TMI Blog2016 (2) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... panies [ 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 & professional expenses by treating the same as capital in nature without adducing any reason for the same. We hold that these expenses are required for obtaining clearances/licenses in connection with business activity of the assessee. Accordingly, it is squarely eligible for deduction. - Decided in favour of assessee Disallowance u/s 14A - Held that:- We find that the assessee had incurred only long term capital loss after indexation and in order to invoke the provisions of section 14A 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. - De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The ld.AR argued that the assessee company is not a shareholder of M/s. ABP Pvt. Ltd. Accordingly, the provisions of section 2(22)(e) of the Act cannot be invoked in the hands of the assessee. The ld.AR of the assessee has also brought to our attention to pages 2-3 of the ld.CIT(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 that money was received by the assessee company for investment in M/s. Kaleido Scope Entertainment Pvt. Ltd, who eventually produced a Bollywood movie called Sathiya. Accordingly, this borrowing should be construed only in the course of business. It takes the character of pure business and falls under the exception of clause (ii) to section 2(22)(e) of the Act. 7. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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(22)(e) and no other basis has been suggested in the order of the Assessing Officer. 8. We also find that the ld. CIT(A) had deleted the addition on this issue by observing as under:- The intention of the legislature behind the provision of 2(22)(e) is to tax dividend in the hands of the share holder. Further, the A.R has also distinguished the judicial decisions cited by the AO in his assessment order from the present case. Another issue which has to be kept in mind is the purpose behind 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during character. It was mentioned further that the brokerage paid was really in the nature of remuneration paid in order to avail of the services of the broker with a view of acquire the premises on rent . The fiveyear period was described in the said judgment as a relatively short period end, following the decision of the Supreme Court in India Cements Ltd. 's case [1966] 60 ITR 52 and the ratio spelt out therein it was held in Hoechst 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. Accordingly, he held that the expenditure incurred for acquiring office space on lease for the purpose of assessee s business was squarely allowable as revenue expenditure. Thus, he deleted the addition made by the ld.AO towards brokerage, stamp duty and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 case. 18. The ld.AO mechanically had applied Rule 8D(2)(iii) of the I.T Rules 1962 for making addition u/s. 14A of the Act to the extent of ₹ 8,57,363/-. On 1st appeal, the ld. CIT(A) deleted the same. Aggrieved, the revenue is in appeal before us on the following ground:- 3. that on facts and circumstances, the Ld CIT (A) erred in deleting the disallowances u/s 14A to the tune of ₹ 8,57,363/-, which was calculated by the Assessing Officer as per Rule-8D because the assessee has earned 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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