TaxTMI 
TaxTMI 
2018 (12) TMI 1734
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....ances of the appellant's case, the, CIT(A) erred in confirming disallowance of long term capital loss Rs. 1,49,70,000 on sale of 30,00,000 shares of Arvind Ltd. 2. On the facts and in the circumstances of the appellant's case, the Ld. CIT(A) erred in confirming disallowance of short term capital loss on sale of 1,00,000 shares of Anagram Knowledge Academy Ltd. (AKAL) amounting to Rs. 3,50,00,000. 3. On the facts and in the circumstances of the appellant's case, the Ld. CIT(A) erred in confirming disallowance to the extent of Rs. 11,82,418 from out of the total disallowance of Rs. 58,77,294 made by the Assessing Officer u/s.14A of the IT. Act read with Rule 8D of the IT. Rules. 4. On the facts and in the circumstances of the appellant's case, the Ld. CIT(A) erred in confirming disallowance to the extent of Rs. 13,63,244 from out of the total disallowance of Rs. 16,03,792 made by the Assessing Officer being depreciation on BMW Motorcar. 5. The appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal. 3. The first issue raised by the assessee is that ld....
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....ly. Thus there was very high possibility for getting the lower circuit breaker triggered on the sale of shares of the company due to substantial fall in the price of Arvind Ltd on account of supply of 30 lacs shares. 3.5 The assessee also explained that it saved cost approximately 1.5 - 2% of the listed sale price on account of transaction cost, i.e., brokerage, securities transaction tax, and service tax, etc. Thus the price for the transaction of the sale of shares was determined after considering a 15% discount of the market price which comes to Rs. 28.31 per share. Accordingly, the transaction for the sale of shares as discussed above cannot be treated as a non-genuine and sham transaction. 4. However, the AO was of the view that the whole of the transaction resulting the long-term capital loss is a colorable device to generate the longterm capital loss. Accordingly, the AO issued show cause vide notice dated 25-02-2013 to the assessee to explain such loss. 4.1 In compliance to it the assessee vide letter dated 5th March 2013 submitted as under: 1. The shares were sold off-market to avoid the sudden supply of the shares in the stock exchange otherwise the pric....
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....Being aggrieved by the order of learned CIT (A) assessee is in appeal before us. 8. The learned AR before us filed a paper book running from pages 1 to 114 and submitted that there is no provision under the income tax Act to determine the sale price of the shares akin to the provisions of section 50C of the Act. 8.1 Even as per the provisions of section 56(2)(x) the difference between the sale price and market price is subject to tax in the hands of the recipient. In the case, the assessee is a seller. Therefore, the said provisions cannot be applied in its hands. Moreover, the provisions of the section are applicable with effect from 1st April 2017. 8.2 Similarly, the provisions as specified under section 50CA of the Act are not applicable to the facts of the instant case. It is because the provision of section 50CA of the Act does not speak about the quoted shares. Moreover, the provisions of the section are applicable with effect from 1st April 2018. 9. On the other hand, the learned DR submitted that the shares were sold to a group company at a price less than the market price. Had the assessee sold these shares through the stock exchange then the impugned loss coul....
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....SE & NSE were 4,87,085 and 9,56,701 respectively. The relevant details showing the average number of shares traded in the stock exchange is placed on pages 54 to 55 of the paper book. Thus the sudden supply of 30 lacks shares, that too by the promoter of the assessee company in the stock exchange would have adversely affected the price of the shares of Arvind Ltd. 10.5 We also note that the assessee must have saved transaction cost consisting of service tax, Security transaction tax, and brokerage by selling the shares off-market. Had the assessee gone through the network of stock exchange then he would have incurred the cost as stated above. Therefore the difference, to the extent of the cost involved in such transfer, as discussed above, between the market price and actual price requires due consideration for quantifying the loss arising from the sale of shares. 10.6 We also note that there is no provision under the Act prescribing the guidelines for pricing of the shares unlike the provisions contained under section 50C of the Act concerning immovable properties under the head capital gain. Thus in the absence of any specific provision to determine the sale price of the sh....
