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2016 (2) TMI 753 - ITAT KOLKATA

2016 (2) TMI 753 - ITAT KOLKATA - TMI - Deemed dividend u/s 2(22)(e) - Held that:- Advance has been given by one Group Company to another so that that company is able to carry out and pursue its business activities with another party. This has not been doubted by the AO. It therefore, implies that this was a genuine business advance and not a ploy to pass on the profits as an advance and not as dividend in order to save payment of tax on dividend distribution. Base on above discussion, it is to .....

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annot be added at any stretch of imagination as capital expenditure.- Decided in favour of assessee.

Filing fees paid to Registrar of Companies [ ROC] towards increasing of authorized capital is not allowable as revenue expenditure. See Punjab State Industrial Development Corporation Vs. CIT reported in (1996 (12) TMI 6 - SUPREME Court) - Decided against assessee

Legal & professional charges - Held that:- We also find that the ld. AO had merely disallowed the said legal & p .....

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of the Act, the existence of exempt income is sine qua non . The ld. AO has not disputed the long term capital loss claimed by the assessee and had allowed the same. Hence, in this scenario invoking the provisions of rule 8D(2)(iii) of IT Rules 1962 directly without recording the satisfaction in terms of rule 8D(1) is not warranted in accordance with law. - Decided in favour of assessee - ITA No. 966/Kol/2013 - Dated:- 10-2-2016 - Mahavir Singh, JM And M. Balaganesh, AM For the Appellant : None .....

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n 2(22)(e) of the Act towards deemed dividend could be invoked in the sum of ₹ 1,14,45,125/- in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee company during the assessment year under consideration had received an advance of ₹ 1,14,45,125/- from another group company M/s. ABP Pvt. Ltd [ in short ABP ]. The assessee is an entertainment company and advance that was received from M/s. ABP Pvt. Ltd was for the investment in M/s. Kaleido Sc .....

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of the assessee. 4. None appeared on behalf of the revenue. It is noticed that the ld. JCIT/Sr.DR had filed an adjournment petition in respect of 16 cases as against 21 cases listed for hearing today. It is noticed that the ld. JCIT/Sr.DR was on leave on the said date of hearing. We do not appreciate such action of the ld.JCIT/Sr.DR in this regard as it is bounden duty to handover the files to any other ld.DR with the consent of the ld.CIT/DR, ITAT. The institution of ITAT cannot suffer due to .....

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T(A) s order, wherein shareholding pattern of both the lending company as well as the assessee company is reproduced herein below:- "(a) Major share holders of M/s. ABP (P) Ltd holding more than 10% of shares and voting rights were:- 1. A. Sarkar 2. S. Sarkar 3. ABP Holding (P) Ltd 4. Satellite Holding (P) Ltd Major shareholders of assessee company holding more than 10% of shares and voting rights were:- 1. ABP Holding (P) Ltd. 2. Satellite Holding (P) Ltd." 6. The ld.AR further argued .....

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r in the lending company i.e M/s. ABP Pvt. Ltd. We also find from the records that lending was in the ordinary course of business. Accordingly, it definitely falls within the exception clause (ii) of section 2(22)(e) of the Act. We hold that provisions for deemed dividend could be invoked in the hands of the shareholder and not otherwise. In this regard, we place our reliance on the following judgments:- • In the case of Universal Medicare (P) Ltd reported in 190 Taxman 144 (Bom), wherein i .....

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e (e) expands the nature of payments which can be classified as a dividend. Clause (e) of section 2(22) includes a payment made by the company in which the public is not substantially interested by way of an advance or loan to a shareholder or to any concern to which such shareholder is a member or partner, subject to the fulfillment of the requirements which are spelt out in the provision. Similarly, a payment made by a company on behalf, of for the individual benefit, of any such shareholder i .....

