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2017 (12) TMI 527 - AT - Income TaxDeemed dividend u/s 2(22)(e) - Held that:- We are of the view that section 2(22)(e) was not applicable in the case of the assessee company, as it was holding only 1.7% of the voting power in the lending company M/s Mega Resources Ltd. We note that the AO has erred in law as well as on facts in considering the share holding of the subsidiary company for computing the voting power of the assessee, therefore we are of the view that the AO has misconstrued the provisions of section 2(22)(e) of the Act. The requirement of section 2(22)(e) is that the assessee should be holding not less than 10% voting power. The provisions of section 2(22)(e) is applicable only to a person who is the beneficial holder of shares having not less than 10% of the voting power. But, in the assessee`s case under consideration, we find that the assessee is not holding shares in excess of the prescribed limit and consequently, the provisions of section 2(22)(e) are not applicable. Addition u/s 36(i)(va) r.W.S. 2(24)(x) in respect of employee’s contribution to PF/ESI for an amount of ₹ 1,32,86,580/- - Held that:- Based on the provisions of section 43B(a) of the Act, it is abundantly clear that employer`s contribution to provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, is allowable on actual payment basis. We note that the Assessing Officer had made the addition on account of employee’s contribution, which is factually incorrect. However, the material on record suggests that the same is related to the employer’s contribution which was allowable u/s 43B. Therefore, considering the factual position, as explained above, we do not find any infirmity in the order of CIT(A), therefore, we confirm the order of CIT(A). Addition made on account of gratuity liability - Held that:- The coordinate Bench Kolkata in assessee’s own case allowed the claim of the assessee, holding that the liability for gratuity in respect of those employees who had retired during the year is allowable u/s 40A(7)(b), even if no provision for the same had been made in the accounts. Respectfully, following the judgment of Jurisdictional ITAT, Kolkata in assessee own case, we are of the view that the order passed by the ld. CIT(A) does not contain any infirmity. Therefore, we confirm the order passed by the ld. CIT(A). Addition u/s 14A r.w.r. 8D - Held that:- We are of the view that considering the judgment of jurisdictional ITAT ‘A’ Bench, Kolkata in the case of REI Agro Ltd. [2013 (9) TMI 156 - ITAT KOLKATA] wherein it was held that the disallowance under rule 8D (2)(iii) should be restricted to 0.5 % of only those investments which yielded tax free income, during the relevant previous year. Therefore, following the judgment of the Jurisdictional ITAT (supra), we direct the Assessing Officer to compute disallowance under Rule 8D(2)(iii) by restricting to those investments that have yielded tax free dividend income during the year.The CIT(A) has already directed the Assessing Officer to compute the disallowance under rule 8D (2)(iii), by considering only those investments that have yielded tax free dividend income during the year, therefore, we are of the view that order of CIT(A) does not contain any infirmity and hence we confirm the order passed by CIT(A).
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