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....e listed price of a share in place of actual sales consideration. 10.12 We also note that it is not the case of the Revenue that there was some inflow of money from the buyer of the shares to the assessee which is unaccounted. As there is no dispute about the nature of the transaction and the consideration received by the assessee against the sale of shares, therefore the transaction cannot be termed as a sham transaction. 10.13 Moreover, the onus is on Revenue to establish that assessee has received some benefit over and above the actual sales consideration. In this regard, we find support and guidance from a recent judgment of Delhi high court in case Arjun Malhotra vs. CIT (403 ITR 354) where the same issue has been dealt and decided in favor of the assessee. The relevant extract of the order reads as under: "24. In view of the aforesaid discussion and pronouncement of law in K.P. Varghese case (supra), we fail to fathom how the tribunal had distinguished the said decision solely and entirely on the ground that in the present case the transaction was not at arm's length (see paragraphs 18 and 19 of the order of the tribunal quoted above in paragraph 16). K.P. ....
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....ussion would also take care of the argument that M/s GIPL had paid for foreign travel of the assessee. The fact that M/s GIPL had incurred any such expenditure would not be a ground and reason to substitute the actual consideration received with the figure relying upon the market quotation of the share as the fair market value." 11. Now coming to the main allegation/finding of the AO, which was later confirmed by the ld. CIT(A), that assessee has used this transaction as a colorable device to reduce its future tax liability and heavily relied on Honorable Supreme court in case of McDowell & Co. Ltd vs. Commercial tax officer (154 ITR 148) dated 17-4-1985 wherein apex court observed that tax planning within the law is permitted, but colorable devices cannot be part of tax planning. 11.1 In the case of McDowell & Co, the assessee was not collecting the sales tax liability on the excise duty even after the amendment in the distillery rules 76 & 79 w.e.f. 4-8-1981. As such before the amendment in the rules, i.e., distillery rules 76 & 79 w.e.f. 4-8-1981, the buyers were liable to deposit the excise duty directly to the state government. Therefore the assessee did not collect the ....
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....as a result of arrangement between the seller and buyer split into two, namely - duty so far paid separately directly to the tax authorities and the balance so paid to the seller; the arrangement was existing solely for the purpose of not paying the tax and it is not a transaction in reality of receiving less price than the one on which it was marketing. The Court no where said, that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell's case (supra). Ratio of any decision has to be understood in the context it has been made. The facts and circumstances which led to McDowell's decision (supra) leaves us in no doubt that the principle enunciated in the above case has not affected the freedom of citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs wi....
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....e ignored if the acts are unambiguous and bona fide, merely on the ground that treating those as deliberate would result in tax liability in future. While the planning adopted as a device to avoid tax had been deprecated, principle cannot be read as laying down the law that a person is to arrange his affairs so as to attract maximum tax liability, and every act which results in tax reduction, exemption of tax or not attracting tax authorised by law is to be treated as device of tax avoidance." 11.4 It is also pertinent to mention here that whenever assessee has two options, any layman will always go for one which reduces its tax liability but to hold that the transaction as a colorable device Revenue needs to see it in entirety, as held by the Hon'ble Gujarat high court in the abovementioned case. 11.5 The AO in his order also relied on the judgment of Supreme Court in the case of workmen vs. Associated Rubber Industry limited (157 ITR 77) (SC) and held that facts of the above case are similar to assessee's case. However, we note that the above decision was in respect to the calculation of bonus payable to workers where an artificial entity was created to divert the ....
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....arrants. 12.2 The assessee has claimed a short-term capital loss in the year under consideration amounting to Rs. 3.50 crores on sale of shares of AKAL and Rs. 36,19,050/- on account of forfeiture of share warrants. The necessary details of such loss stand as under: Sr. No. Name of Security Date of investments No. shares purchase Purchase value Price/ shares Date of sale No. share sold Value of sales Sales valve Per unit Holding days Profit/ Loss 1 Anagram Knowledge Academy Ltd. (AKA L) 20/03/10 1000 00 5000 0000 500 25/03/10 100000 1500 0000 15 0 5 -35000000 2 Arvind Ltd. Warrants 29/09/08 4060 000 3619051 - 17/05/09 Forfeited 0.09 - 229 -3619050 53619051 15000001 38619050 12.3 All the transactions above of sales of shares and forfeiture of share warrants were carried out among the related parties and belonging to the same group. 12.4 The assessee during the assessment proceedings acquired 1,00,000 shares of M/s An....
