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TMI Blog2017 (2) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... ade, it can be in the hands of M/s OMDPL and not in the hands of the assessee. It is misconceived idea to charge payment of ‘on money’ to the shareholders of the company, in which company entered in the transaction. We cannot accept and appreciate the action of the AO. - Decided against revenue Unexplained expenditure - Held that:- AO has not brought any cogent material to prove that assessee has actually incurred these expenses except finding loose sheet in the premises in which such details were recorded. We are inclined to accept the findings of ld. CIT(A). Accordingly ground raised by the revenue is dismissed. - Decided against revenue Disallowance u/s 14A - Held that:- As per the P&L account and balance sheet submitted before us, the assessee had not earned any exempt income. The provisions of section 14A will be applied to find the expenditure relating to exempt income. In the absence of such exempt income, no expenditure can be disallowed in relation to exempt income. Accordingly, we uphold the decision of CIT(A) and dismiss the ground raised by the revenue.- Decided against revenue - ITA No. 367/Hyd/2013 - - - Dated:- 3-2-2017 - SMT P. MADHAVI DEVI, JUDICIAL MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td and M/s OM Metal Developers Pvt. Ltd. It is in M/s Om Metal Developers Pvt. Ltd., the assessee-company holds 35% share holding and the balance by M/s Metro Management Services Pvt Ltd., New Delhi. 4.1 Though the agreement was for 20 acres of land @ ₹ 5 crore per acre, as per registered sale deed dt.18.04.2008, only 10 acres of land was transferred @ ₹ 1.8 crores per acre, aggregating to ₹ 18.00 crores. 4.2 During the course of search and seizure proceedings conducted by DDlT, New Delhi on 06.01.2011 at the premises of Shiv-vani group of companies, having interests in M/s Metro Management Services Pvt. Ltd., a similar agreement of sale was found for the land at Hafeezpet, Hyderabad between the 11 vendors as above and M/s Om Metal Developers Pvt. Ltd (OMDPL). As per the DDIT(lnv.), New Delhi, the amount for purchase of 10 acres of land was shown at ₹ 20.30 crores in the books of M/s OMDPL and a further amount of ₹ 21.6 crores was shown as 'advances against land in the Balance Sheet. As per the agreement found at New Delhi, ₹ 30.00 crores has been paid by M/s OMDPL to the vendors on the date of agreement. The sale mentions that a furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds. The assessee further pointed out some inconsistencies in the version of the Assessing Officer in concluding that the assessee had paid unrecorded sale consideration for purchase of land in the name of M/s OMDPL, the gist of which is as under: (a) In para 3.2, the Assessing Officer while bringing the relation between the purchaser of land, M/s OMDPL and the assessee company, stated that in essence the agreement for sale of land was between M/s Gold Stone Exports ltd and M/s OMDPL, since there were common Directors/ interested parties in both the companies. By stating so, the Assessing Officer had not considered the corporate status of these two parties and the share holders/Directors were equated with the companies. The assessee further brought out that the legal framework pertaining to a company's operations and obligations acknowledges separate legal existence as a key feature of the company structure and lifting the veil of corporate personality means that the company is longer viewed as a distinct entity. (b) In para 3.1 the Assessing Officer refers to an agreement of sale dated 07.08.2006 for transfer of 20 acres of land for a consideration of ₹ 100 cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possesses and conclusions could be drawn emanating from the material available. The available material should indicate the course of conclusion that can be drawn. He noted that from the assessment order, AO had come to a conclusion first and then brought in the available material to fit into the already drawn conclusion - conclusion preceding the available material. CIT(A) observed that whatever material was found in possession of the assessee about the land transaction was not considered as incriminating but the material found from the premises of M/s Shiv-vani group at New Delhi was found to be incriminating and the assessee was confronted with such material found at New Delhi. As contended by the assessee, this material has to be first clarified from the parties directly involved in the transaction, i.e., M/s OMDPL and the vendors. However, no effort appears to have been made in this direction. Any adverse conclusion from a transaction against outside parties, in whatever way these outside parties were connected with the main parties concerned to the transaction, should originate from an independent enquiry being carried out, which was missing in the case on hand. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders in M/s OMDPL. AO failed to appreciate that company is an independent entity and distinct person. The action of the company will not have any bearing on the shareholders. AO has no jurisdiction to charge anything in the case of assessee over the dealings of any other person. It is brought on record that on money was paid in the dealings by M/s OMDPL towards the purchase of land, if at all any addition can be made, it can be in the hands of M/s OMDPL and not in the hands of the assessee. It is misconceived idea to charge payment of on money to the shareholders of the company, in which company entered in the transaction. We cannot accept and appreciate the action of the AO. Accordingly, we uphold the findings of the CIT(A) in this regard and dismiss the ground raised by the revenue. 11. As regards the disallowance of expenditure amounting to ₹ 29,90,050/- under section 69C of the Act, the Assessing Officer referred to impounded material Annexure-3, page 32, wherein certain payments to various vendors/ provisions like milk, water, vegetables were noted. The total of such payments was ₹ 29,90,050/-. The Assessing Officer held that as these expenses were no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year under consideration and were accumulated over a period of time, (ii) in the absence of any exempted Income, the provisions of 14A cannot be invoked, (iii) they have reserves of around 603.48 crores as against the investments of ₹ 7.27 crores made and therefore, without proving the nexus between the loans obtained and the investments made, the provisions of section 14A cannot be invoked for making disallowance of interest. The assessee also relied on a number of case laws on this issue. 19. The CIT(A) observed that the submissions of the assessee were agreeable and n nexus between the funds borrowed and the funds invested by the assessee was brought out by the Assessing Officer. Therefore, he directed the Assessing Officer to delete the addition made. 20. Ld. DR relied on the findings of AO. 21. Ld. AR submitted that assessee had not earned any exempt income and in the absence of any exempt income, provisions of section 14A cannot be applied. Moreover, the assessee had incurred financial charges on the working capital loan and no portion of working capital loan was diverted. 22. Considered the rival submissions and perused the material facts on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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