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e the payment, even assuming that it was a dividend would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The Tribunal was, in the circumstances, justified in coming to the conclusion that, in any event, the payment could not be taxed in the hands of the assessee. We may in concluding note that the basis on which the assessee is sought to be taxed in the present case in respect of the amount of ₹ 32,00,000 is that there was a dividend under section 2( .....

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hind giving the advance. Advance has been given by one Group Company to another so that that company is able to carry out and pursue its business activities with another party. This has not been doubted by the AO. It therefore, implies that this was a genuine business advance and not a ploy to pass on the profits of M/s. ABP Pvt. Ltd as an advance and not as dividend in order to save payment of tax on dividend distribution. Base on above discussion, I hold that advance of ₹ 1,14,45,125/- g .....

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ted as revenue expenditure in the facts and circumstances of the case. 11. The brief facts of this issue are that the assessee has incurred the following expenditure and claimed the same as revenue in nature:- 01 Brokerage Rs.11,05,173/- 02. Stamp Duty ₹ 3,20,120/- 03. Registration charges ₹ 05,024/- 04. Filing Fee ₹ 2,00,000/- 05. Legal & Professional charges Rs.5,80,520/- Total Rs.23,00,717 12. The ld.AO disallowed the aforesaid expenditure treating the same as capital in .....

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tion of the same in the facts and circumstances of the case. The ld. CIT(A) has relied upon the decision of the Hon ble Bombay High Court in the case of Hoechst Pharmaceuticals Ltd reported in (1978) 113 ITR 877(Bom), wherein it has been held as under"- "1. It has been observed in Hoechst Pharmaceuticals Ltd. 's case [1978)113 ITR 877 (Bom) that the period of lease which was of five years could not be said to be such a long period that the assessee could be said to have acquired or .....

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t Pharmaceuticals Ltd. 5 case [1978] 113 ITR 877 (Bom) that the Tribunal had taken the correct view and allowed the expenditure as being expenditure of a revenue nature. 2. In the case of DCIT vs. Metro Shoes Pvt. Ltd., 258 ITR 106 ITAT, Mumbai Bench it was held that it is well settled that when the transaction involved is a lease and not a purchase, the expenditure incurred thereon, including brokerage of commission or stamp duty or the like, is an allowable revenue expenditure." 13. Accor .....

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supported the order of the ld.CIT(A). We find that the ld.CIT(A) had dealt with the issue in favour of the assessee by placing his reliance on the decision of the Hon ble Bombay High Court in the case of Universal Medicare (P) Ltd (supra). We hold that the expenditure incurred by the assessee towards brokerage, stamp duty and registration charges for acquiring the office space of 5650 sq.ft at Gariahat Mall on lease for the purpose of assessee s business was squarely allowable as revenue expend .....

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5 ITR 792 against the assessee, wherein it was held that the filing fees paid to Registrar of Companies [ ROC] towards increasing of authorized capital is not allowable as revenue expenditure. The ld.AR during the course of hearing before us has fairly conceded to this issue. Accordingly, this portion of ground no.2 raised by the revenue before us is allowed to that extent. 16. In respect of legal & professional charges amounting to ₹ 5,80,520/-, we find that the same was paid towards .....

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n with business activity of the assessee. Accordingly, it is squarely eligible for deduction. Hence, we find no infirmity in the impugned order of the ld. CIT(A) on this issue. This portion of ground no.2 is dismissed. To sum, ground no. 2 raised by the revenue on various issues is partly allowed. 17. The last issue to be decided in this appeal of revenue is as to whether the disallowance u/s. 14A of the Act could be made to the extent of ₹ 8,57,363/- in the facts and circumstances of the .....

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ed Long Term Capital Gain/Loss (exempted income). 19. We have heard the ld.AR and perused the material available on record. We find that the total income earned by the assessee company was of ₹ 1,16,86,236/- out of which ₹ 1,10,50,000/- was "Profit on sale of Investment". After indexation this profit becomes a long term capital loss and no tax was required to be paid. In this scenario, a question arises whether provisions of section 14A could be applied when there is no res .....

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