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....related parties and belonging to the same group. Accordingly, the AO held that assessee used this sale & purchase of shares and forfeiture of warrants as a colorable device to reduce its tax liability and disallowed the same and added to the total income of the assessee. 13. Aggrieved assessee preferred an appeal to learned CIT(A). The assessee before the ld. CIT(A) submitted as under: i) The transaction cannot be classified as a colorable device merely on the ground that sale & purchase of shares is within the same group, to which assessee also belongs. The other relevant facts and pieces of evidence which justify the business expediency of transaction cannot be ignored. ii) Unlike the provisions of section 40A(2) of the Act, there is no provision under the head capital gain chapter to determine the fair sales consideration if the transaction is between the related parties. iii) Ld. AO failed to justify that how the payment and receipt of the transaction are nullified, or there was some unaccounted transaction to nullify the effect of such transaction in the books. iv) The fair market value of the share as per Rule 11UA is Rs. 109.65 per shar....
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....same was disclosed in the books of accounts. 16.1 The transaction was carried out between the related parties, but that cannot be the basis for treating the transaction as a colorable device. There was no defect pointed out by the authorities below regarding the purchase price of the shares of AKAL which was inclusive of the premium. Therefore the loss incurred on the sale of shares cannot be treated as a colorable device. 16.2 The learned AR also submitted that if the company in which public is not substantial interested issues shares at a premium exceeding the fair market value, then it shall be treated as income of the company and not of the shareholder. Moreover, such provision was brought under the statute with effect from 1st April 2013. Thus the shares purchased by the assessee at a premium do not generate any income in its hand. 16.3 Similarly, the learned AR further argued that the loss on the forfeiture of warrants was not disputed by the AO, being the amount of rupees 4,59,949.00 as discussed above. Therefore there is no question for disallowing the loss by treating the same a colorable device. 17. On the other hand, the learned DR submitted that the loss inc....
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.... the fair market value of the shares determined as per rule 11UA of Income Tax rule. As per rule 11UA, the value of the share comes at Rs. 109 per share. Therefore, there remains no doubt that the price of the share sold was at a higher price than the fair market value. 19.3 Under the income tax provision, we note that there was no mechanism to determine the purchase & sale price of the share at that the relevant time. The lawmakers to determine the transfer value of unquoted share brought special provision by introducing Section 50CA of the Act which reads as under: "[Special provision for full value of consideration for transfer of share other than quoted share. 50CA. Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being share of a company other than a quoted share, is less than the fair market value of such share determined in such manner as may be prescribed 40a , the value so determined shall, for the purposes of section 48, be deemed to be the full value of consideration received or accruing as a result of such transfer. Explanation.-For the purposes of this section, "quoted share" means....
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....are to another group concern BVHPL. These shares were acquired by the assessee @ Rs. 74.25 in December, 2006. The said transaction as per the Assessing Officer suggested colorable device so that by selling the shares to its own subsidiary, at prices above or below the book value, the assessee was manipulating the income to reduce its tax liability. First of all, as decided in the paras hereinabove, the shares have not been sold to subsidiary of the assessee but to a concern from whom the assessee has raised loan to the extent of Rs. 18 crores and the decision was taken to repay the loan and arrest the payment of interest on such loans, the shares of the group concern were sold in off market transaction to BVHPL. The said transaction is not a colorable device. Further, the assessee has sold the shares on the market price prevailing on the date of sale and no fault can be found with such transactions undertaken by the assessee. In case as against the market value, the other concern had purchased the shares at a higher value, then it would be questionable, but it is not so, in the present case and hence, we find no merit in the orders of authorities below in holding that the loss clai....
