TMI Blog2016 (9) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions have to be given effect to even though they resulted in reduction of tax liability, provided that they are genuine and bona fide and it cannot be called as colourable device. In case, a transaction took place with the sole intention to defraud Revenue and that resulted in deduction of tax liability, it can be called as a dubious method followed by the assessee, as the parties involved therein have no right to indulge any tax evasion and it cannot be taken away by any judgment of the Court. This has to be considered and in fairness, it should be appreciated that all transactions, which resulted in evasion of tax liability, can be considered as a device or subterfuge or colourable transaction. We found on perusal of the share warrant certificate and the financial statements and the assessment order, the ld. Assessing Officer in his order is silent on this transaction of financial statement of Shriram City Union Finance Limited and accounting system. Therefore, we set aside order of the Commissioner of Income Tax (Appeals) order and remit the disputed issue to the file of ld. Assessing Officer for re-examination based on the information submitted on warrants and financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of :4,49,00,729/- and other income of :866/-. The dividend income earned on equity shares are claimed as exempted, whereas interest income accrued on the fixed deposits with Standard Chartered Bank. The ld. Assessing Officer alleged that the assessee company has claimed :13,00,300/- towards the Lead Management fee paid to DSP Merrill Lynch Limited, :2,48,175/- towards Advisory fee for restructuring was included in Professional charges. Further, the assessee company paid :1,20,00,000/- towards Escrow Management fee. The ld. Assessing Officer issued letter dated 17.12.2010 requesting to provide details of Professional Charges and Management charges and the ld. Authorised Representative explained and filed the letter referred at page 2 of the assessment order as under:- . Fee for restructuring ₹ 2,48,175 related to business activity of assessee. These expenses were not incurred to earn dividend income. The lead management fee of ₹ 13,00,300 and Eskrow Management fee of ₹ 1,20,00,OOO paid to DSP Merrilt Lynch Ltd and Standard chartered Bank respectively related to open offer issued for shares of Shriram City Union Finance Limited. The entire expenses r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the Tribunal decision in the case of ITO vs. Daga Capital Management (P) Limited 117 ITD 169 (Mumbai) were it was held that were the assessee engaged in the business of dealing in shares and securities, the disallowances are mandatorily required to be calculated as per provisions of Section 14A read with Rule 8D and ld. Assessing Officer computed the disallowances and after adjustment of disallowance which the assessee company has already disallowed :51,220/- has worked out to :6,84,294/- and the assessee aggrieved with the additions of Lead mangement fee and Escrow Management fees, advisory fee disallowed u/s.14A r.w.r. 8D and disallowance u/s.14A r.w.r. 8D :6,84,294/-, filed an appeal before Commissioner of Income Tax (Appeals). 4. In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the findings of the ld. Assessing Officer at page 3 to 6 of his order and written submissions filed by the assessee at page 7 referring similar business activity of group concern M/s. Shriram Capital Limited in ITA No.638/Mds/2012, assessment year 2005-06 and ITA No.639/Mds/2012 for assessment year 2007-08, on the concept of business expediency and commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of Shriram City Union Finance Limited and prayed for deletion of addition made by the ld. Assessing Officer. 6. Contra, ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals) and vehemently opposed to the grounds. 7. We heard the rival submissions, perused the material on record and judicial decisions cited. The ld. Authorised Representative emphasized that the assessee company has incurred expenditure for acquisition of shares in open offer of Shriram City Union Finance Limited and also restructuring fees :2,48,175/- and lead management fees of :13,00,300/- paid to DSP Merrill Lynch Limited and :1,20,00,000/- was paid to Standard Chartered Bank and DSP Merrill Lynch Limited. The contention of the ld. Authorised Representative that the assessee is in the business activity of shares and securities and 99% of income consist of dividend and interest income. Therefore, this expenditure has be treated as business expenditure and be allowed. The ld. Authorised Representative drew our attention to the order of Tribunal in assessee s own case of assessment year 2009-10 in ITA No.981/Mds/2013 were similar issues were considered in respect of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the ground of the assessee is allowed for statistical purpose. 