9911796707
TMI Blog2016 (10) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... n alternative plea on Inter-Corporate Deposits (ICD). There is nothing on record to suggest that the two companies are authorized for Inter-Corporate Deposits. Since there is no demonstrative evidence on record by which it can be proved that the impugned amount is Inter-Corporate Deposits, the claim of the assessee cannot be accepted. - Decided against assessee. Disallowance of Insurance Premium - Held that:- There is no denying that the Insurance Premium has been paid on the life of the Directors of the Company. The claim of the assessee that such Insurance Premium is nothing but perquisite is not acceptable. Since there is nothing on record which could suggest that such perquisite is part of the service agreement with the Directors. Moreover, there is no commercial expediency to take Insurance on the life of Directors unless the premium is paid towards Keyman Insurance Policy. The assessee has also failed to produce any documentary evidence to prove that the said amount has been treated as a perquisite in the hands of the Directors. Considering all these facts in totality, we decline to interfere with the findings of the ld. CIT(A). The second grievance of the assessee is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he requisite details. On examination of the details, the A.O. found that the assessee-company has received an unsecured loans of ₹ 1,55,20,000/- from Arcata Trade Link Pvt. Ltd. (ATLPL). 5. On verification of the shareholding pattern of the assessee-company qua ATLPL, the A.O. found that the assessee company holds 26.81%% shares in ATLPL. The A.O. further found that ATLPL has accumulated profits of ₹ 3,22,97,892/-. 6. Drawing support from the provisions of section 2(22)(e) of the Act, the A.O. asked the assessee to show cause why the sum of ₹ 1,55,20,000/- should not be treated as deemed dividend. 7. In response, the assessee filed a detailed reply vide submission dated 09/12/2010 and strongly contended that the amount of ₹ 1,55,20,000/- received from ATLPL has been wrongly classified under the head loan from companies. It was explained that in fact this is a share application money received from ATLPL. Assessee filed copy of ledger account duly confirmed by ATLPL along with the copy of Board resolution of ATLPL. 8. This contention of the assessee was dismissed by the A.O. for the following reasons:- (i) ₹ 1,55,20,000/- received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses incurred for earning exempt income should not be made as per the provisions of section 14A read with Rule 8D. 14. Assessee filed a detailed reply explaining that the share investments have been made through Portfolio Management Company, Kotak Mahindra for which the assessee has paid ₹ 2,94,345/- as Portfolio Management Fees and the same has also been disallowed. Further Demat charges of ₹ 16,238/- and Security Transaction Tax of ₹ 8003/- have also been disallowed. Therefore, no further disallowance is necessary. The claim of the assessee was dismissed and the A.O. computed the disallowance at ₹ 2,39,857/-. 15. Aggrieved by these additions/disallowances, the assessee carried the matter before the ld. CIT(A) but without any success. 16. The relevant findings of the ld. CIT(A) while confirming the addition on account of deemed dividend reads as under:- 2.3 I have considered the facts of the case; assessment order and appellant's submission. It is not in dispute that appellant is a substantial shareholder of the lender company and is covered by the provisions of section 2(22)(e) of IT act. The money received by the appellant was reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ICD in the normal course of business. Neither appellant nor associate concern is in the business of ICD. Assessing officer discussed the nature of ICD in detail and i endorse his view that appellant's loan transactions cannot get out of the purview of deemed dividends under section 2(22)(e) of IT act. In the case of appellant, the loan transactions are not in the nature of ICD since there is no tenure or interest payment in the appellant's transactions. The decisions relied upon by the appellant are not applicable in the clear facts of the case. In my considered view, it is a fit case of application of section 2(22)(e). If such transactions will not be considered deemed dividend then there may not be any transactions which may find place in the category of deemed dividend. The provision in the statute and therefore the same has to be applied. Accordingly, I confirm the addition made by the assessing officer. 17. The relevant findings of the ld. CIT(A) while confirming the addition on account of Insurance Premium paid reads as under:- 3.3. I have considered the facts of the case; assessment order and appellant s submission. Appellant claimed insurance premium p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applicable with effect from assessment year 2008-09 by Bombay High Court the disallowance of expenses relating to exempt income are Io be made by the method prescribed in the said rule. It is not in dispute that appellant earned exempt income in the form of dividend on investment of more than ₹ 213 Lacs. Appellant paid interest of ₹ 36.58 Lacs on borrowed funds used for business purposes as well as making investments. Appellant incurred substantial employees' remuneration and other administrative expenses, part of which may relate to investment resulting in exempt income. Similarly payment of interest will also partly relate to investment resulting in exempt income' therefore disallowance under section 14 A on account-.of interest and other expenses are necessary. Coming to the method of computation of disallowance under section 14A, assessing officer disallowed expenses relatable to exempt income as per rule 8D which is mandatory from assessment year 2008-09. For interest, proportioned expense is disallowable whereas for other expenses .5% of investment value is disallowable. Considering the fact that appellant claimed huge administrative and other exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. A perusal of the balance sheet of the assessee shows at Schedule-1, the share capital of the assessee which is at page 13 of the paper book and reads as under:- SHARE CAPITAL As at 31-03-2008 As at 31-03-2007 Authorised 100000 Equity Shares of ₹ 10/- 1000000.00 1000000.00 Each (P.Y. 100000) 1900000 8% Cummu. Red. Preference 19000000.00 19000000.00 Shares of ₹ 10/- each fully paid up 20000000.00 2000000.00 (P.Y. 1900000) Issued,Subscribed Paid up: 100000 Equity Shares of ₹ 10/- 1000000.00 1000000.00 Each fully paid up (P.Y. 100000) 1900000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no commercial expediency to take Insurance on the life of Directors unless the premium is paid towards Keyman Insurance Policy. The assessee has also failed to produce any documentary evidence to prove that the said amount has been treated as a perquisite in the hands of the Directors. Considering all these facts in totality, we decline to interfere with the findings of the ld. CIT(A). The second grievance of the assessee is also dismissed. 26. The third grievance relates to the disallowance made u/s. 14A read with Rule 8D of the Act. There is no denying that during the year under consideration the assessee has earned exempt income in the form of dividends and Long Term Capital Gains. It is also an admitted fact that the assessee has engaged a Portfolio Manager for doing transaction on its behalf. The Portfolio Management Fees, Demat charges and Security Transaction Tax have already been disallowed by the assessee. It is also an admitted fact that the assessee has paid substantial interest on its borrowings. The Assessee must have also incurred some administrative expenses. Provisions of Section 14A read with Rule 8D squarely apply on the facts of the case. The disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