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....arned very small profits and, thus, they were not in a financial condition to subscribe to assessee's shares at such a high premium - Whether, in aforesaid circumstances, Assessing Officer rightly concluded that assessee failed to prove identity of parties and genuineness of share transactions and, thus, impugned addition was to be confirmed - Held, yes [Para 6] [In favour of revenue]" 19.9 We also feel to clarify that the issue of shares at a premium is the prerogative of AKAL which cannot be questioned. Similarly, the decision of the assessee to subscribe the shares of AKAL at a premium is its prerogative which cannot be questioned. The only test to treat the sum of share capital as income under section 68 of the Act or 56 of the Act and that too in the hands of the recipient i.e. AKAL in the instant case. In this regard, we find support & guidance from the judgment of Mumbai Tribunal in the case of Green Infra Limited Vs. ITO reported in 38 taxmann.com 253 wherein it was held as under: "No doubt a non est company or a zero balance company asking for a share premium of Rs. 490 per share defies all commercial prudence, but at the same time one cannot ignore the fac....
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....ssee is allowable. The answer is yes. It is because the purchase value cannot be disputed and the sale price of the shares was determined as per the provisions of Income Tax Rule. Therefore the loss claimed by the assessee is within the provisions of the Income Tax Act. 20.4 In our considered view the same logic can be applied to the case on hand. However, the facts of the case in hand are a bit different from the example given above. In the case on hand, the shares were sold within 5 days from the date of acquisition. Accordingly, the loss was incurred in the same financial year in which the assessee acquired the shares. The transaction resulting the loss creates suspicion in the mind that it was generated for the purpose of the loss in order to set off the taxable income. Now the next doubt arises that such loss must have been set off against the income. But the fact is that the assessee has not claimed the set off of such loss in the year under consideration. In our considered view this fact cannot be ignored. It is because if the assessee would intend to set off of such loss in the same financial year, then it would have done so in that year only. But the assessee has not done ....
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....hus simply the transaction was carried out among the related parties can not the ground to hold that the loss claimed by the assessee is bogus. The taxability of the transaction has to be seen as per the provision of the Act. It cannot be decided based on emotions and the moral of the assessee. In this regard we find support & guidance from the judgment of Hon'ble Apex Court in the case of CIT Vs. A. Raman & Co. reported in 67 ITR 11 wherein it was held as under: "Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented." 20.9 Thus from the above, we note that the conduct of the assessee is suggesting that the loss was not created purposefully to meet some malafide purposes. 21. We also want to explain such loss incurred by the assessee with the help of another example. 21.1 Supposing Mr.....
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....e the assessee had sold the shares at a value admittedly lower than the market price. Yet the shares could not be assessed on the difference amount being her income because no inference can be drawn in the facts and circumstances of the case that the design of the assessee was such that she concealed certain facts and she received the difference of the value by fraudulent means. There was no evidence direct or inferential, nor was there any finding by any income-tax authority that the assessee indulged in such a practice. We are fortified in our view by a judgment of the Supreme Court in the case of CIT v. Shivakami Co. Pvt. Ltd. [1986] 159 ITR 71 (SC). We also find support in our view from a Division Bench judgment of the Bombay High Court in the case of India Finance and Construction Co. Pvt. Ltd. v. B.N . Panda, Dy. CIT[1993] 200 ITR 710." A.Y. 1994-95 We further find that the order of ld. CIT(A) is in conformity with the decision of jurisdictional High Court in the case of Marghabhai Kishabhai Patel & Co. (supra) wherein Hon'ble Court referred to the case of Madras High Court in the case of Ramlinga Choodambikai Mils Ltd. vs. CIT (1955) 281 ITR 952 and that of Gujarat High ....
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....ot be effected with a group company. As long as the Revenue could not doubt the sale price of the shares, it would not be open for the Revenue to contend that the assessee had shown loss which it did not really suffer. In the present case, it is not even the case of the Revenue that shares were sold at a price lower than the market rate. If that be so, the question of inflating the loss by transferring the shares to group company would not arise. Under ordinary circumstances, it is always open to the assessee in his own wisdom to either hold on to certain bunch of shares or to sell the same to avoid further loss, if he finds that market value of the shares is fast diminishing. It is equally open for the assessee to effect such sale during the same year when he also chooses to dispose of certain profit making shares. In the present case, of course, there is a further angle of the shares in question being pledged to IDBI and therefore it would not be possible for the assessee to deliver the original share certificates to its purchaser along with the duly signed transfer forms. As already noted, such special angle may have repercussion insofar as the legal relation between the assesse....
