TaxTMI 
TaxTMI 
2025 (3) TMI 1371
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....firming the addition of Rs. 15,82,185/- on account of gross dividend and Rs. 25,31,015/- on account of gross interest, thus aggregating to Rs. 41,13,200/-. 3. The Ld. CIT(A) has erred in law and in facts in confirming the addition of Rs. 1,16,640/- out of the aggregate addition of Rs. 4,45,170/- made by the Ld. A.O. on account of unexplained investment in shares. 4. The Ld. CIT(A) has erred in law and in facts in confirming the addition to the tune of Rs. 55,220/- on account of alleged profit on sale of shares on estimated basis. 5. The Ld. CIT(A) has erred in law and in facts in confirming the addition of Rs. 6,19,229/- on account of alleged interest income without considering and appreciating the submissions of the appellant. 6. The Ld. CIT(A) has erred in law and in facts in disallowing the various expenses claimed by the appellant in connection with the various income offered and assessed by the Ld. A.O. a. The Ld. CIT(A) ought to have allowed deduction of interest on shares/debenture call money payable by the appellant of Rs. 16,16,148/- b. The Ld. CIT(A) ought to have allowed trading loss on sale of shares of 1,79,28,290/-....
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....d that it has received dividend of Rs. 2,663/- from Jindal Iron & Steel and Swaraj Mazda. The AO further observed that he collected particulars of dividend and interest income from the office of the Custodian and came to the conclusion as under:- (a) Accrued Gross Dividend for F.Y. 1992-93 - Rs.15,82,185/- (b) Accrued Interest - Rs.20,24,812/- (c) Gross Interest for F.Y. 1992-93 [2024812 _0.80] - Rs.25,31,015/- Total Rs. 41,13,200/- 5.1. For the above calculation, the AO took TDS rate of 20% and made additions accordingly. 6. The assessee challenged the additions before the ld. CIT(A). It was strongly contended that the shares purchased were not registered, therefore, the assessee did not receive any dividend as the same is paid only to the registered shareholders. The ld. CIT(A) compared the dividend accounted for by the group entities of the assessee and found that the assessee has not accounted for the dividend and observed that the computation made by the AO and the income being offered by the assessee is to be decided whether the same is reasonable and judicious. The ld. CIT(A) was of the opinion that the divi....
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....nsidered the following substantial question of law:- "(i) Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal was right in law in holding that the de jure owner of the shares alone is entitled to the dividend declared by a company, though the assessee-company might be de facto owner of shares but had no right to receive the dividend from the company unless it is the registered shareholder of the company?. (ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the dividend of Rs. 16,84,150 has not accrued to the assessee and thereby holding that such dividend income could not form part of the total income of the assessee? (iii) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law, in accepting the assessee's submission, that even though the amounts were paid for acquiring the shares, shares have not been delivered to the assessee-company and the change in ownership of the shares have not been registered and notified and, therefore, the assessee's name did not appear in t....
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....t in the case of benami shares ; (d) Shares which are lost or stolen. The Assessing Officer has further set out that in respect of all these categories the ownership of the assessee has not been recognised by any person or any authority. The Assessing Officer has recorded a finding that the dividend income has not been received by the custodian in respect of the shares referred to above. The dividend also has been received by some other person. There is also nothing brought on record to indicate that the assessee in terms of section 27(1) of the Securities Contracts (Regulation) Act has lodged the shares for transfer. Considering these circumstances, in our opinion, we find no reason to interfere with the findings recorded by the Commissioner (Appeals) and as confirmed by the Appellate Tribunal. The questions of law therefore, as raised would not arise and consequently, the appeal dismissed." 10. Finding parity of facts, we direct the AO to delete the additions on account of dividend and interest. In fact, most of the debentures were convertible debentures and have been converted into shares, therefore, there is no question of estimating any interest o....
