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TMI Blog2016 (6) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has erred in law in confirming the action of ld. AO in disallowing transfer cost of Rs. 5.50 lacs and Rs. 2.05 lacs incurred wholly and exclusively in connection with the transfer of Shella land while working out short term capital gain u/s 48 of the Act. 2. Both the lower authorities have erred in law and on facts in not properly appreciating and considering various submissions, evidences and supporting placed on record during the course of the assessment proceedings and not properly appreciating various facts and law in its proper perspective and further erred in passing orders in gross violation of the principles of natural justice. 3. Learned CIT(A) has erred in law and on facts of the case in confirming the action of AO in charging interest u/s 234 A/B/C/D of the Act. 4. Learned CIT(A) has erred in law and on facts in not adjudicating upon the ground challenging the action of AO in initiating penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act. 4. At the outset, ld. Authorized Representative for the assessee submitted that he is not pressing Cross-objection; hence, the Crossobjection filed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares Interactive Technologies were purchased in earlier year also beside purchase and sale in current year about 2/3rd share holding continued in subsequent years. The earlier and subsequent share holding in Interactive Technologies have been accepted by the department; therefore, there is no gainsaying that the impugned transaction was paper transaction. The current year purchase was made to safeguard the earlier share holding and to save the company from financial crisis which may have lead to liquidation. It is evident from the record that the book value of the company had gone up to Rs. 170/- per share as on 18.12.2010 which was for Rs. (-) 40.23 per share as on 29.12.2007 i.e. before the infusion of funds by the appellant. The aforesaid company had paid the taxes of Rs. 95/- lakhs for the A.Y. 2010-11 after set off of earlier years losses (profit Rs. 614/- lakhs for the A.Y. 2010-11) and also paid advance-tax of Rs. 15/- lakhs for the A.Y. 2011-12. 7.2 Beside assessee furnished all the relevant documents to demonstrate the authenticity of purchase and sale of shares by filing - copy of allotment letter, resolution passed by the Company allotting shares to the assessee, bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings nor while sending the remand report. It is evident from the submission dated 18.12.2010 of the appellant before the Assessing Officer that the shares at high premium were purchased to save the company from liquidation and to re-strengthen the company's capital and reserves and the appellant was successful in saving the aforesaid company from adverse consequences. It is evident from the record that the book value of the company had gone upto Rs. 170/- per share as on 18.12.2010 which was for Rs. (-) 40.23 per share as on 29.12.2007 i.e. before the infusion of funds by the appellant. The aforesaid company had paid the taxes of Rs. 95/- lakhs for the A.Y. 2010-11 after set off of earlier years losses (profit Rs. 614/- lakhs for the A.Y. 2010-11) and also paid advance-tax of Rs. 15/- lakhs for the A.Y. 2011-12. These payments of taxes are the results of the funds infused by the appellant in the share capital of the company. Apart from it, the infusion of the funds by the appellant in the shape of purchase of shares, the aforesaid company had not only survived from the liquidation but its standing was substantially improved. The book value of the shares had rose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares with distinctive numbers were actually delivered and the amount was received by the assessee by account payee cheques. The Assessing Officer had no where controverted this submission of the appellant though the entire facts were before him. In view thereof, the transaction of sale of share is held to be genuine. Therefore, the implied conclusion of the Assessing Officer that the assessee had made the deliberate attempt to reduce its incidence of tax by adopting a colourable or questionable device cannot be said to be justifiable." 7.6 Relying on Hon'ble Calcutta High Court judgment in the case of CIT vs. Oberoi Hotels P. Ltd, 334 ITR 293 (Cal.), ld. CIT(A) held that the transactions of the purchase and sale of shares of the assessee were genuine and he accordingly allowed the impugned Short Term Capital Loss of Rs. 1,82,10,800/- attributable to sale of part of the shares of M/s. Inter Active Technologies Pvt Ltd., by observing as under:- "......The shares were actually purchased by the assessee and payments were made by account payee cheques. The shares were actually sold and payments were received by account payee cheques. On account of crash of the share market, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of part of the shares of M/s Inter Active Technologies Pvt. Ltd. The Assessing Officer is directed to allow the aforesaid loss of Rs. 1,82,10,800/-. The first ground of appeal is accordingly allowed." 7.7 Ld. Counsel thus contends that assessee's earlier year share holding in Inter Active Technologies has been held to be genuine by Assessing Officer, similarly after the impugned sale 2/3 share holding continue, which also has not been doubted. In view of these facts coupled with the sufficient material on record which has not been controverted by ld. Assessing Officer, there is no reason to disallow the loss on the basis of some assumptions, presumptions and conjectures. 8. We have heard the rival contentions and perused the material available on record. The undisputed facts are that the assessee was already a share holder in said Inter Active Technologies, and after selling about 1/3 share holding remained owner of about 2/3 rd shares in next year, doubts have been raised by ld. Assessing Officer only in respect of this year's sale of shares tow2ards the end of the year. It emerges from the record that assessee in order to protect his earlier share holding purchased the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Banyan & Berry and Hon'ble Calcutta High Court in the case of CIT vs. Oberoi Hotels P. Ltd. (supra), we see no infirmity in the order of ld. CIT(A) allowing the impugned STCG loss. We uphold his order on this issue, this ground of the revenue is dismissed. 9. By ground No.2, Revenue challenges the deletion of disallowance of interest expenditure of Rs. 9,87,264/-. The Assessing Officer disallowed the above interest expenditure of Rs. 9,87,264/- alleging that the assessee failed to provide the nexus of utilization of borrowing for earning offered interest income. In first appeal Ld. CIT(A) deleted the disallowance of interest by following observations: "4. is much substance in the contention of the Ld. Counsel that when it has been accepted by the Assessing Officer that interest expenditure has been expended t earn interest income, it is no matter of consequences at what rate interest has been charged or paid. The appellant had explained the reasons as to how the interest expenses were more than the interest receipts as is evident from the submission of the Ld. Counsel reproduced in para-4.1 above. There is no case for diversion of borrowed funds for non-business p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer. 9.2 Ld. Counsel contends that ld. Assessing Officer observed that the assessee has earned interest income of Rs. 19,03,827/-, whereas interest expenditure of Rs. 28,97,976/- was shown to have been incurred resulting in loss under the head income from other sources. To explain the justification assessee, vide letter dated 23.12.2010 submitted that interest expenditure has been incurred to earn interest income only which is required to be netted off with the interest expenditure. It was also submitted, the earlier borrowers desired to return interest bearing loans thereby borrowed funds would have remained idle, to avoid bearing the interest on borrowed funds assessee, as a prudent measure and in these peculiar circumstances charged lower interest @ 6% on old loan & advance. Ld. Assessing Officer though accepted the contention of the assessee that interest expenditure has been incurred to earn interest income, however, without assigning any tenable reason, disallowed the excess interest expenditure over interest income. It is contended once it has been principally accepted by the Assessing Officer that interest expenditure has been expended to earn interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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