TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 1310
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....sion of Hon'ble Special Court dated 30.04.2010 in MP No. 41 of 1999, the assets under consideration and the consequential income belongs to Late Shri Harshad S. Mehta and hence the Income confirmed by the learned Commissioner of Income-Tax (Appeals) ought to have been taxed in the hands of Late Shri. Harshad S. Mehta and not in the hands of the appellant." 3. At the outset, the learned Counsel for the assessee stated that he has instructions from the assessee not to press this ground and accordingly, he conceded. As the learned Counsel for the assessee has not pressed this issue, we dismiss this issue as not pressed. 4. The second issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of short term capital loss. For this assessee has raised following ground No.2: - "The Ld. Commissioner of Income-tax (Appeals) has erred in Law and in facts in confirming the disallowance of short term capital Loss amounting to Rs. 2,44,62,328/-." 5. Briefly stated facts are that the assessee purchased 9% tax free IRFC bonds for the value of Rs. 50 crores from Harshad S Mehta for a total consideration of Rs. 50,31,95,205/- on 26-09-1991. The assessee so....
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....etc., then such loss shall not be considered in computing his net taxable income. Further, the provisions of sub-section (1) of Sec.94 say that where the owner of any securities sells or transfers those securities and buys back or reacquires the securities, then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise than by the owner, the interest payable as aforesaid shall, whether it would or would not have been chargeable to income-tax apart from the provisions of the said sub-section, be deemed, for all the purposes of the Act, to be the income of the owner and not to be the income of any other person. 9. From the sequence of events, it is clear that the assessee purchased 9% Tax-Free IRFC Bonds of the value of Rs. 50 crores from M/s. Harshad S. Mehta for a consideration of Rs. 50,31,95,205/- on 26/9/1991 and sold these bonds on 11/10/1991, i.e. within a period of about 15 days, for a consideration of Rs. 47,87,32,877/- and claimed a loss of Rs. 2,44,62,328/-. In the process, the assessee also received tax-free interest of Rs. 1 ,84,50,000/-. From the sequence of events, it appears that this transaction of....
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....f the result of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise than by the owner, the interest payable as aforesaid shall, whether it would or would not have been chargeable to income- tax apart from the provisions of this sub- section, be deemed, for all the purposes of this Act, to be the income of the owner and not to be the income of any other person. Explanation.- The references in this sub- section to buying back or reacquiring the securities shall be deemed to include references to buying or acquiring similar securities, so however, that where similar securities are bought or acquired, the owner shall be under no greater liability to income- tax than he would have been under if the original securities had been bought back or reacquired. (2) ----------------------------------- (3) ----------------------------------- (4) Where any person carrying on a business which consists wholly or partly in dealing in securities, buys or acquires any securities and sells back or retransfers the securities, then, if the result of the transaction is that interest becoming payable in respect of the securities is receivabl....
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....ncome by reason of Sec. 94(1) of the Act. The provisions of Sec. 94(4) would come into operation only if:- (i) Where any person is carrying on a business which consists wholly or partly in dealing in securities; (ii) Buys or acquires any securities and sells back or retransfers the securities; (iii) The result of the transaction is that interest becoming payable in respect of the securities is receivable by him; and (iv) Such interest is not deemed to be his income by reason of the provisions contained in sub-section (1) According to us, it is a pre-requisite that the provisions of Sec.94(1) of the Act ought to be applied in the case of the actual owner of the securities from whom the same were bought by the assessee. However, the AO had failed to examine as to whether the provisions of Sec.94(1) of the Act had been applied in the case of the party from whom the shares in question were purchased and to whom the same were sold by the assessee. The bonds in question were purchased and re-sold to Harshad S. Mehta, but the provisions of Sec.94(1) of the Act had not been invoked in the said case, and, therefore, the provisions of Sec.94(4) of the Act could not be invoked in....
