIT(A) the Revenue as well as the assessee are in appeal before us. 55. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. So far as the waiver of interest amounting to Rs. 3.78 crores is concerned we find the Ld.CIT(A) has given a finding that the interest of Rs. 3.78 crores charged since from the date of obtaining of the loan till the date of closure of the account was not debited by the assessee in the profit and loss account. It has not been claimed in the computation statement also. Therefore, when such interest was not debited in the books of account, waiver of interest by the bank will not lead to taxable income in the hands of the assessee. In our opinion, when any expenditure is neither debited to the profit and loss accounts nor claimed as a deduction ....
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....ding liability and consequently the said amount was taxable u/s. 41(1) of the I.T. Act. On further appeal the Tribunal held that provisions of section 28(iv) was not applicable because benefit of claim was not received by the assessee in kind. Further, it was held that provisions of section 41(1) of the Act was not applicable because there was no cessation of trading liability. On a reference the Hon'ble High Court observed as under : "Findings : At the very outset, we wish to point out three facts which are undisputed : (a) that a loan was advanced by KJC to the assessee, (b) that the assessee had paid interest at 6 per cent. per annum for ten years being the period of contract, (c) that the assessee never got deduction for payment of interest under section 36(1)(iii) or under section 37 of the Act. These three facts are not disputed by the Department. Therefore, we are required to consider the applicability of the provisions of sections 28(iv) and 41(1) of the Act in the light of the abovementioned three undisputed facts. (A) On section 28(iv) : At the outset, we wish to clarify that this judgment is confined to the facts of this case. This is because the value of any ben....
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.... for expansion. Therefore, the import was that of plant and machinery. The consideration paid was for such import. In the circumstances, section 28(iv) is not attracted. Lastly, we may mention that, in this case, AMC agreed to forego the principal amount of loan as a part of take-over arrangement with KJC to which the assessee was not a party. The waiver of the principal amount was unexpected. In the circumstances, one fails to understand how such waiver would constitute business income. (B) On section 41(1) : Alternatively, it was argued on behalf of the Department that in this case waiver constituted remission of trading liability and, therefore, section 41(1) stood attracted. We do not find any merit in this argument. Firstly, in the present case, the prerequisite of section 41(1) is not applicable. In order to apply section 41(1), an assessee should have obtained a deduction in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. In this case, the assessee has not obtained such allowance or deduction in respect of expenditure or trading liability. It is not disputed that the assessee has paid interest at 6 per cent. over....
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....ts referable to loans received for purchase of capital assets would not constitute a trading liability and accordingly section 41(1) was not attracted. In our case, the most fundamental fact which is required to be borne in mind is that there was no deduction given to the assessee in earlier years and, therefore, Rs. 57,74,064 could not be included as income under section 41(1) of the Act. Lastly, it is important to bear in mind that the toolings constituted capital asset and not stock-in-trade. Therefore, taking into account all the above facts, section 41(1) of the Act is not applicable. In the circumstances the above questions are all answered in the affirmative, i.e., in favour of the assessee and against the Department. This disposes of Reference Application No. 1709 of 1982 filed by the Department. Reference Application No. 1708 of 1982 filed by Department : The learned advocates on both sides have informed us that the questions falling under Reference Application No. 1708 of 1982 stand covered by various judgments of our court. Accordingly, we answer the following questions. "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified i....