8. The next ground that the ld. Commissioner of Income Tax (Appeals) erred in confirming the action of ld. Assessing Officer in rejecting the assessee s claim of Short Term Capital Loss of :14,00,00,000/- on claim of forfeiture of warrants. 8.1 The assessee company claimed loss as Short Term Capital Loss :14,00,00,000/- and the loss pertaining to forfeiture of warrants allotted to the assessee company which could not exercised within the stipulated time due to liquidity crisis and the loss is chargeable under Capital Gains as per Sec. 48 of the Act. There is no sale consideration received by the assessee and ld. Authorised Representative explained that share warrants are purchased for :14,00,00,000/- and assessee company relinquished rights to buy shares of Shriram City Union Finance Limited and taken the consideration as Zero observed at page 5.1 of ld. Assessing Officer order as under:- Shriram City Union Finance Limited issued 35,00,000 warrants to us on 16.05.2008 convertible within 18 months from the date of allotment at the option of holder into equity shares of Rs. 10 each for cash at the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the AR of the appellant relied on the ratio of the decision of the Hon'ble Delhi High Court in the case of CIT v . Chand Rattan Bagri [329 ITR 356] and ratio of the decision of the Kanataka High Court in the case of DCIT v. BPL Sanyo Finance Ltd. [312 ITR 63]. On the other hand, the AO relied upon the ratio of the decision of the Honble ITAT, Ahmadabad B Bench in the case of Ajay Singh Mehta v. DCIT [ 1 14 ITD 628]. In the case cited by the AO, the Hon'ble ITAT Ahmadabad 'B' Bench, relied upon the ratio of the decision of the Supreme Court of India in the case of CIT v. B.C . Srinivasa Setty [1981] [128 ITR 294] in coming to the view that assessee will not be entitled to claim the deduction under short t erm capital loss in the absence of value being assigned to the consideration received on transfer of warrants for the purpose of computation of capital gains u/s . 48 of the I. T. Act. The ratio of the decisions relied upon by the AR of the appellant are not applicable to the facts of the present case as the decisions rendered by High Court of Karnataka and High Court of Delhi cited supra, did not consider the ratio of the decision rendered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. Authorised Representative drew our attention to the Audited financial statements of the Shriram City Union Finance Limited as on 31.03.2010 and share warrant certificate. The fact of the share warrant conversion forfeiture was referred in the Directors report at page 11 as under:- As approved by the Extraordinary General Meeting, optionally convertible warrants were issued to various subscribers in the years, 2008. In November, 2009 all the subscribers except Shriram Retail Holdings Pvt. Ltd (SRHPL) exercised their option and converted the warrants into equity shares at a price of Rs. 400/- per share ( Rs. 40/- on allotment and balance on conversion of warrants into equity shares). The non conversion of warrants into shares by SRHPL resulted in forfeiture of money paid by them . Further, the ld. Authorised Representative drew our attention to the page 44 of the Annual Report at Schedule 3 Reserves and Surplus were the forfeiture amount of optionally convertible warrants were transferred to Capital Reserve. Normally authorities concerned shall proceed on the basis of the professed intention of the parties to a document/ transaction /arrangement. If that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 The ld. Commissioner of Income Tax (Appeals) confirmed the action of the ld. Assessing Officer of disallowance of Sec 14A expenditure while calculating Bok profits. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 9.3 Before us, the ld. Authorised Representative argued that the disallowance u/s.14A r.w.r. 8D of the Act is disputed and being challenged. Further, the provisions of Sec. 115 JB of the Act are inclusive provisions and Addition in the assessment proceedings to returned income shall not be added for calculating the Book profits and prayed for allowing the appeal. 9.4 Contra, ld. Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals) and vehemently opposed to the grounds. 9.5 We heard the rival submissions, perused the material on record and judicial decisions. The contention of the ld. Authorised Representative that the disallowance should not be considered for computation of Book Profit u/s.115JB. Similar issue was decided by the Bangalore Bench of Tribunal in the case of Manipal Technologies Ltd. vs. DCIT, in ITA No.1222/Bang/2012 dated 25.07.2014 wherein it was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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