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TMI Blog2016 (2) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... For The Rspondent : Shri B C S Naik ORDER PER B.R. BASKARAN (AM) These are the cross-appeals filed by the assessee and revenue challenging the order dated 15.3.2013 passed by Ld CIT(A)-14, Mumbai for the assessment year 2008-09. 2. The assessee is engaged in the business of carrying out printing jobs for clients and is also publishing various magazines. The first issue urged in the appeal filed by the assessee relates to disallowance made out of Repairs Maintenane expenses to the tune of ₹ 12,34,345/- treating the same as Capital expenditure. The AO has listed out certain items with the observation that they are capital in nature. Accordingly he disallowed the same, but allowed depreciation thereon. The Ld CIT(A) also confirmed the same with the observation that the assessee has not produced relevant bills and invoices before the AO as well as before him. However, we notice that the said observation is contradictory to the observations made by the AO, wherein he observes that he has perused the bills and details submitted. However, on a perusal of the details furnished by the AO, we notice that the assessing officer has disallowed an item which is as low a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not applicable. 5. We notice that the tax authorities have come to the conclusion that the same represents capital expenditure without examining the purpose for which the impugned expenditure was incurred. According to Ld A.R, it was incurred in respect of its own divisions to ascertain their intrinsic value. Accordingly it was submitted that the Ld CIT(A) was wrong in presuming that the new income earning apparatus was brought into existence. We find that the submissions made by the assessee is in contradiction with the observations made by Ld CIT(A). As stated earlier, the nature of expenditure can be decided only if the purpose of the expenditure is ascertained clearly. The AO has simply disallowed the expenditure without making any discussions, where as the observations made by the Ld CIT(A) has been claimed to be incorrect. Under these set of facts, we are of the view that this issue also requires fresh consideration at the end of the AO. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to examine this issue afresh. 6. The next issue contested by the assessee relates to the disallowance made u/s 14A of the Act. The assessee has received dividend inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation of the provisions of section 2(22)(e) read with the provisions of section 2(18) of the Act, same are reproduced below : Section 2(22) dividend includes- (a) .; (b) . ; (c) ; (d) ; (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; Section 2(18): company in which the public are substantially interested -a company is said to be a company in which the public are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts individual capacity ADIPL is a private limited company. However, the provisions of section 2(18) require that the status of the company as to whether it is private company or not, is to be seen vis- -vis as defined in the Companies Act, 1956 . Definition of terms of a ‗company , ‗existing company , private company and public company has been provided in section of the Companies Act as under : DEFINITIONS OF COMPANY , EXISTING COMPANY , PRIVATE COMPANY AND PUBLIC COMPANY 3(1) In this Act, unless the context otherwise requires, the expressions company , existing company , private company and public company , shall, subject to the provisions of sub-section (2), have the meanings specified below : - (i) (ii) ; (iii) private company means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by is articles, (a) restricts the right to transfer its shares, if any ; (b) limits the number of its members to fifty not including (i) persons who are in the employment of the company ; and (ii) persons who, having been formerly in the employment of the company, were members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be noted that the appellant is a company in which public are substantially interested and the appellant had throughout the current previous year beneficially held more than 50% shares of ADIPL (i.e. shares carrying not less than 50% of the voting power of ADIPL). It is thus quite evident that AOIPL is covered in the definition of 'a company in which public are substantially interested' by virtue of the provisions of clause (B)(c) of section 2(18)(b) of the Act. In view of this therefore, I have no other option than to hold accordingly. 5.11 In the background of above finding, it is to be ascertained as to whether the aggregate amount of deposits of ₹ 11.80 crores can be considered to be deemed dividend in the hands of the appellant in view of the provisions of section 2(22)(e) of the Act. I have already held above that ADIPL is a company in which public are Substantially interested, considering that during the course of F.Y. 2007-08 more than 50% shares of ADIPL were held by the appellant. Since ADlPL is a company in which public are substantially interested, it is evident that the provisions of section 2(22)(e} are not attracted. Hence the amount of ₹ 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(18)(b) to the effect that either parent company (SIFCO or Akash) should hold any shares or requisite shares in the 2nd subsidiary (assessee) or that the 1st subsidiary company (Samudaya or Adavat) should hold 100 per cent shares of the assessee. In our opinion, Samudaya and Adavat are companies to which clause (b) applies and since they held requisite number of shares in assessee companies, it would meet the requirement of being companies in which public is substantially interested. 16. It is true that Samudaya and Adavat are not companies to which this clause applies of its own and that they acquire that status by virtue of their being subsidiaries of SIFCO/Akash Agencies Ltd. but that cannot be a ground for holding that the second part of clause (c) becomes operative and therefore 100 per cent of its holding must be held by Samudaya and Adavat to make it eligible to grant the derivative status to the assessee in which it holds 50 per cent shares. We do not find any such condition that in order to be eligible to be a company to which this clause applies it has to have that status of its own and not by virtue of its being a subsidiary of another Company; nor that, otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly interested and hence the deposits received by the appellant from ADIPL cannot be deemed to be the taxable dividend income in the hands of the appellant as per the provisions of section 2(22)(e) of the Act. Thus, it is evident that even if the said inter-corporate deposits received by the appellant are treated to be in the nature of 'loans or advances', then also the same are not taxable in the hands of the appellant as deemed dividend 5.15 Coming back to the alternate claim of the appellant that the deposits received by the appellant from ADIPL are in the nature of inter-corporate deposits, and hence cannot be termed as 'loans or advances', I find merit in the arguments advanced by the ld. AR in this regard. The appellant had received Inter Corporate Deposits from ADIPL. ld. Assessing Officer has not given any reason either in her assessment order or in the remand report to substantiate as to why the sum of ₹ 11.80 crores are not inter-corporate deposits and instead these are loans and advances . loans and advances are not the same as deposits. Hon'ble Mumbai ITAT , in the case of Bombay Oil Industries reported in 28 SOT 383 (Mum) has held as un ..... 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