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2015 (2) TMI 250 - AT - Income TaxAccrual of income - brokerage on new issue of shares (IPO) - double taxation - addition to income to to the tune of ₹ 12,95,636.08, on account of brokerage on new issue of shares - Held that:- The assessee company is a Member of the DSE having membership no.D-201. It is also allotted IPO Broker Code no.5/0201/4. The undisputed fact is that the initial public offer (IPO) business is done in the name of assessee company, by virtue of its Membership and registrations. Thus all the income earned at the first stage has to be treated as income of the assessee company. The doctrine of overriding title cannot, in our view, be applied to the case of the assessee company. Undisputed fact is that M/s Prasad & Co. has done the IPO business and the assessee company had no active role whatsoever in such business, except that of lending the use of its Membership and registration. The income from IPOs as well as the expenditure on the same, is undisputedly incurred by M/s Prasad & Co. The arrangement has not been disputed by the AO. It is a fact that the entire income has been accounted for by the partnership firm M/s Prasad & Co. Thus the entire amount transferred by the assessee company to M/s Prasad & Co. should have been allowed as expenditure of the assessee company. The First Appellate Authority has recognised this fact that the assessee could have claimed expenses to the extent of the amount payable to M/s Prasad & Co. While observing so, he chose to uphold the illegal action of the AO in bringing the tax to gross receipts. When the assessee has not received any income from this activity, tax is levied on gross receipts, on a hypothetical basis. This is against the provisions of the Income Tax Act. Same income is sought to be taxed twice. This should not have been done. Thus we direct the AO to grant deduction of ₹ 12,95,636/- from the income assessed in the hands of the assessee as no income that arises from the business of IPO can be brought to tax in the hands of the assessee company for the reason that it has not earned or derived any income from such activity. - Decided partly in favour of assessee.
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