TMI Blog2015 (10) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... s business income and not under the head of income from house property. In this case also one of the main objections of the assessee company was lending money on interest. Accordingly, we restore this issue to the file of the AO for deciding afresh the nature of income received - Decided partly in favour of assessee. Receipt of share from Venture Capital Company - Held that:- In the instant case before us what has been distributed by the Venture Capital Company to assessee is the surplus in the account of assessee with the Venture Capital Company. The distribution of the surplus is definitely chargeable to tax. In the present case a doubt has arisen only because this distribution has been done not in terms of money but in terms of kind, shareholding in a corporate entity. However, the nature of distribution of surplus can neither decide nor govern the taxability of income in the hands of assessee. Income has definitely been earned in terms of kind. In the present facts the income has really been earned in terms of kind as shares of the corporate entity. Nevertheless the nature of receipts in the hands of assessee is income being surplus in its account held with the Venture Capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the interest income under the head Income from Other Sources instead of under the head Profits and Gains of Business or Profession . 3.2 It is submitted that in the facts and the circumstances of the case, and in law, no such action was called for. 3.3 Without prejudice to the above, the ld. CIT (A) erred in summarily dismissing the alternative claim of the Appellant that assuming - but not admitting - that the interest income was liable to be taxed under the head Income from Other Sources , the necessary and appropriate deductions, as available u/s. 56 read with 57 of the Act, should have been granted to the Appellant. 4.1 The ld. CIT (A) erred in confirming the action of the A.O. in taxing ₹ 41,75,9801-, being the alleged income on account of receipt of shares from the Venture Capital Company. 4.2 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for. 5.1 The ld. CIT (A) erred in not adjudicating the ground regarding the benefit of indexation while computing the long term capital gain. 5.2 It is submitted that in the facts and the circumstances of the case, and in law, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.4 Without prejudice to the above, the ld. CIT (A) erred in summarily dismissing the alternative claim of the Appellant that assuming - but not admitting - that the interest income was liable to be taxed under the head Income from Other Sources , the necessary and appropriate deductions, as available u/s. 56 read with 57 of the Act, should have been granted to the Appellant. 4. DISALLOWANCE OF LOSS 4.1 The ld. CIT (A) erred in confirming the action of the AO. whereby the AO. disallowed loss of ₹ 1,35,990/- on proportionate basis from the loss on redemption units by holding that the ground was not pressed. 4.2 It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance was called for. 4. The grounds raised by the assessee for A.Y. 2007-08 in ITA No. 601/Mum/2012 read as under:- 1. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE 1.1. The Commissioner of Income - tax (Appeals)-2, Mumbai [ ld. CIT (A) ], erred in framing the appellate order without affording reasonable and fair opportunity of being heard. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertains to disallowance of expenses under Rule 8D of the IT Act. 6.1 In the assessment year 2005-06, the assessee received dividend income of ₹ 10.94 lakhs. The AO disallowed ₹ 9.43 lakhs under Rule 8D by relying on the decision of Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd., 328 ITR 81. 6.2 By the impugned order, the CIT(A) confirmed the disallowance. 6.3 We have considered rival contentions and found that relevant assessment year under consideration are 2005-06 to 2007-08 in which rule 8D is not applicable, however, reasonable disallowance is warranted. The Tribunal in assessee's own case for the assessment year 1997-98 2000-01 2001-02 has decided the similar issue and restricted the disallowance to the extent of 5% of the dividend income. As the facts and circumstances of the case are same, we direct the AO to restrict the disallowance to 5% of the dividend income. 7. The next issue pertains to taxing interest income as income from other sources. It was contended by ld. AR that one of the main object of the assessee company was lending money. He invited our attention to the total interest income received during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be charged to tax Assessing Officer has not concurred with the contention. According to him, at the time of squaring up the account of assessee, the Venture Capital Company has transferred the surplus/profit in kind, that is, 10594 equity shares of Biocon Ltd, for the value of ₹ 53,25,061/-, which is in lieu of payment due to assessee. According to Assessing Officer this is nothing but profit earned on behalf of assessee and is required to be brought to charge of tax. 8.1 By the impugned order, the CIT(A) confirmed the action of the AO. 8.2 The contention of ld. AR was that profit would accrue to assessee only at the time sale of the shares on the ground that the value of ₹ 53,25,061/- shall be an integral part of cost of these equity shares to the assessee for computation of capital gains at the time of sale of these shares. It was also contended that under provisions of Section 155U of the Income tax Act, the Form No.64 is the final determining factor for chargeability to tax. It has been contended that the shares under consideration were purchased on behalf of assessee company and in the absence of any sale of the shares, no income can accrue to the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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