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TMI Blog2022 (9) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... amended by the Income Tax Rules 2017 with effect from 1.4.2018 where instead of book value, fair market value of share is mentioned. The Act does not provide that this amendment is retrospective. It is clearly mentioned that this amendment is with effect from 1.4.2018. Hence, Assessing Officer's adoption of fair market value for making the computation which is not in accordance with the extant provisions has rightly been deleted by the learned CIT(A). It is not disputed that when the book value of the shares is adopted as per the extant rules the addition will not be justified. Hence, we do not find any infirmity in the same. We note that nothing has been brought before us by the revenue as to why the Assessing Officer has applied the same retrospectively - we agree with the submission of the ld. Counsel of the assessee and remit back the issue to the file of the AO to examine the issue on the basis of exposition in the case law pointed above. Needless to add, the assessee should be granted adequate opportunity of being heard. Disallowance of Processing fees under the head Interest Finance Costs - HELD THAT:- As assessee submitted that the revenue authorities have erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, the judgment of the Hon ble Apex Court in the case of Goetze (India) Ltd. vs. CIT reported in 284 ITR 323 have no application. 1.3. That the finding of the learned Commissioner of Income Tax (Appeals) that judgment of the Hon ble Apex Court has no reference to CIT(A) and therefore, addition claim cannot be entertained by the Commissioner of Income Tax (Appeals) is based on fundamental misconception of facts and law and wholly unsustainable. 2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding addition of Rs.2,87,80,000/- by invoking section 56(2)(vii)(a) of the Act. 2.1. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that section 56(2)(vii)(a) of the Act had no application to the transactions of allotment of shares by write issue by JAM India Pvt. Ltd. and therefore, invocation of provisions to make the impugned addition is not in accordance with law and wholly untenable 2.2. That the learned Commissioner of Income Tax (Appeals) while upholding and sustaining the addition, has failed to appreciate that shares had been purchased by the assessee on the basis of book value of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and the same should be allowed. However, this plea of the assessee was rejected by the Assessing Officer by referring the decision of the Hon ble Supreme Court in the case of Goetze (India) Ltd. vs CIT [2006] 157 Taxman 1 (SC). 4. Upon assessee s appeal, the Ld. CIT(A) upheld the order of the Assessing Officer. 5. Against this order, the assessee is in appeal before us. 6. We have heard both the parties and perused the records. We note that in the said order, Goetze (India) Ltd. (supra) the Hon ble Apex Court has expounded that the said decision would not impinge upon the powers of ITAT in dealing with the claim otherwise than by revised return. Accordingly, we direct the Assessing Officer to consider this issue and decide as per law. Apropos Ground No.2 7. The assessee has made share investment of Rs. 8,04,00,000/- in M/s JAM India P. Ltd. Following is the detail of shares purchased: Purchase from Amount Rate Dt. of purchase Mr. Kunal Lalany Rs. 64,00,000/- @ Rs. 32/- 13.04.2014 M/s Mega airways ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Kunal Lalani M/s Mega Airways Limited being valued at Rs. 32/- and Rs. 40/- when the FMV of the shares as per the valuation report got done by M/s JAM India Pvt. Ltd, is Rs,l03/ . The transaction of purchase of shares of M/s JAM India Pvt. Ltd. from Mr. Kunal Lalani M/s Mega Airways Limited clearly attracts the provisions of Section 56(2)(viia)(ii) of the I.T, Act, 1961 and will be chargeable to tax under the head Income from other sources . The transaction of rights issue of shares at below the FMV also attracts the provisions of Section 56(2)(viia)(ii) of the I.T. Act. 1961 and will be chargeable to tax under the head income from other sources . The quantum of addition on this issue is calculated as under- Date of transaction Puchased from Rate at which purchased (Rs.) FMV Difference No of shares Addition 13.04.14 M/s Mega Airways Limited 40 103 63 200000 12600000 16,04.14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the Valuation report was prepared only five months later in September, 2014 and no significant event has happened in between April-September, the valuation in September is closest to the date of transfer of share from the shareholders. That, therefore, share value as per Valuation report in September, 2014 may be rightly considered for determining the FMV of shares purchased before the valuation date. 13. He further held that rights issue of shares from the company M/s JAM India P. Ltd. will clearly attract provisions of this section. Hence, he sustained the addition. 14. Against the above order, the assessee is in appeal before us. 15. We have heard both the parties and perused the records. The Ld. Counsel of the assessee relied upon the decision of ITAT in CIT vs M/s. Kilitch Healthcare India Ltd. Ors. in ITA No.7061/Mum/2019, vide order dated 22.03.222 for the following proposition:- 30. We have heard both the parties and perused the records. Learned Counsel of the assessee pointed that application of valuation method adopted by the Assessing Officer is not applicable for A.Y. 2015-16 and the said method is applicable only from A.Y. 2018-19. That learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why the Assessing Officer has applied the same retrospectively. Hence, we do not find any infirmity in the order of learned CIT(A). Accordingly, we uphold the same. 16. The ld. Counsel of the assessee submitted that this decision duly covers the assessee s case and agreed that the issue may be sent back to AO to follow the same. He further pleaded that there is no contrary decision on this issue. 17. Upon careful consideration, we agree with the submission of the ld. Counsel of the assessee and remit back the issue to the file of the AO to examine the issue on the basis of exposition in the case law pointed above. Needless to add, the assessee should be granted adequate opportunity of being heard. Apropos Ground No.3 18. On this issue, the Assessing Officer noted that the assessee has debited processing fees of Rs.25,74,864/- under the head Interest Finance Costs . Upon Assessing Officer s enquiry, it was submitted that Rs.7,74,864/- was paid as processing fees for purchase of business assets and the same is allowable as the loan has been taken for assets used for the business of the assessee. The Assessing Officer was of the opinion that the same cannot be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d along with notice u/s 142(1) dated 20.10.2017 the assessee was asked to specify the head sub-head under which this loss of investment in the above shares was claimed and also the allowability of the claim of these expenses, in response, vide letter dated 24.10.2017, it has been submitted as under:- The assessee has been asked to inform under which head the loss from investment in Crayons Advertisement (Nepal) Pvt. Ltd. has been written off. In this regard we have to inform you that the assessee has written of above investment debiting the same to Bad Debts for the FY 2014-15, This is to further inform that all the amount written off have been part of business revenue of the assesses and have formed part of business receipts of the assessee except a sum of Rs.3,40,313/- written off related to investment in shares of Crayons Advertising (Nepal) Pvt. Ltd. 24. The AO did not accept the above explanation. He observed that it is a matter of record that the shares continue to be held as capital assets and have not been transferred during the year. That it is not understood as to how this loss which is nothing but diminution in the value of the investments can be claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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