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TMI Blog2016 (7) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Godrej 63,352/-. Having heard both the parties, we do not find any reason to interfere with the order of ld. CIT(A) on this count, as he has made a reasonable disallowance of 5% of the expenditure incurred under the head administrative and personal expenses - Decided against revenue Addition of deemed dividend u/s 2(22)(e) - Held that:- Admittedly, the assessee was not a shareholder of Radhika Securities Pvt. Ltd. and, therefore, no deemed dividend could be added in the hands of the assessee company. Accordingly, we see no reason to interfere with the order of ld. CIT(A) in deleting the addition - Decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... ire, hold and dispose off or otherwise investment in shares, debentures, stocks, bonds, obligations and securities'. The AO further pointed out that perusal of the P&L a/c shows that the assessee had primarily derived its income from speculative trading of shares and delivery based trading of shares. He noted that the long term capital gain was shown in respect of sale of scrip in Rasandik Engineering Industries India Ltd. amounting to ₹ 98,41,195/-. AO further observed that it is scrip in which the assessee had also done non- delivery based speculative trading and declared speculation profits on the same. He, therefore, concluded that since the assessee itself had declared business income from the trading in the shares of Rasandik Engineering Industries India Ltd., the claim of the assessee that it derived long term capital gain from the same scrip could not be accepted. He, accordingly, treated the entire capital gains as business income of the assessee. 5. Ld. CIT(A), keeping in view the facts of the case, read with CBDT Circular no. 4/2007 dated 15.6.2007 and also in view of the decision of Hon'ble Bombay High Court in the case of CIT Vs. Gopal Purohit ITA no. 1121 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years; …….. . 5. It is reiterated that the above principles have been formulated with the sole objective of reducing litigation and maintaining consistency in approach on the issue of treatment of income derived from transfer of shares and securities. All the relevant provisions of the Act shall continue to apply on the transactions involving transfer of shares and securities"' 10. Ld. counsel further relied on the decision of ITAT Delhi Bench 'C' in assessee's own case for AY 2008-08 rendered in ITA no. 4151/Del/2013 vide order dated 9.5.2014, wherein it has been held that principle of consistency requires that the view taken in one year should be followed in subsequent year unless the facts or the legal position justifies departure therefrom. The observations of Tribunal are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in view of the main object of the company of assessee for which it was formed. The first main object of assessee as per memorandum of association contained at page 74 was as under: "To carry on investment business and to purchase, acquire, hold and dispose of or otherwise invest in shares, debentures, stocks, bonds, obligations and securities, issued or guaranteed by any company constituted or carrying on business in India or elsewhere and debenture, stocks, bonds, obligations, and securities issued or guaranteed by any government, state dominion sovereign ruler, commissioner, public body or authority, supreme municipal, local or otherwise whether in India or elsewhere and to deal in and/ or invest in real estate or properties, either out of its own funds or out of funds that the company might borrow and to vary or otherwise dispose of exchange, transfer or alienate any of the investments, real estates and properties of the company." 13. A bare perusal of this object clearly shows that main object of the assessee was trading in shares including investment in shares etc. also. However, in order to find out whether the income arising from sale of shares is to be assessed as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto stock-in-trade, unless the intention is proved otherwise. 16. Ld. CIT(A) has pointed out that from the record it is evident that assessee company had distinct port-folio of shares and mutual funds under two categories i.e. investments and stock-in-trade. He has observed that during the last few years too the assessee company had followed the same practice of holding certain shares under the head "Investment" and some shares as "Stock in trade". Therefore, as the assessee was holding the shares as investment consistently and the same were acquired out of own funds, there was no reason to treat the same as business income. We, accordingly confirm the order of ld. CIT(A) on this issue in view of various decisions relied by ld. CIT(A) as noticed earlier. 17. In the result, department appeal for AY 2005-06 is dismissed. AY 2006-07 (ITA no. 1279/Del/2011): 18. Grounds of appeal raised in AY 2006-07 are as under: 1. On the facts and circumstances of the case and in law, the order of the CIT(A) is erroneous, perverse, illegal and against the provisions of law which is liable to be set aside. 2. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut since administrative and personal expenses must have been incurred to earn exempt income, determined the disallowance at ₹ 63,352/-. 25. Having heard both the parties, we do not find any reason to interfere with the order of ld. CIT(A) on this count, as he has made a reasonable disallowance of 5% of the expenditure incurred under the head administrative and personal expenses. Ground is dismissed. 26. In the result revenue's appeal for AY 206-07 is dismissed. Assessment year 2007-08 (ITA no. 1747/Del/2011): 27. Grounds of appeal raised in AY 2007-08 are as under: "1. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of 15,97,563/- out of ₹ 16,35,393/-on account of expenses u/s 14A made by AO. 2. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting addition of RS.52,64,895/- as business income instead of LTCG & STCG. 3. On the facts and circumstances of the case and in law, the Ld. CIT" (A) has erred in deleting addition u/s 2(22)(e) of RS.15,34,349/- on account of loan received. 4. The appellant craves leave, to add, alter or amend any ground of appeal rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the order of ld. CIT(A) on this count, as he has made a reasonable disallowance of 5% of the expenditure incurred under the head administrative and personal expenses. Ground is dismissed. 34. Apropos ground no. 3, brief facts are that from the balance-sheet of the assessee company, the AO noticed that assessee had received loan from one of its group company i.e. Radhika Securities Pvt. Ltd. He required the assessee to file copy of account, shareholding pattern of Rasandik Engineering Industries India Ltd.. He also show caused the assessee as to why addition u/s 2(22)(e) be not made. After considering the assessee's reply, the AO observed as under: The share holding pattern of the Radhika securities Pvt. Ltd. is as under Mrs.Anjula Khanna-25% Mrs.Radhika kapoor-75%. The shareholding pattern of assessee company is as under- Mrs.Anjula Khanna-25% Mrs.Radhika kapoor-75%. Applying above parameters of section 2(22)(e) it is seen that assessee company has received loan from the company in which it seen that both of the shareholders are common in assessee company and company from which assessee company has received loan and both shareholder has substantial interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to "shareholder". When we keep in mind this aspect, the conclusion would be obvious, viz., loan or advance given under the conditions specified under section 2(22)(e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non- members. The second category specified under section 2(22)(e) of the Act, viz. a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of "deeming share-holder", then the Legislature would have inserted a deeming provision in respect of shareholder as well, that has not happened. Most of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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