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2015 (10) TMI 182 - ITAT MUMBAI

2015 (10) TMI 182 - ITAT MUMBAI - TMI - Disallowance of expenses u/s 14A with Rule 8D of the IT Act - Held that:- 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 divide .....

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e Court held that where the main object of the company is letting out of the property, rental income received from such letting out, is assessable as 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 .....

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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 Capital Company distributed to assessee at the time of squaring up the account of assessee with the Venture Capital Company. Accordingly, we do not f .....

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T(A)-2, Mumbai for the assessment years 2005-06, 2006-07 & 2007-08 in the matter of order passed u/s 143(3) of the Income Tax act, 1961. 2. The grounds raised by the assessee for A.Y. 2005-06 in ITA No. 4102/Mum/2011 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 th .....

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e disallowance by applying half percent to the total investments; and (iii) Summarily disregarding and ignoring completely the detailed factual submissions made by the Appellant. 2.3 It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance was called for. 2.4 Without prejudice to the above, assuming - but not admitting - that some disallowance u/s. 14A was called for, it is submitted that in the facts and the circumstances of the case, and in law, the .....

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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 share .....

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llant was entitled to the benefit of indexation." 3. The grounds raised by the assessee for A.Y. 2006-07 in ITA No. 600/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 order is r .....

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; and (iii) Summarily disregarding and ignoring completely the detailed factual submissions made by the Appellant. 2.3 It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance was called for. 2.4 Without prejudice to the above, assuming - but not admitting - that some disallowance u/s. 14A was called for, it is submitted that in the facts and the circumstances of the case, and in law, the computation of disallowance made by the ld. CIT (A) is arbitrar .....

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IT (A) failed to appreciate that the Appellant had earned interest income in the course of its regular business activities. 3.3 It is submitted that in the facts and the circumstances of the case, and in law, no such action was called for. 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", t .....

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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 order is required to be held as bad in law on account of breach of the princip .....

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so, the CIT (A) failed to appreciate that the Appellant had earned interest income in the course of its regular business activities. 2.3 It is submitted that in the facts and the circumstances of the case, and in law, no such action was called for. 2.4 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 .....

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otal investments; and (iii) Summarily disregarding and ignoring completely the detailed factual submissions made by the Appellant. 3.3 It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance was called for. 3.4 Without prejudice to the above, assuming - but not admitting - that some disallowance u/s. 14A was called for, it is submitted that in the facts and the circumstances of the case, and in law, the computation of disallowance made by the ld. CIT .....

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e 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 h .....

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which 90% interest income was from ICD. Ld. AR also relied on decision of Hon'ble Supreme Court in the case of M/s Chennai Properties & Investment Ltd. (Civil Appeal No.4494 of 2004, vide order dated 9-4-2015. 7.1 We have considered rival contentions and found that major portion of the interest income was received by the assessee through ICD and not from securities as is stated u/s.56 of the I.T.Act. In case of M/s Chennai Properties & Investment Ltd. (supra), the Hon'ble Suprem .....

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eme Court in the case of M/s Chennai Properties & Investment Ltd. (supra). We direct accordingly. 8. In the assessment year 2005-06, the AO has also taxed ₹ 41,75,980/- on account of receipt of share from Venture Capital Company. The facts are that the assessee had made investment in the Venture Capital Company in the earlier years. During the financial year 2004-05 the account of assessee was squared with the Venture Capital Company. At this time, assessee was given shares of corporat .....

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tion was shown as unrealized capital gain. Accordingly, before the Assessing Officer the claim was put up that the amount under consideration was not chargeable to tax. It was contended that Section 155 U of the Income. tax Act was applicable and the calculation is contained in Form 64 depicted the correct income chargeable to tax and accordingly, the amount under consideration should' not be charged to tax Assessing Officer has not concurred with the contention. According to him, at the tim .....

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rue 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 co .....

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