TaxTMI 
TaxTMI 
2020 (6) TMI 102
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....he Ld. CIT(A) has wrongly upheld the disallowance made by Ld. A.0. u/s 56(viib) of the Income Tax Act, 1961 of Rs. 34,38,000/- on account of valuation of premium received on issue of shares" 3. The assessee company is engaged in the business of investment in shares. Return of income was filed on 8/9/2013 declaring a loss of Rs. 1,17,70,956/-. Assessment u/s 143(3) was made on 19/2/2016 determining total income at Rs. 32,44,078/- in the assessment order. The Assessing Officer disallowed expenses pertaining to earning exempt income of Rs. 21,33,361/-. The Assessing Officer also disallowed interest and loan processing charges for diversion of interest bearing funds to the sister concerns to the extent of Rs. 60,72,432/-. The Assessing Officer also added Rs. 34,38,000/- on account of excess premium received on sale of shares to Shoveller Infra Commission Ltd. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A) and CIT(A) partly allowed the appeal of the assessee. 5. As regards Ground No. 1 relating to disallowance u/s 14A read with Rule 8D(2)(iii) of expenditure of Rs. 2,97,725/- on account of exempt income, the Ld. AR submitted that under R....
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....order and the order of the CIT(A). 7. We have heard both the parties and perused the material available on record. During the year the assessee received dividend income of Rs. 54,84,142/-. The assessee made investment of Rs. 22,00,000/- in the shares of Glofin Investment & Finance of Rs. 22,00,000/- and other investments were made in earlier years. The assessee paid interest of Rs. 35,26,028/- for the loans taken by it from Tata Capital Finance Services as on 31.12.2012. Thus there is no correlation between the investment made in the shares of other company with the borrowing of funds during the year. Hence, the CIT(A) rightly held that interest disallowed has to be restricted to the extent of funds invested in Glofin Investment & Finance during the year. The disallowance of interest under Rule 8D(2)(ii) worked out by the CIT(A) as under: a x b / c i.e. Rs. 35,26,028/- x Rs. 22,00,000 / Rs. 11,43,78,415/- = Rs. 67,821/- As per this working the CIT(A) held that the interest pertaining to the investments made during the year works out to Rs. 67,821/- under Rule 8D(2)(ii). The disallowance under Rule 8D(2)(iii) being ½% of the value of average investment....
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....g given to financial institutions by assessee to effect that it would provide additional margin to subsidiary company to meet working capital for meeting any cash losses. But in the present case, funds were specifically borrowed for infusion of equity in the associate concerns which is totally different aspect from the case of Hero Cycles (Supra). Hence the CIT(A) rightly confirmed the addition. Ground No. 2 is dismissed. 11. As regards to Ground No. 3 against the order of the CIT (A) in upholding the disallowance/addition made by the Assessing Officer under section 56 (2) (viiib) of the act of Rs. 34,38,000/- on account of valuation of premium received on issue of shares. The fact shows that Assessee Company had allotted 90,000 shares of Rs. 10 each to Messer Shoveller Infracon limited at the premium of Rs. 40/- per share. The total shares allotment made by the assessee company amounts to Rs. 4500000/-. The Assessing Officer asked the assessee to file valuation report in support of the share premium charged by the assessee with reference to its assets and liability as per Rule 11UA of The Income Tax Rules. The assessee submitted the valuation as per letter dated 8/2/2016, th....
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....t. Therefore, assessee is in appeal before us. 13. The Ld. AR submitted that as on 31st March 2013 the company was having shares of Hanung Toys and Textiles Limited whose book value (cost) was Rs. 3,83,38,380/- being 2738000 equity shares whose market rate was Rs. 138.80 per share having market value of Rs. 38,00,34,400/- whereas its book value was only Rs. 3,83,38,380/-. He submitted that assessee has substituted the book value of the shares of listed entity by taking market value of the listed shares as on that date. He submitted that all other unlisted equity shares are considered at that book value only. Thus, he submitted that listed equities book value was Rs. 14/- per share, whereas the market value was Rs. 138.80 per share, which has been added to the book value of the other assets of the company, resulted into the fair market value of the shares of the assessee company at Rs. 71.04 per share. He also referred to the definition of 'fair market value of the shares' as provided under section 56 (2) (viiib) of the act and submitted that if the assessee can substantiate to the satisfaction of the assessing officer, based on the value as on the date of the issue of its shares....