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....ssee did not exercise his right to acquire the shares against the share warrant otherwise the assessee would have invested more money by acquiring shares at a higher value. The transaction carried out among the parties has not been doubted, and the same is supported on the basis of supporting pieces of evidence. Therefore, we are of the view that the loss claimed by the assessee is within the purview of law. 21.7 We also note that during the year under consideration there was another forfeiture of the warrant of Arvind Ltd on which assessee incurred a longterm loss of Rs. 4,59,949/- which was allowed by the AO. But, no addition was made by the AO. The relevant extract of the AO order is reproduced as under: Sr. No. Name of Security Date of Investments No. of Shares Purchases Purchase Value Price/ shares Date of Sales No. of Share sold Value of Sales Sales Value per unit Indexed Cost Profit/ Loss 2 Warrants 26/03/08 400000 401001 1.00 17/05/09 400000 Forfeited 1 459950 21.8 It is also pertinent to mention here that AO did not make any addition even after....
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....assessee during the year has earned dividend income of Rs. 31,25,760/- which was claimed as exempt income under section 10(34) of the Act. The assessee in respect of such income has made the following disallowances in its income tax return. 1. Interest expenses 1,47,18,116.00 2. administrative expenses 3,25,000.00 22.3 However, the AO vide order sheet entry dated 23rd November 2012 proposed to make the disallowance as per the provisions of section 14A read with rule 8D of Income Tax Rule. 22.4 The assessee in response to the notice issued by the AO inter-alia submitted vide letter dated 18th of December 2012 that its funds exceed the amount of investment as on 31st March 2010. As per the assessee, its funds as on 31st March 2010 is of Rs. 1,89,06,41,542/- whereas its investment as on 31st March 2010 stands at Rs. 1,37,30,44,257/- only. Thus the assessee claimed that no disallowance of interest expenses could be made. 22.5 The assessee without prejudice to the above also submitted that if the disallowance of interest expense needs to be made then interest expense net of interest income should be considered for disallowance. 22.6 The assessee regarding the adm....
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.... if is observed that Assessing Officer has computed such d/sa/towance at Rs. 62,02,294 being 0.5% of average investments. On careful consideration of Profit & Loss Account submitted by Appellant is observed that Appellant was debited operating and other expenses as well as loan processing fee of Rs,98,78,058 in Profit & Loss Account out of which major expenditure in form of fees for increase in authorized share capital for Rs. 63,97,821, donation of Rs. 12,50,000 and loss on state of asset for Rs. 1,21,101, etc., are already disallowed, while filing Return of income and only expenditure of Rs. 15,07,415 are claimed. It is settled legal law that disallowance under Section 14A cannot exceed expenditure deb/ted and claimed in Profit & Loss Account The Hon'ble Anmedabad ITAT In identical cake of Adani Port Infrastructure Pvt. Ltd, (I.TA No. l383/Ahd/2013) has held as under: Further our attention has also been drawn on the P &LI A/c drawn on 31st March, 2008 according to which the assessee has claimed expenditure in respect of filling fees, Demat charges, finance charges etc. as follows: Filling fees 126950 Demat charges 657548 Legal Expenses ....
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....ermining the expenditure incurred by the assesses for earning of exempt income. Thus, the disallowance expenditure can be made under sub-section (1) for the expenditure incurred for earning of exempt income in the case under appeal before us, from the perusal of the assessee's profit & loss account, it is evident that the total expenditure incurred was Rs,49,04,028/- only. Thus, the assesses claimed the deduction for the expenditure of R$.49,04,028/-- which is debited to the profit & loss account. The disallowance cannot exceed the expenditure actually claimed by the assesses. We, therefore, accept the assessee's contentions that the disallowance made by the Assessing Officer and sustained.by the learned CIT(A) in excess of total expenditure debited to profit & loss account was unjustified. Accordingly, we restrict the disallowance to the extent of expenditure actually claimed by the assesses i.e. Rs. 49,04,028/- 5.3 Therefore on merits as wet! we can hold that in such situation a disallowance u/s. 14A cannot exceed the expenditure actually claimed by the assessee. In the absence of any contradictory judgment pieced before us, we hereby respectfully follow the decision of ....
