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2022 (3) TMI 1516 - AT - Income TaxDisallowance u/s 14A r.w. Rule 8D - main contention that the CIT(A) has deleted the said disallowance u/s 14A r.w. Rule 8D by ignoring the CBDT Circular No.5/2014 dated 11.02.2014 - HELD THAT:- Assessee did not claim any expenses. No deduction was claimed, therefore, there should be no disallowance expenses, hence, on this aspect also no disallowance u/s 14A r.w. Rule 8D is required. CIT(A) has also dealt with the finding of the AO. AO computed the average value of the investment which did not yield the exempt income but CIT(A) has relied upon the decision of the case titled as Rainy Investments P. Ltd in which it is [2013 (2) TMI 602 - ITAT MUMBAI] specifically held that the share application money which is not capable to yield exempt income, is not required to be considered for computing the disallowance u/s 14A r.w. Rule 8D also. Accordingly, considering the case of the assessee by above said angle, the CIT(A) has disallowed the addition raised in view of the provisions u/s 14A. Circular nowhere hindered the law relied by the CIT(A). Moreover, the issue of interest has duly been adjudicated in due course of law. CIT(A) has decided the issue judiciously and correctly which is not required to be interfered with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition of transfer of shares - gift receipts as liable to be considered as Sham transaction - whether the same is liable to be taxed u/s 56(1) and 28(iv)? - As argued that CIT(A) has deleted the addition without looking at the very nature of transfer of shares in substance i.e. the creation of holding company and subsidiary company was a colourable device adopted to evade taxes - HELD THAT- We are of the view that the gift is not a colourable device to avoid the tax liability if any. As receipt of share from the Private Limited Company for without or inadequate consideration whereas in the present case, the assessee is the recipient of shares of a listed company so the provisions u/s 56(2)(viia) of the Act is not liable to be applicable. As the provision Section 28(iv) and 56 in case of receipt of shares of a listed a company as gift is not applicable. Accordingly, we uphold the finding of the CIT(A) on this issue. Power of the CIT(A) u/s 251 - CIT(A) issued the direction to tax the share transaction amount in the hands of the transferor - HELD THAT:- In the case of Mrs. Banoo E. Cawasji v. CIT[1981 (12) TMI 31 - MADHYA PRADESH HIGH COURT] the Hon’ble High Court has observed that the CIT(A) is not required to pass the order in the case of third party. Accordingly, we are of the view that the observation of the CIT(A) is not justifiable, therefore, we set aside the such direction and decide the issue nos. 1 to 4 in favour of the assessee against the revenue.
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