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2016 (12) TMI 444 - ITAT BANGALORENature of loss - business loss OR capital loss - Held that:- We find no merit in this objection of CIT(A) in view of this fact that shares were acquired by the assessee as per Board Resolution dated 3.9.2007, as per which, the shares in these two companies are to be acquired as stock-in-trade. Hence, on this issue, we reverse the order of the CIT(Appeals) and hold that loss in question is a business loss and not a capital loss. Business loss in shares - whether hit by explanation to section 73(1) or not - Held that:- Shares were acquired by application and allotment of shares and not by way of purchase. Hence we hold that the loss in question in the present case is not hit by Explanation to section 73(1) and therefore, such loss is entitled to be set off against normal business income of the assessee. Disallowance u/s 14A - Held that:- We find that as per the profit & loss account of the assessee for the present year available there is no income earned by the assessee under the head ‘dividend’ which is exempt u/s 10. In the case of Cheminvest Ltd. (2015 (9) TMI 238 - DELHI HIGH COURT ) cited by the ld. AR of assessee, it was held by the Hon’ble Delhi High Court that where the assessee had not earned any exempt income, no disallowance can be made u/s. 14A. Since there is no actual receipt of exempt income by the assessee in the present year, we are of the considered opinion that no disallowance can be made u/s. 14A as per this judgment of Hon’ble Delhi High Court rendered in the case of Cheminvest Ltd. (supra) - Decided against revenue Disallowance made by the AO u/s. 36(1)(iii) - Held that:- we find that a categorical finding has been given by the CIT(A) that the advances given to M/s. Asianet T.V. Holding (P) Ltd. of ₹ 79.40 crores and to M/s. India Radio Ventures of ₹ 10.2 crores and ₹ 3.23 crores and the remaining advances given to M/s. Azure Services Pvt. Ltd. and some more advance to other group companies were all given as part of larger business strategy in the ordinary course of business and hence these advances were given for business expediency and therefore, as per judgment of Hon’ble Apex Court rendered in the case of S.A. Builders [2006 (12) TMI 82 - SUPREME] no disallowance of interest in respect of this interest free advance is justified. Since this finding of act of ld. CIT (Appeals) could not be controverted by the ld. DR of revenue and in view of the facts of the present case, this issue is covered in favour of assessee Disallowance u/s 40A - the amount paid is excessive - Held that:- The ld. CIT (Appeals) has given a categorical finding that section 40A (2)(b) can be invoked when the AO feels that such expenditure is excessive or unreasonable having regard to fair market value of goods , services or facilities for which the payment is made and since, the AO has not given a categorical finding that the expenditure in question is excessive or unreasonable, he cannot invoke the provisions of section 40A(2). On this aspect, we find no infirmity in the order of CIT (Appeals) because in fact, no such finding is given by the A.O. that the amount paid is excessive or unreasonable. Addition u/s 37 - Whether the expense was for business purpose or not - Held that:- Categorical finding has been given by the CIT(Appeals) that there is no material on record to show that expenditure was in the nature of capital expenditure or not for the purpose of business. Although in the assessment order, the AO has stated that this expenditure was not incurred exclusively for the business or profession, no basis or reason has been indicated by the AO for saying so. On this issue also, we find no infirmity in the order of CIT (Appeals). Expenditure allowable u/s. 37 - Held that:- The subsidiary company had held certain shares and assessee company had received non-compete fee and fees paid by the assessee is relating to negotiating non-compete agreement and related transaction. If an effort is made for a joint venture and the same is aborted, then the expenses incurred for the joint venture has to be allowed as revenue expenditure. In the present case, expenses were incurred in relation to joint venture with Star Group and categorical finding of AO is that no such venture has taken place and therefore, we find no reason to interfere in the order of CIT(Appeals) on this aspect of the matter also. Deemed dividend u/s. 2(22)(e) - Held that:- We find force in the submissions of the ld. AR of assessee and we find that the dispute is regarding receipt of loan advanced by the lender company Jupiter Capital Pvt. Ltd. ₹ 5432.90 lakhs and Hindustan Infrastructure Project & Engg. Pvt. Ltd. ₹ 2569.43 lakhs and as per the AO also, the assessee is not a shareholder in any of these two companies. Under these facts, the judgment of Hon’ble Karnataka High Court rendered in the case of DCIT v. Sri Rajiv Chandrashekar (2016 (4) TMI 310 - KARNATAKA HIGH COURT) is squarely applicable wherein it was held by the High Court that if the assessee is not a shareholder in the lender company, addition cannot be made u/s. 2(22)(e) of the I.T. Act.
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