TaxTMI 
TaxTMI 
2012 (8) TMI 638
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....shing various details and the orders relied upon on issue of disallowance of interest u/s 14A of the Act. The A.O. in his assessment order has discussed Schedules to balance sheet as on 31st March 1999 vide para Nos 2,3,4,5,6 & 7. He noted that assessee had received an amount of Rs.18,85,762/- which was taxable as business income. He noted that assessee invested a sum of Rs.64,90,880/- in shares on which assessee received dividend of Rs.1,59,121/- and claimed exemption u/s 10(33) of the Act. He also noted that assessee invested a sum of Rs.3,98,80,539/- in lands, shops, garages and flats. He also noted that assessee has given advances to various parties amounting to Rs.11,39,86,306/- and assessee has not shown any income from these advances and deposits. He also noted that assessee had his own capital and borrowed funds which was utilised for making investments. At para No. 7 of his order, A.O. has noted as under:- "7. The loans taken by the assessee have been mostly utilised for making (I) investments in lands, shops, garages ands flats (II) Investments in shares and (III) Advances & deposits. It is evident from the above discussion that the assessee has not shown any income out ....
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...., interest relatable to such investment was allowable. For this proposition he relied on decision in case of CIT vs. Rajendra Prasad Moody reported in 114 ITR 519 (SC). He further submitted that following the principles in the case of CIT v. Reliance Utilities & Power Ltd. reported in (2009) 313 ITR 340 (Bom) (344) if there were interest free funds available to assessee sufficient to meet its investments and at the same time assessee had raised a loan, it can be presumed that investments were from the interest free funds available. The Ld. counsel for assessee also relied on decision of co-ordinate Bench of ITAT in the case of Zircon Finance Leasing P. Ltd. in ITA No. 5046/Mum/2003 on similar facts and circumstances which confirmed order of ld. CIT(A) in deleting addition while estimating disallowance of Rs.2000/- on dividend earned. Accordingly, he submitted that no disallowance should be made since facts are similar in this case. 5. We have examined the issue on basis of facts available on record. We have to admit that we are unable to understand the basis for working out average disallowance made by ld. CIT(A) in his order. It was submitted that assesee had its own funds both c....
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....bsp; 3 Interest free Loans 68,202,288 4 Advances from Ranbaxy Laboratores 90,057,465 Interest Bearing funds 47,265,254 137,322,719 We further find that documents regarding availability of funds were filed for the first time before the CIT(A). The Revenue has nowhere taken a ground that rule 46A has been violated. The documents are mainly in the shape of computation of income, balance sheet, and availability of funds etc. The additional funds available are stated to be a sum of Rs.1,13,49,967/- which were received by the assessee from Ranbaxy Laboratories Ltd. on account of advance payment against sale of shares. However, if these funds were not available to the assessee as observed by the first appellate authority the revenue should have brought some evidence to show that observations of the ld. CIT(A) are not correct. Therefore, in our opinion, ld. CIT(A) has correctly worked out the availability of interest free funds and the working clearly shows that interest free funds were available to the assessee to the extent of Rs. 9,00,57,465/- and interest free advances were only of Rs.8,32....
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.... of sale of shares in all these related companies/persons on which loss was claimed are malafide and sham transactions. The A.O. was of the opinion that the assessee has adopted a colorable device to reduce the tax liability in respect of capital gains on sale of shares of M/s Hotel jal Ltd. However, the A.O.'s finding on value of sale price was that M/s Asia Network Ltd. was no longer in existence as admitted by the assessee. In respect of Gufic Ltd., the assessee could not furnish any basis for determination of sale price of shares whereas value of equity shares of M/s Andromeda Holdings Pvt. Ltd. was 'nil' amount. The ld. CIT(A) however agreed with the opinion of the A.O. that the present transaction fall in the category of colorable device. 6.1 It was submitted that the assessee had invested in these shares long back and there was no dispute about the investments and sale of shares of the above companies. The only objection by the A.O.in denying the long term capital loss is that these shares are sold to the daughter and the group concern and was of the opinion that the assessee adopted this colorable device to reduce his tax liability. It was further submitted that the group ....
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....s accepted by the department as no adverse inference was taken in the earlier year. During the year if assessee has sold the shares of Andromeda Holdings Pvt. Ltd because its value has gone down because of the loss in the subsidiary company due to dispute with PBCI, then no fault can be found in such a sale transaction. Merely because 30,000 shares have been sold to Ms. Dhyuti Choksi, daughter of the director of the assessee company, it cannot lead to a conclusion that this is a sham transaction. As far as the loss on account of Plus Channel is concerned, we again find that the transaction cannot be called sham. The assessee was already the promoter of Andromeda Holdings Pvt. Ltd along with the renowned personalities, namely, Mr. Mahesh Bhatt, Mr. Amit Khanna, Mr. Dilip Piramal Group, and Mr. Ajit Gulabchand of Hindustan Constructions Group. Plus Channel Ltd. was involved in making of TV serials, pictures and music albums etc. During the year ending 31-3-98 the revenue from sales and services and commission etc. was about Rs.41 crores approximately, which shows that the company was definitely doing business. Therefore, if being the promoter assessee purchases further shares, no fau....