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TMI Blog2010 (10) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance by the CIT(A). Ground No. 7 is in respect of miscellaneous expenses and Ground No. 8 is disallowance of general administrative expenses. 2.3 After considering the grounds of appeal of the assessee, first we would like to deal with ground No. 2. 3. Briefly, the facts of this ground NO 2 are that during the course of assessment proceedings, the AO while examining the details noticed that the assessee company took secured loan and paid financial charges. The AO examined the section 36(1)(iii) of the Act in the light of the facts of the case and noticed that the assessee company has utilized the borrowed capital for investing in securities. He noticed that the assessee company is not engaged in business of investments. The company was incorporated to provide online payment solutions to the retails and corporate segments which were transferred to ICICI Bank Ltd. During the year, the assessee company did not give any such sort of business and the business income earned by the assessee company is on account of settlement made on transfer of mutual fund which was not transferred to the transferee on record date as per the agreement, for which the assessee company was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount Advertisement in media for open offer made to share holders of TATA Infomedia Ltd. 204,019 Out of Pocket expenses incurred by MCS Ltd. In making open offer 109,236 Other expenses 14,566 Out of Pocket expenses incurred by MCS Ltd in making open offer 22,603 Total 3,50,424 4. The assessee filed appeal before the CIT(A) and the CIT(A) after a detailed discussion, by invoking section 14A enhanced the disallowance of interest expenditure applying Rule 8D of the Income Tax Rules observing as under:- In view of the above discussions, I am convinced that the provisions of section 14A, r.w. rule 8D would apply to the instant case. I am also convinced that the interest expenditure is directly attributable to the earning of dividend income. In the circumstances, the entire interest expenditure, amounting to ₹ 42058219/- would have to be disallowed under Rule 8D(2)(i). This would bring us to the question of balance general and administrative expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for strategic investment is an allowable expenditure, for which he relied upon the following judgments:- i) Repl Enterprises P. Ltd. Vs. ITO, 38 SOT 459 (Mum.) ii) Sujay Trading (P) Ltd. Vs. JCIT, 111 ITD 249 (Mum) (TM). 5.4 The learned AR further submitted that miscellaneous and administrative expenses are consequential to ground No. 2. 6. The learned Departmental Representative, on the other hand, relied upon the order of CIT (A). 7. We have heard the learned representatives of the parties and perused the record. The crux of the matter to be examined in this case is whether investment in shares, securities including strategic investments is assessee s business activities or not? The scope of the term business as defined in section 2(13) is very wide and courts have construed this term in various contexts to amplify and elucidate the concept of what is a business for the purpose of taxation of income under the I.T. law. The statutory definition has been explained and the words used in the definition have been interpreted in a wider sense and not in a restricted sense. The shares and securities are acquired and held as investments in such case, in order that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the fact that it should have shares in other companies as to which it should busy itself in the most active way and occupy itself as an alert and astute shareholder looking after its holding in those companies, and the companies themselves ; and that was its activity and it pursued it zealously, so I should always have held that this company was carrying on business. The learned counsel for the Department, however, submitted that this decision would not hold good in India in view of a decision of the Supreme Court in Bengal Assam Investors Ltd. vs. CIT (1966) 59 ITR 547 (SC). That was a case in which the question was whether, in the case of an investment company its dividend income formed part of its profits and gains chargeable to tax under s. 10 of the Indian IT Act, 1922 ? The company was not a dealer in shares. In answering this question, the Supreme Court observed at page 554 as follows : It seems to us that on principle before dividends on shares can be assessed under s. 10, the assessee, be it an individual or a company or any other entity must carry on business in respect of shares ; that is to say, the assessee must deal in those shares. It is evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. We must assume that the legislature deliberately used that expression and it intended to convey some meaning thereby. The expression business' is a well-known expression in income-tax law. It means, as observed by this Court in Narain Swadeshi Weaving Mills vs. CEPT (1954) 26 ITR 765 (SC) some real, substantial and systematic or organised course of activity or conduct with a set purpose'. This is also the meaning given to that expression in the earlier decisions of the High Courts and the judicial Committee. We must, therefore, proceed on the basis that the legislature was aware of the meaning given by Courts to that expression when it incorporated s. 23A into the Act in 1957. Hence we must hold that when the legislature speaks of the business of holding of investments', it refers to real, substantial and systematic or organised course of activity of investment carried on by an assessee for a set purpose such as earning Profits (Underlining ours). The learned counsel for the Department wanted us to confine this decision to the language of s. 23A, as in his submission, holding of investments was taken to be a business only by reason of some statutory fiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... underwrite invest in and acquire and hold shares, stocks, debentures, debenture stock, bonds, participations, certif ications, participation remits, mutual open and or closeend funds, negotiable instruments, instruments of every description obligations and securities issued or guaranteed by any company constituted or carrying on business in India and debenture, debenture-stock, bonds, obligation and securities issued or guaranteed by any Government, State, Dominion, Sovereign, Rules, Commissioners, public body or authority, supreme, municipal or local or otherwise f irm or person by original subscription, tender, purchase, exchange or otherwise and to deal with and turn to account the same provided always that no investment imposing unlimited liability on the company shall be made 9. After considering the object close and systematic business activities of the assessee company, We find that the assessee company has an objective of engaging itself in carry on the business of an investment company and to buy underwrite invest in and acquire and hold shares, stocks, debentures, debenture stock, bonds, participations, certifications, participation remits, mutual open and or close- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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