TMI Blog2016 (3) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed. The valuation on date of conversion into stock in trade was taken on the basis of report of Chartered Accountant. There was no contrary sale price available on the date of conversion. When the purchase & sales are genuine and purchases & sale prices are accepted, the parties are independent and not related to the assessee u/s.40A(2)(b) of the Act and there was no evidence that suppressed sale price difference came back to the assessee, the loss on sale could not be disallowed as loss arising from sham transaction or as bogus loss. Hence, the addition made by the Assessing Officer was rightly deleted by the CIT(A). - Decided in favour of assessee Disallowance out of administrative and other expenses and payment to and provision for employees u/s 14A - Held that:- We are inclined to concur with the findings of the CIT(A) who has rightly deleted the disallowance in question, because the dividend income, agricultural income and other incomes of the assessee having found no nexus with the expenses incurred by the assesseecompany. The assessee-company is a member of Association of Persons (AOP) and AOP is a separate legal entity. The assesseecompany received share of profit fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside and that of the Assessing Officer be restored. 2. The brief facts of the case are that the assessee is a company engaged in the business of manufacturing of soap, stone powder, agricultural produce and trading in consumer goods. 3. First issue is with regard to the deletion of addition made on account of accrued interest on OFCPNs/DDBs of ₹ 6,98,276/-. The Assessing Officer made the additions of ₹ 3,49,138/- each on the investment of OFCPNs of Adesh Finstock Pvt Ltd Akshat Finstock Pvt Ltd as accrued interest. The CIT(A) in his order observed that this issue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench of this Tribunal in the case of Kisan Discretionary Family Trust in appeal No.1850/Ahd/2007 for AY 2003-04. Agreeing to the contention of Authorized Representative, we find that this issue is squarely covered in favour of the assessee by the aforesaid decision of ITAT in the case of Kisan Discretionary Family Trust (supra). Therefore, the order of the CIT(A) in this regard needs no interference from our side; we confirm the same. 4. The next issue is with regard to the disallowance of loss on sale of Optionally Fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in law and on facts in deleting the addition made on account of disallowance of loss on sale of OFCPNs of Ideal Petro Products and Shree Rama Polysynth Pvt Ltd of ₹ 13,05,16,000/-. On the other hand, ld. Authorized Representative supported the order of the CIT(A) and raised various factual and legal arguments for the same. 4.5 After going through the rival contentions and material on record, we find that Optionally Fully Convertible Promissory Notes (in short OFCPNs ) were purchased on 25.03.2002 on the price shown in books and payments were made. It was treated as investment made and purchases were made from independent concerns not related to the assessee. The OFCPNs were sold on price indicated by the assessee and the sale claimed to be genuine. The sale was made to independent parties and there is nothing on record to suggest that they were related to the assessee as prescribed u/s 40A(2)(b) of the Act. On these purchases and sale, the assessee suffered loss as indicated above. There was no evidence on record to suggest that the sale was made at lower price than the market rate and the balance amount was received back by the assessee. The assessee converted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.29,45,363 5.1 The Assessing Officer has considered that assessee company earned following incomes which were exempt income or given different treatment for taxation:- Dividend income ₹ 10,30,730 Agriculture income ₹ 8,72,075 Share of profit from AOP ₹ 9,60,061 Profit on sale of securities Rs.3,03,31,069 Rs.3,31,93,935 Therefore, the Assessing Officer allowed ₹ 3,64,050/- as expenses incurred for earning exempt income on the basis of following formula: Rs.3,31,93,935/26,85,56,550 x 2945363 = ₹ 3,64,050; and disallowed ₹ 3,64,050/- u/s. 14A of the Income-tax Act. 5.2 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) observed that there was no direct expenses relatable to earning of dividend income, agricultural income and other incomes and therefore, the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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