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TMI Blog2022 (11) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... (22)(e) - assessee has received Loan - AR submitted that the Assessee is not shareholder in Trenton Investment Company Pvt Ltd but Trenton Investment Company Pvt. Ltd is holding 99% share in the assessee company - HELD THAT:- In the case before us, the Trenton Investment Company Pvt. Ltd is 99% shareholder in the Assessee Company. The Trenton Investment Company Pvt. Ltd has given loan of Rs.1,00,00,000/- to the assessee company. Thus, the loan has been given by share holder. Therefore, provisions of Section 2(22)(e) will not be applicable to the impugned loan by Trenton Investment Company Pvt. ltd.- AO is directed to delete the said addition. Loan from Kimplas Piping System Ltd - The facts of the present case explains that Provisions of Section 2(22)(e) are attracted for the loan of Rs.Rs.11,12,387/- from Kimplas Piping System Ltd to the assessee. Therefore, respectfully following the ITAT Mumbai bench decision , we hold that the AO has rightly treated loan received from Kimplas Piping System Ltd as deemed dividend. Accordingly, impugned addition is upheld. Therefore, the Ground No.3 is partly allowed as discussed in earlier paras. Correct head of Income - Rental Income - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) - 1, Nashik [ the CIT (A) for short] erred in confirming the order of the learned Income Tax Officer - 1 (2), Nashik, [ the AO for short] which was passed in violation of principles of natural justice without affording a proper opportunity of being heard to the Appellant. 2. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the AO in invoking section 14A r.w.r. 8D of the Act, whereby a disallowance of Rs.12,81,831/- was made in the hands of the Appellant. 2.1 While doing so the Ld. CIT(A) failed to appreciate that: (i) No satisfaction as contemplated u/s 14A r.w.r. 8D was recorded by the AO prior to invoking section 14A; (ii) The provisions of section 14A were not at all applicable in the present case since no exempt income was actually earned by the Appellant in the present case; and; (iii) In any case no disallowance as per Rule 8D was called for in respect of interest expenditure in the present case. 2.2 In the facts and circumstances of the case the disallowance made by the AO and sustained by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such addition of Rs.3,00,000/- made in the hands of the Appellant by the AO, could at all be sustained while computing book profits u/s 115JB of the Act 6. The Appellant craves leave to add, amend, alter delete and modify all or any of the above grounds of appeal. 2. We have heard both the parties and perused the records. Ground No.1: 2.1 The assessee had stated that Ld.CIT(A) had not given opportunity of hearing to the assessee , which was violation of principal of Natural Justice. On perusal of the order of the Ld.CIT(A) it is observed that the assessee s submission has been reproduced by the Ld.CIT(A). The Ld.CIT(A) had considered the submission of the assessee before deciding the case. Assessee was granted opportunity by the Ld.CIT(A). Thus, there was no violation of natural justice. Hence, the ground number 1 of the assessee is dismissed. Ground No.2: 14A disallowance : 2.2 The AO has made addition u/s 14Arw Rule 8D of the Act of Rs.12,81,831/-. The Ld.CIT(A) had upheld it. At the outset the Ld.AR submitted that there was no exempt income earned by the assessee during the year hence there cannot be any disallowance u/s 14A of the Act. The Ld.AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there can be no question of making any disallowance u/s 14A of the Act. Similar view has been taken by the Hon'ble Delhi High Court in CIT v. Holcim India (P.) Ltd . [2015] 57 taxmann.com 28. More recently the Hon'ble jurisdictional High Court in Pr. CIT v. Kohinoor Projects (P.) Ltd . [2021] 276 Taxman 180/[2020] 121 taxmann.com 177/425 ITR 700 (Bom.) has held that in the absence of any exempt income, there cannot be any disallowance of expenses u/s 14A of the Act. 19. The raison d'etre given by the ld. first appellate authority for sustaining the disallowance that the computation of income of the firm may result into positive income as well as negative income, i.e. loss and therefore, the provision of section 14A do not prohibit disallowance of expenditure in relation to exempt loss incurred by the assessee, is neither here nor there. The Hon'ble jurisdictional High Court in Pr. CIT v. HSBC Invest Direct (India) Ltd. [2020] 421 ITR 125 (Bom.) has held 'that disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration.' If the disallowance is to be restricted to the amount of exempt income, the sequitur i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; However, in the case before us, the Trenton Investment Company Pvt. Ltd is 99% shareholder in the Assessee Company. The Trenton Investment Company Pvt. Ltd has given loan of Rs.1,00,00,000/- to the assessee company. Thus, the loan has been given by share holder. Therefore, provisions of Section 2(22)(e) will not be applicable to the impugned loan by Trenton Investment Company Pvt. ltd. Hon ble Bombay High Court in the case of CIT Vs. Jignesh Shah [2015] 54 taxmann.com 293 (Bombay) has held, Thus on strict interpretation of Section 2(22)(e) of the Act, unless the Respondent-Assessee is the shareholder of the company lending him money, no occasion to apply it can arise. In this case as observed, the Lender Company is shareholder of the assessee and assessee is not share holder of the Lender. Therefore, respectfully following the Hon ble Bombay High Court, the AO is directed to delete the said addition of Rs.1,00,00,000/-. 3.3.1 Kimplas Piping System Ltd : The AO has mentioned in the Order that Kimplas Piping System has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .com 430 (Mumbai - Trib.) has held as under: Quote, With regard to inter corporate deposit of Rs. 9 lakhs, assessee has taken inter corporate deposits, but the same was repaid before the end of the current assessment year. However, we notice that since the assessee is having substantial interest in M/s ABM Steels (P.) Ltd. and M/s ABM Steels (P.) Ltd. is having substantial accumulative profit in its balance sheet and M/s ABM Steels (P.) Ltd. is a company in which public are not substantial interested, therefore the provisions of section 2(22)(e) are very much attracted. Therefore, any credit or advantage taken by the persons having substantial interest will attract the provision of section 2(22)(e) of the Act. Even though, assessee has repaid the deposit within the same year, it does not mean that the loan or benefit is not taken. We can call any name but ultimately assessee has taken a credit/benefit, the assessee should have known that it is surpassing the deeming provisions particularly when it has holding beneficial interest. It is settled law that deemed dividend provisions get attracted as soon as it takes benefit and it does not matter whether it is repaid within the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars. In this case for earlier AY 2013-14 and AY 2014-15, the assessee had shown the rent as Income from House Property and department had accepted it in the order u/s 143(3). Thus, for the same premises, for earlier year department accepted it as Income from House Property. No valid reason given by the AO for changing the head of Income from Income from House Property to Income from other Sources. We are aware that the principle of Res Judicate does not apply to the income tax proceedings but principle of consistency needs to be followed when facts are same. Once Income tax department had accepted the income as Income from House property for two years, on the same facts for the same source of income, there is no reason to deviate from earlier stand. In these facts and circumstances of the case, we are of the opinion that the assessee has rightly offered the rent as Income from House property. Hence, the AO is directed to treat it as Income from house Property. As far as the difference in amount of rent offered for taxation and the amount of rent as per 26AS, the AO is directed to verify the documents and reconcile. The Assessee shall submit all relevant documents to the AO. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account of the company. The aforesaid observations of the Apex Court concludes the issue by holding that the Assessing Officer does not have a power to embark upon the fresh enquiry with regard to the entries made in the books of accounts of the Company when the accounts of an assessee Company is prepared in terms of Part II Schedule VI of the Companies Act scrutinized and certified by the statutory auditors, approved by the Company in general meeting and thereafter filed before the Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Thus, the issue is no longer res integra. Unquote. 6.2 Thus, respectfully following the Hon ble Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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