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....tract of the order is reproduced below: "Where assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in tax-free securities, it would have to be presumed that investment made by the Assessee would be out of the interest-free funds available with Assessee and no disallowance was warranted u/s 14A." 25.2 Similarly, we also find support from the judgment of Hon'ble Gujarat High Court in the case of UTI Bank Ltd. reported in 32 Taxmann.com 370 where the headnote reads as under : "If there are sufficient interest free funds to meet tax free investments, they are presumed to be made from interest free funds and not loaned funds and no disallowance can be made under section 14A" 25.3 Because of the above proposition, we hold that no disallowance of interest expense claimed by the assessee can be made on account of investment in the securities under section 8D r.w.s. 14A of the Act. 25.4 However, we note that the assessee has made the disallowance of the interest expenses for the amount of Rs. 1,47,18,116.00 which was proposed and disallowed by the AO as per the provisions of section 14A read with rule 8D of....
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....ule 8D. The relevant details of the disallowance made by the assessee are placed on pages 33 to 34 of the paper book and reproduced the same as under: ENCLOSURE-7 Items Debited to Profit and Loss Account being amounts inadmissible under Section 14A: [vide Part-B Clause No.17(i)] Note: Expenditure incurred in relation to income which does not form part of the total income is computed at up Rs. 1,50,43,116/- and such inadmissible amount has been computed as under : Sr. No. Account Head Amount Remarks 1 Direct Expenses - - 2 Interest Expenses 1 47 18 116 See note(i) below 3 Other Expenses: 0.5% of Average Investments 3 25 000 Subject to observation pint(ii) below Total 1 50 43 116 Note: (i) In the opinion of the assessee, the disallowance on account of interest in the proportion of Average Investment to Average Assets should be restricted to Rs. 83,90,734/- (i.e Interest Expenditure Rs. 1 99 186/- less Interest income Rs. 1 15 50 452/-) (ii) In the opinion of the assessee, the allowable administrative expenditure comes to Rs. 15 07 419/- as de....
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....The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed^89, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act :]" 25.11 A plain reading of the above provisions reveals that the AO before making the disallowance under section 14A read with rule 8D was to record his satisfaction, but in the case, before us, we note that the AO failed to record any satisfaction as mandated under the provisions of section 14A of the Act. Therefore, we are of the view that no disallowance under section 14A read with rule 8D can be made other than the amount disallowed by the assessee in its income tax return. In t....
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....s in his name and the bills for the said purchase are also in the name of director. Therefore, Appellant Company is not the legal owner of the motor care. For claim of depreciation the two conditions are to be fulfilled namely - Appellant must be owner of the asset and it must: be used for the purpose of Appellant's business. In this case appellant is not the owner since the ownership vests with the directors who are separate entity than the Appellate Company. As regards use of these cars for the purpose of business, the same were not furnished. Therefore, use of car for the purpose of company's business is not established by the Appellant, Although the onus to prove the user of asset was on the Appellant, the same was not discharged either before the Assessing Officer or before the undersigned. Claim of an expense in the company account is not an evidence to prove that asset was used for the business of the company. In absence of any tangible evidnece to prove the Business use of the motor cars purchased in the name of directors, it is held that the motor cars were not used for the purpose of Appellant's business. Coming to the Appellant's argument of bene....
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....ed in all these cases beyond doubt with the user of asset, dominion and control is also proved. Therefore, claim of depreciation in these cases were a//owed by various high Courts. However, in the Appellant's case use for the purpose of business is not at all proved and the dominion and control also remained unproved, therefore, these decisions do not help the Appellant. Considering the larger bench decision of apex court and the Delhi High Court decision in the case of MM Fisheries private Ltd, the decision of jurisdictional ITAT is not followed which has not considered mess decisions, it is, therefore, held that the depreciation claimed by the Appellant is correctly disallowed by the Assessing Officer. As the entire issue is adjudicated against the Appellant by my predecessor CIT | (Appeals), following the ratio herein above, disallowance made by the Assessing Officer is upheld. However, it is observed that Assessing Officer has made disallowance of depreciation at Rs. 16, 03, 792 which is similar to disallowance made in A.Y. 2009-10 whereas correct disallowance on car is Rs. 13,63,224/-. Thus, disallowance is restricted to Rs. 13,63,244. This ground is partly allowe....
