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TMI Blog2018 (1) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... een construed that TCI Borukha Projects Ltd is a company in which public or substantially interested and therefore the payment of loan or advance by TCI Borukha Projects Ltd., even to a beneficiary shareholder having not less than 10% of the voting power is outside the provision of section 2(22)(e) of the Act. Therefore we hold that no part of the loan given by TCI Boruka Projects Ltd., can be taxed as deemed dividend u/s 2(22)(e) of the Act in the hands of the assessee. As far as loans or advance by Transcorp Enterprises Ltd is concerned it is clear from page 119 of the paper book Vol.I which we have extracted in the earlier part of this order that substantial part of the business of this company is lending of money. It is not disputed that the lending of money to the assessee is in the ordinary course of the business of Transcorp Enterprises Ltd. In such circumstances no part of the advance or loan can be construed as deemed dividend within the meaning of section 2(22)(e) of the Act. We therefore are of the view that CIT(A) was fully justified in giving relief to the assessee in this regard. - I.T.A No.129/Kol/2016 And I.T.A No.329/Kol/2016 - - - Dated:- 29-11-2017 - Sri N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce once again u/s 14A is not justified. By the Revenue 1. On the fact and circumstances of the case, the Ld. CIT(A) erred in law in restricted the addition to ₹ 4,32,847/- instead of ₹ 43,79,995/- disallowance u/s. 14A made by the AO, on a wrong appreciation of facts ignoring the provisions of section 14A of the IT Act, 1961, read with rule 8D and over rule a plethora of the judicial pronouncement like Godrej Boyce Mfg. Co. Ltd. vs. DCIT, Range 10(2), Mumbai reported [2010] 194 Taxman 203 (Bombay) / [2010] 328 ITR 81 [Bombay] / [2010] 234 CTR 19 Bombay, A Bench of Chennai ITAT in the case of Shiva Industries Holidays Pvt. Ltd. vs. ACIT (IT Appeal No. 1917 of 2011) and K Bench of Mumbai ITAT in the case of Stream International Services Pvt. Ltd. vs. ACIT (IT Appeal No. 8997 of 2010) and the Circular issued by CBDT vide No. 5 of 2014. 3. The Assessee is a company. It is engaged in the business of construction and dealing in shares. The assessee earned dividend income of ₹ 22,16,243/- and the same was claimed as exempt u/ s 10(34) of the Income Tax Act, 1961 (Act). Similarly the assessee earned capital gain on sale of shares at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, on the first day and the last day of the previous year. In this case % or 0.5% of ₹ 7,10,33,364/- i.e., ₹ 3,55,167/-. 2.6. Thus the disallowable expenses is determined at ₹ 43,79,995/- (Rs.6,93,022/- + ₹ 33,31,806/- + ₹ 3,55,167/-) to add back with the total income of the assessee. Simultaneously, the said disallowance is also a subject matter of addition by virtue of clause-(f) under Explanation [1] to the section 115JB for determining the MAT amount payable by the assessee. 4. Before CIT(A) the assessee pointed out that with regard to disallowance of interest expenses of ₹ 33,31,806/- under Rule 8D(2)(ii) of Income Tax Rules, 1962 (Rules), the assessee had own interest free funds and therefore no part of the interest expenses which are debited in the profit and loss account can said to have been used for the purpose of making investments which yielded exempt income. The assessee therefore pleaded that no disallowance of interest expenses should be made. On the above plea the assessee gave the following computation of own funds based on the balance sheet for the financial year 2007-08 to 2011-12. 5. It can be see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown by the assessee in its computation of income, the assessee has raised ground nos. 1 to 6 before the tribunal. 11. We have heard the rival submissions. The ld. Counsel for the assessee reiterated the submissions as were made before CIT(A) besides referring to a certain decided cases. The ld. DR relied on the order of the AO. 12. We have carefully considered the rival submissions. As far as disallowance of ₹ 3,266/- being demat charges is concerned it is clear from page-7 of the order of AO which is the computation of total income by the AO that a sum of ₹ 3,266/- has already been added to the profit as per profit and loss account. Making the addition of the very same sum as disallowance u/s 14A of the Act would be a double addition and therefore the addition of ₹ 3,266/- is directed to be deleted. 13. As far as disallowance of interest expenses under Rule 8D(2)(ii) of the Rules is concerned, it is clear from the summarised balance sheet of the assessee from the financial years 2008-09 to 2011-12 that the assessee had non-interest bearing funds sufficient to cover the investments made in shares. It has been held by the Hon ble Bombay High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 7 to 13 and grounds of appeal of the revenue is ground no.2 in its appeal. These grounds read as follows :- Grounds of appeal of the Assessee: 7. That the learned Assessing Officer erred in arbitrarily invoking the provisions of section 2(22) (e) of the Income Tax Act, 1961 even when the said provisions are not applicable. in case of the appellant and on the facts and circumstances the Commissioner of Income Tax (Appeals) erred in sustaining the said action of the Assessing Officer. 8. That TCI Bhoruka Projects Ltd is a company in which the public are substantially interested and is listed with Kolkata Stock Exchange and Bangalore Stock Exchange and therefore provisions of section 2(22)( e) are not applicable on the facts and in the circumstances. 9. Bhoruka Investment Ltd held 12.75% of the Share capital of TCI Bhoruka Projects Ltd as on 31.12.12 but held only for a part of the year. 10. Appellant had a running current account with TCI Bhoruka Projects Ltd. and for most part of the year there was a debit balance in the name of TCI Bhoruka Projects Ltd in the books of the appellant and only for a few days towards the end of the year there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its principal business of money lending. 19. Aggrieved by the orders of CIT(A) in allowing relief to the assessee the revenue has raised ground no.2 before the Tribunal. Aggrieved by the order of CIT(A) in not deleting the entire addition of the deemed dividend in respect of loans received from TCI Bhoruka Projects Ltd., the Assessee has raised Grounds No.7 to 13 in its appeal. 20. It is the case of the Assessee that as far as TSI Bhoruka Projects Ltd., is concerned, the said companies shares are listed in the Calcutta Stock Exchange and the provisions of Sec.2(22)(e) of the Act does not apply to a company in which the public are substantially interested. Sec.2(18)(b)(A) of the Act lays down that shares of a company which is not a private company, if they are listed in a recognised stock exchange, they are to be regarded as Company in which public are substantially interested. The loan or advance which a company is substantially interested is outside the purview of section 2(22)(e) of the Act. As far as loan from Transcorp Enterprises Ltd., is concerned, the ld. Counsel for the assessee brought to our notice that one of the exceptions u/.s 2(22)(e) is that if loans and adv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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