9911796707
TMI Blog2016 (1) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... ster company in order to purchase the shares of the very same sister company and thus avoid the perils of those shares being held by two entities thus endangering its existence. - Decided in favour of the assessee. Disallowance u/s 14A read with Rule 8D - Held that:- In the case of the assessee the provisions of Section 14A read with Rule 8D will not be applicable in regard to investments made for acquiring the shares of the assessee’s sister concerns. See EIH Associated Hotels Ltd v. DCIT [2013 (9) TMI 604] - Decided in favour of the assessee. - I.T.A.No.1272/Mds. /2015 & C.O. No.82/Mds/2015 - - - Dated:- 27-11-2015 - SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER Appellant by : Mr.V. Vivek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef facts of the case are that the assessee is a private limited company engaged in manufacture of components and sub assembly for D.C. motors, filed its return of income for the assessment year 2010-11 on 12.10.2010 admitting loss of `2,48,37,432/-. Subsequently, the return was taken up for scrutiny and the assessment was completed vide order dated 11.03.2013 wherein the Ld. AO made disallowed the expenditure of `2,64,09,499/- by invoking the provisions of Section 14A of the Act and also made addition of `7,26,03,874/- on account of Section 2(22)(e) of the Act. 4. During the course of assessment proceedings, it was observed by the Ld. A.O that the assessee-company had obtained loan of ₹ 15 Crores from its subsidiary company M/s Agi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J 161 and Escorts Ltd. reported in 102 TTJ 522. 5.2 With respect to the invoking of provisions of Section 2(22)(e) of the Act the ld. CIT(A) deleted the addition based on the finding that the advances given by M/s Agile Electrical Sub Assembly Pvt. Ltd. to the assessee-company is undoubtedly an advance in the ordinary course of business. 6. Ld. DR vehemently argued before us by stating that the provisions of Section 14A and Rule 8D will be applicable in the case of the assessee-company and pleaded that the computation worked out by the Ld. A.O may be upheld. He also argued on the applicability of Section 2(22)(e) of the Act by citing the provisions of Section 2(22)(e) of the Act. 7.1 We heard the rival submissions and carefully per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money in the form of advance or loan. Loan or advance given to the shareholders or to a concern, under normal circumstances would not qualify as dividend, If such loan or advance is given to such shareholder as a consequence of any further consideration which is beneficial to the company received from such a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder, in such an event, by the deeming provisions, such payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(22)(e) of the Act, is legal and valid and do not call for any interference. - Decided in favour of assessee. The jurisdictional High Court in the case CIT v. Madurai Chettiyar Karthikeyan reported in 223 Taxman 350, it has been categorically held that trade advance in relation to business transaction cannot be treated as deemed dividend U/s. 2(22)(e) of the Act. In the present case before us, the entire transaction has been made with a view to consolidate the business of the assessee and thereby derive benefit by stalling competition. Further, in the case Farida Holdings Pvt. Ltd. v. DCIT decided by the Chennai Bench of the Tribunal reported in 51 SOT 452, it has been held that regular business transaction carried on by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. A perusal of the order of the CIT(Appeals) shows that out of total investment of ₹ 64,18,19,775/-, ₹ 63,31,25,715/- is invested in wholly owned subsidiary. This fact supports the case of the assessee that the assessee is not into the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore, the investments made by the assessee in its subsidiary are not to be reckoned for disallowance U/s. 14A r.w.r. 8D. The Assessing Officer is directed to re-compute the averag ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