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....allowance of Rs. 17,01,370/- made by AO on account of short charging of interest on the advances given to Radiant Urja Limited. 32. The 1st issue raised by the Revenue is that learned CIT-A erred in deleting the disallowance made by the AO for Rs. 36,19,050.00 on account of forfeiture of warrants of Arvind Ltd. 32.1 This issue has already been considered by us while adjudicating the appeal of the assessee in ITA 218/AHD/2016. For a detailed discussion, please refer to Para number 10 of this order. Hence the ground of appeal of the Revenue is dismissed. 33. The 2nd issue raised by Revenue is that ld. CIT-A erred in restricting the disallowance at Rs. 11,82,418/- under section 14A read with rule 8D of Income Tax Rule against the addition made by the AO Rs. 62,02,094.00 only. 33.1 This issue has already been considered by us while adjudicating the appeal of the assessee in ITA 218/AHD/2016. For detailed discussion please referred to Para number 14&15 of this order. Hence the ground of appeal of the Revenue is dismissed. 34. The last issue raised by Revenue is that learner CIT(A) erred in deleting the addition made by the AO Rs. 17,01,370.00 on account of short charging ....
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....wed the interest solely on the ground that the assessee had given interest free loans to the associate concerns, viz., R. R. Family Trust and Sagar Texile Mills and this disallowance, in appeal the CIT (Appeals) deleted by holding that the amount advanced to both R. R. Family Trust and Sagar Textiles Mils were not given during the year under consideration, but the same was given in the earlier years. CIT (Appeals) had also taken note of the fact that there was sufficient funds available with the assessee-respondent on which there was no interest liability that had been incurred. In such circumstances, relying on the case of Torrent Financiers Ltd. (supra), it found that the disallowance was not justifiable. The Tribunal on noting these details, in terms held that there was nothing contrary that could be brought on record by the Department. The assessee's equity share capital Rs. 3.85 cores and reserve and surplus of Rs. 5.52 crores also were noted by the Tribunal. It found that the interest free fund available with the assessee was far greater than the loan advanced to the sister concerns and as a corollary to that, it concluded that the borrowed money was not utilized....
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.... Ltd. (Supra) to the facts of the case on hand and when it has been found that the assessee was having interest-free funds far in excess of investments and therefore, it can be said that the investments are made out of interest-free funds and therefore, the AO was not justified in making additions and/or making disallowance under Section 36(1)(iii) of the IT Act. Under the circumstances, no error and/or illegality has been committed by the learned IT AT in deleting the disallowance made by the AO under section 36(1)(iii) of the IT Act. No question of law much less substantial question of law arise with respect to deletion of the disallowance made by the AO under section 36(1)(iii) of the IT Act." Considering the facts discussed herein above, addition made by Assessing Officer for Rs. 17,01,370 is deleted. This ground of appeal is allowed. 36. Being aggrieved by the order of ld. CIT-A Revenue is in appeal before us. The ld. DR before us vehemently supported the orders of the AO whereas the learned AR for the assessee before us submitted that the own fund of the assessee exceeds the amount of loan. Therefore there cannot be any disallowance of interest expenses. The ld. A....
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....the appeal of the Revenue is dismissed. 39. Now coming to the Revenue appeal in ITA 248/AHD/2016, the Revenue has raised the following grounds of appeal. The ld.CIT(A) has erred in law and on facts in directing to restrict the disallowance under section 14A r.w. Rule 8D at Rs. 15,41,073/- as against Rs. 1,00,07,145/- worked out by the Assessing Officer." On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary. 40. The only issue raised by Revenue is that ld. CIT-A erred in restricting the disallowance at Rs.15,41,073.00 under section 14A read with rule 8D against the addition made by the AO at Rs. 1,00,07,145.00 only 40.1 The identical issue has already been considered by us while adjudicating the appeal of the assessee in ITA 218/....