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....ed to the assessee was Rs. 4.40 crores as there was a discrepancy of Rs. 10 lakhs. The AO noted that the assessee has made unexplained investment of Rs. 10 lakhs in 9% tax free NTPC bonds and accordingly, he added the same to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) partly deleted the addition and sustained the addition of Rs. 10 lakhs by observing in Para 19 as under: - "19. From the above, it is clear that the assessee is showing investment in NTPC Bonds at Rs. 4.4 crores, while as per information provided by NTPC, such investment is Rs. 4.5 crores. There is nothing on record to show that the investment made by the assessee in NTPC Bonds is actually Rs. 4.4 crores + Rs. 4.5 crores. Apparently, even the NTPC letter does not indicate that the appellant's investment in the NTPC Bonds amounted to Rs. 8.9 crores. If that be the case, there is only a discrepancy of Rs. 10,00,000/- between the investment as disclosed by the assessee and as reported by NTPC. It is also relevant to mention over here that the AC has added only the differential interest of Rs. 45,000/- in respect of unexplained investment in NTPC Bonds (appa....
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....how to the assessee that it is holding NTPC bond of Rs. 4.50 crores as alleged by the Revenue and this information was never made available to the assessee and unless the said evidence is placed at the disposal of the assessee, the same cannot be explained. In view of the above facts, we delete the addition and allow this issue of assessee's appeal. 11. The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO on account of unexplained investments in shares amounting to Rs. 5,40,700/-. 12. Briefly, stated facts are that in original assessment certain additions were made as unexplained investments in shares for the reason that the assessee failed to produce contract notes for purchase of shares. In the set aside assessment proceedings, assessee produced certain contract notes for verification but could not produce the contract note of Coventry Coil on about 1200 shares and ITW Signode of about 1400 shares. Accordingly, AO made addition of Rs. 5,40,700/- by observing as under: - "1. Coventry Coil: In the original assessment an addition of Rs. 57,80,000/- was made as unexplained investment in 57800 shares of Coventry Coil. In the s....
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.... appeal is allowed. 14. The next issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance on account of car rental expenses at 50%. For this assessee has raised following ground No.5: - "5. The Ld. Commissioner of Income-Tax (Appeals) erred in Law and in facts in confirming the disallowance on account of car rental expenses to the extent of 50% of the aggregate amount of Rs. 3,98,091/- claimed by the appellant." 15. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the Revenue has disallowed excessive at 50%, but 15% is quite reasonable because the personal element cannot be denied. Accordingly, this issue of assessee's appeal is partly allowed. 16. The next issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act to the extent of Rs. 50%. For this assessee has raised following ground no. 6: - "6. The Ld. Commissioner of Income-Tax (Appeals) erred in law and in facts in confirming the disallowance u/s. 14A of the Act to the extent of 50% of Rs. 11,65,140/- di....
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....refore, the contractual liability existed during the year under consideration despite the fact that subsequently a new Auditor was appointed by the order of the Special Court. We find force in the submission of the Learned Counsel for the Asses-see. The appointment is made in the Annual General Meeting and the liability to pay fees is incurred the moment the appointment is made. No adverse inference can be drawn merely from the fact that audit could not be done due to seizure or the books of accounts as well as from the fact that subsequently the Court directed that audit be done through new Auditor. In view of the same and following the decision of the Tribunal mentioned above, we do not find any merit in the ground raised by the Revenue. Accordingly, the orders of the Learned CIT (A) are upheld on this issue. 20. In view of the above, taking a consistent view we also delete the disallowance of audit fee and allow this issue of assessee's appeal. 21. The next issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of depreciation at Rs. 61,640/-. For this assessee has raised following ground No.8: - "8. The Ld. Commissioner of Income-Tax (A....
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....ble to notified entity. This aspect of the matter is required to be held against the assessee following the judgment of the Hon'ble Bombay High Court in the case of Divine Holdings Pvt. Ltd( ITA No.3334 of 2010 dated 7/3/2012), as decided by our Co-ordinate Bench in the case Eminent Holdings Pvt. Ltd. in ITA NO.2139/Mum/2013 dated 18/6/2014, which also was a case of notified entity under the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992. At the time of hearing this aspect of the matter was fairly conceded by the Ld. Representative of the assessee. 6.1 The second plea of the assessee is with regard to the quantum of interest chargeable under section 234A, 234B & 234C of the Act which is to the effect that the interest should be charged after considering the amount of tax deductible at source on the income assessed. Similar plea of the assessee was upheld by our Co-ordinate Bench in the case of Eminent Holdings Pvt. Ltd. (supra). Following the same, we deem it fit and proper to restore the matter back to the file of AO who shall recompute the interest chargeable under section 234A, 234B & 234C of the Act after considering the amount of tax deducti....