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TMI Blog2015 (9) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to Assessment Year 2009-10 against order passed under section 143(3) of the Act. 2. Both the appeals relating to related parties were heard together and are being disposed off by this consolidated order for the sake of convenience. 3. The assessee in ITA No. 7326/Mum/2012 has raised the following ground of appeal:- "The learned CIT(Appeals) has erred in confirming the addition of Rs. 13,15,993/-. The reasons assigned by hi for doing the same are wrong and insufficient. Provisions of the act ought to have been properly construed before doing the same. Regard being had to the facts and circumstances of the case, the said addition ought not to have been made." 4. The issue raised in the present appeal is against deletion of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in Rainy Investment Pvt. Ltd. Vs. ACIT in ITA No. 5491/Mum/2011 relating to Assessment Year 2008-09, order dated 16.01.2013. It was further pointed out by the Ld. A.R. for the assessee that the reliance placed upon by the AO on decision of Special Bench in Cheminvest Ltd. Vs. ITO (supra) was misplaced as the said decision has been overruled by the Hon'ble Allahabad High Court in CIT Vs. Shivam Motors Pvt. Ltd. in ITA No. 88 of 2014 relating to Assessment Year 2008-09, judgment dated 05.05.2014. It was further pointed out by the Ld. A.R. for the assessee that the Chennai Bench of Tribunal in ACIT Vs. M. Baskaran in ITA No. 1717/Mum/2013 vide order dated 31.07.2014 had considered issue at length and held that no disallowance und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of disallowance under section 14A of the Act in relation to the share application money arose before the Tribunal in Rainy Investment Pvt. Ltd. Vs. ACIT (supra) wherein it was held as under:- "4. We have heard the parties, and perused the material on record. Section 14A r/w r. 8D is mandatory in its application where the assessee earns income which is claimed tax- exempt, as dividend income in the instant case. In fact, there is no doubt with regard to this; the assessee itself conceding to the same before us and, besides, being engaged in the business of making investments and earning dividend income as an integral part thereof. The only option, therefore, if it considers the application of the provision as operating to its detriment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'share application money', as opined by us, is not in the least for the reason that it did not yield any tax-free income for the relevant year, but for the reason that it is incapable of any such income. The same is only in the nature of application (offer) money, which would though, on allotment, get adjusted against the cost of the said shares, and only whereupon any rights in the investee company inure to the allottee. No rights, not even inchoate, in the share capital of the issuing company arise on the payment of the share application money, irrespective of the Rainy investments Pvt. Ltd. v. Asst. CIT time period for which it may outstand. The same may at best yield interest income (for which a special procedure though has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoning, we hold that no disallowances under section 14A of the Act is to be made in respect of the investment made by the assessee in share application money. However, relying on the order of the Tribunal we restore this issue back to file of the AO for verifying the claim of the assessee that the such investment is in share application money as on 31.03.2008 and 31.03.2009. In case the stand of the assessee is found to be correct then no disallowance is warranted under section 14A read with Rule 8D of the Rules. 12. In respect of the second aspect of the issue we are in conformity with the finding of the Tribunal in Rainy Investment Pvt. Ltd Vs. ACIT (supra) that the deletion of addition under section 14A on account of share applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes. The reasons assigned by him for doing the same are wrong and insufficient. Provisions of the act ought to have been properly construed before doing the same. Regard being had to the facts and circumstances of the case, the said addition ought not to have been applicable. 4) The learned CIT (Appeals) has erred in not setting off the brought forward business losses. The reasons assigned by him for doing the same are wrong and insufficient. Provisions of the act ought to have been properly construed before doing the same. Regard being had to the facts and circumstances of the case, the said the brought forward business loss ought to have been set-off against the assessed income." 14. The issue in ground of appeal no. 1 to 3 are agai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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