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....AHD/2016. For detailed discussion, please refer to Para number 14&15 of this order. As the issue involved is identical to the issue raised in ITA 218/AHD/2016, therefore, respectfully following the same, the ground of appeal of the Revenue is dismissed. 44. The 3rd issue raised by Revenue is that ld. CIT-A erred in deletion the addition of Rs. 10,80,572.00 under section 36(1)(iii) of the Act. 44.1 The identical issue has already been considered by us while adjudicating the appeal of the Revenue in ITA 247/AHD/2016. For detailed discussion, please refer to Para number 26&27 of this order. As the issue involved is identical to the issue raised in ITA 247/AHD/2016, therefore respectfully following the same, the ground of appeal of the Revenue is dismissed. 45. The 4th issue raised by Revenue is that the learned CIT-A erred in deleting the addition made by the AO of Rs.97,224/- under section 35D of the Act. 45.1 The assessee in the year under consideration has claimed demerger expenses amounting to Rs.97,224/- under section 35D of the Act. The assessee has explained during the assessment proceedings that the demerger expenses were claimed in the earlier assessment years 200....
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....ment year in which it is incurred hence Assessing Officer is not justified in denying such claim in current year. The decision of Hon'ble Gujarat High court in the case of DCIT vs. Gujarat Narmada Valley Co. Ltd. 356 ITR 460 squarely applies to present case. Considering the facts discussed herein above, disallowance made by Assessing Officer for Rs. 97,224/- is deleted. This ground of appeal is allowed." 48. Being aggrieved by the order of learned CIT-A, Revenue is in appeal before us. The learned DR before us relied on the order of AO whereas the ld. AR for the assessee before us reiterated the submission made before the ld. CIT-A and supported his order. 49. We have heard the rival contentions and perused the materials available on record. It is an undisputed fact that the assessee has claimed 1/5th of demerger expenses in the earlier years and there was no disallowance made by the AO in the assessment framed under section 143(3) of the Act. Thus there remains no doubt that these expenses were brought forward from the earlier years. Therefore the same cannot be disallowed in the year under consideration. In this regard, we find support and guidance from the judgment of ....
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....early payment from the bank before the due date. Accordingly, the bank released the payment to the assessee before the due date after charging certain charges which were termed as credit card commission. The assessee also claimed that such credit card commission is nothing but representing the interest paid to the bank. Therefore, there is no liability for deducting the TDS under section 194H of the Act. 50.2 However, the AO did not agree with the contention of the assessee and treated the same as commission to the bank which is subject to the provisions of TDS. Accordingly, the AO disallowed the same due to non-deduction of TDS and added to the total income of the assessee. 51. Aggrieved assessee preferred an appeal to learned CIT-A, who has deleted the addition made by the AO by observing as under: "8.3 I have carefully considered the Assessment Order and the submission filed by the Appellant. The brief facts of present case are that merchant bankers had provided card swiping machines to the appellant company. By availing these facilities, a credit card holder could make payment by swiping the credit card on the said machines against purchases made from various sto....
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....re in the nature of bank interest. Therefore, the same cannot be subject to TDS under section 194H of the Act. However, the AO was of the view that the impugned payment is representing the commission paid to the bank. Therefore there has to be the deduction of TDS under section 194H of the Act. However, the view of the AO was subsequently reversed by the learned CIT (A). 52.2 Now the controversy before us arises to decide whether the commission paid against the sales effected through the use of credit card by the customers is liable for deduction of TDS. There is no ambiguity that the banks levy certain charges if the assessee expects payment from the bank before the due date. If we see the nature of the transaction, it is clear that the assessee pays the charges for availing the fund from the bank before the due date. Thus these charges are representing the interest paid to the bank. 52.3 We also note that there is no role of the bank for the sales made by the assessee to the customers. The bank undertakes the liability to make the payment to the assessee on behalf of the customer who uses the credit card for the payment. In this regard, we also find support and guidance fro....