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....at it has received on 10/04/1992 Rs. 64,49,923/- and on 28/04/1992 Rs. 2,33,096/- totalling to Rs. 66,83,019/- being interest income on the debentures of Reliance Industries. It was further explained that due to limitation of resources and in view of the fact that the books of accounts were being completed by obtaining the details from the Custodian and Income Tax department, the assessee could gather the information as mentioned hereinabove. It was further explained that the balance amount is the difference of refund of the debentures application money paid by the assessee. After considering the facts and the submissions, the ld. CIT(A) observed that the addition of Rs. 64,49,923/- is based on the submissions of the assessee before the AO. The ld. CIT(A) further observed that the assessee has made an application before the Special Court seeking permission to subscribe to the right debentures of Reliance Industries Ltd. and after seeking permission, the assessee applied for debentures and invested an amount of Rs. 74,05,950/- from which it got refund of Rs. 61,97,475/-, along with the interest on debentures application amounting to Rs. 2,52,449/-, the assessee received Rs. 64,49,92....
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....efully perused the orders of the authorities below and have carefully considered the chart exhibited at page 57 and 58 of the order of the ld. CIT(A). We find that on conversion of debentures, the assessee received shares on which it received dividends. Therefore, any difference in the claim of interest expenses qua the interest received on debentures is due to the conversion of debentures into shares. Therefore, the basis on which the interest has been disallowed itself is faulty. Therefore, the addition to the extent of Rs. 16,16,148/- cannot be sustained. Insofar as share trading loss is concerned, the assessee has furnished copies of the contract notes of purchase of shares which are placed on record. Considering the same, the share trading loss cannot be disallowed and insofar as the other expenses are concerned, which are mainly related to the accounting and auditing expenses, were incurred for the purpose of business and the same deserve to be allowed. Considering the totality of facts we do not find any merit in the addition and the same is directed to be deleted. 19. Ground No. 7 relates to the disallowance of interest expenditure of Rs. 10,44,95,850/-. On identical set....
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....artly allowed the ground raised by the assessee on this issue and held that the main purpose of incurring the interest expenditure was not earning income from dividends and unless the interest expenditure was incurred solely for the purposes of making or earning dividend income, no deduction is possible under section 57 of the Act. The learned CIT(A) further held that in the acquisition of shares for capital gains, the dividend income is incidental and not a major factor, and it is thus clear that the sole purpose of borrowing by the assessee @12% per annum cannot be for the purpose of earning dividend income. Accordingly, the interest expenditure was held to be not allowable against dividend income. The learned CIT(A), however, allowed the interest expenditure only to the tune of Rs. 15,73,548 which is the share trading profit. Being aggrieved, both assessee and Revenue are in appeal before us. 30. We have considered the submissions of both sides and perused the material available on record. From the perusal of the computation of total income, forming part of the paper book on pages 464-466, we find that the assessee claimed interest on bank loans of Rs. 2,46,33,261 again....
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.... the taxpayer. Therefore, respectfully following the aforesaid decision of the Hon'ble Supreme Court in Seth R. Dalmia (supra), we are of the considered view that the assessee is entitled to claim a deduction of interest expenditure under section 57 of the Act since receipt of dividend is merely due to the shareholding of the assessee and the interest expenditure has nexus with the income under the head "income from other sources" including dividend income even though not direct. Accordingly, the AO is directed to allow the interest expenditure claimed by the assessee under section 57 of the Act. As a result, ground No. 3 raised in assessee's appeal is allowed, while ground No. 2 and 3 raised in Revenue's appeal is dismissed." 27.2. Similarly in the case of Jyoti H. Mehta vs. ACIT in ITA No. 436/Mum/2023 and ITA No. 1186/Mum/2023, the Tribunal has considered similar grievance, which reads as under:- "41. Ground no 6 pertains to sustaining the addition on account of interest disallowed. The Ld. CIT (A) has granted partial relief, by allowing on proportionate basis, the interest expenditure only to the extent of Rs. 11, 49,540/- as against the total clai....