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2017 (1) TMI 113 - AT - Income TaxDeemed dividend u/s 2(22)(e) - whether the subsidiary company Double Dot Finance Ltd is a company in which public are substantially interested and thereby deemed dividend has not arisen in the hands of the assessee? - Held that:- The subsidiary company viz Doubledot Finance Limited is not a Private Limited Company but is a company in which public is substantially interest as more than 51% (58.53%) of the Equity share capital of Doubledot Finance Limited has been held unconditionally throughout the financial year by Crescent Finstock Limited (the appellant company). It is not envisaged by law that only wholly owned subsidiary of a Listed Company shall be company in which the public are substantially interested.If one were to carefully consider the totality of the provision as contained in section 2(18)(B), it is abundantly clear that the stipulation of “Wholly owned subsidiary” applies only to the Holding Company and not to the company in which the shares are held. Section 2(18)(B) has also made a further distinction between subsidiary companies which are in the nature of Manufacturing Companies and Nonmanufacturing companies in order to qualify as a subsidiary it is sufficient that only 40% of the shares be held by the Holding Company whereas in the Non-manufacturing section it has to be not less than 50% - Decided in favour of assessee Disallowance made under rule 8D(2)(iii) of the Income Tax Rules - Held that:- Simply relying on rule 8D, for the purpose of disallowance, cannot be held to be applicable, because the Assessing Officer having regard to the accounts of the assessee as well as the nature of expenses incurred which can be said to be attributable for the earning of exempt income, has not pointed out what are the expenses which could be said to be have been incurred or attributable on the administrative expenses. Only when the Assessing Officer is not satisfied with the correctness of the claim of the assessee, he can proceed to apply rule 8D. In this case, such a requirement has not been fulfilled by the Assessing Officer. Accordingly, we do not find any merit in the disallowance made by the Assessing Officer under rule 8D and accordingly, the disallowance made by the Assessing Officer under rule 8D and confirmed by the learned Commissioner (Appeals) stands deleted - Decided in favour of assessee
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