TMI Blog2015 (12) TMI 1614X X X X Extracts X X X X X X X X Extracts X X X X ..... AILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Appellant :Shri Hero Rai, A.R. For The Respondent : Shri Anand Mohan, CIT ORDER PER RAJESH KUMAR, A.M: These appeals filed by the assessee are against the consolidated order of CIT(A)-37, Mumbai, dated 11.06.2012 for all the above assessment years. Since all these appeals relate to the same assessee and the issue involved in some appeals is of common nature and therefore these appeals are heard together and are being disposed of by the consolidated order for the sake of convenience and brevity. We shall take up the ITA No.5565/Mum/2012 for A.Y. 2005-06. Assessee has raised following grounds: 1. The Ld. CIT (Appeals) erred in confirming the addition made by Ld.A.C.I.T. on account of Deemed dividend U/s 2(22)(e) of ₹ 46,67,500/-. 2. The Ld. CIT (Appeals) erred in treating the Share Premium Account as part of accumulated profit and further erred in treating the advances received by the Appellant as Deemed dividend. 3. The Ld. CIT(Appeals) erred in confirming the addition made by Ld. A.C.I.T. on account of Deemed dividend even when the company advanci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The ld. CIT(A) confirmed the addition by holding as under: 4.4.9 I had called for the details of payment made by THPL to Encore and find that the same was given in piece meal from 1.11.2004 to 31.3.2005 of a sum amounting to ₹ 1,69,41,108/-. I had also called for the details of allotment of shares and find that the same was allotted as on 27.11.2004 as per form No.2 filed under the Companies Act, 1956 dt.29.11.2004 but registered in ROC on 13.12.2004. As held earlier, the profits of the company accrue on a day to day basis and onus was on the appellant to adduce evidence that it had no other day to day profits during the year and hence cumulative loss at the end of the year cannot justify the claim that the appellant did not have any profits when the loans were being advanced by THPL to EHPL. 4.4.10 In view of the above facts and judicial analysis, I am of the considered opinion that provisions of sec.2(22)(e) apply on all fours to the case of the appellant and hence, no fault can be found with the action of the Ld. A.O. Accordingly, this ground is dismissed. 5. Ld. A.R. submitted before us that the basis on which the addition of ₹ 46,67,500/- on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt with a debit balance of ₹ 14,27,174/- in the balance sheet. Under the head Reserves and Surplus, the assessee is showing share application money at ₹ 93,35,000/-. Amount representing share premium cannot form part of accumulated profit. It is an undisputed fact that the Reserve and surplus consists of only share premium. It is a trite that share premium amount cannot be used for distribution of dividend as per the interpretation of Sec. 78 of Companies Act. When there is a statutory bar on the share premium account being distributed as dividend, the deeming provision of Sec. 2(22)(e) cannot apply. It would be pertinent to note here that not only there is a prohibition on the distribution of the share premium account as dividend under the Companies Act, the same is obliged to be treated as part of the share capital of the company in the light of the provisions of Sec. 78(1) of the Companies Act. A perusal of the provisions of Sec. 2(22)(e) would suggest that it refers to accumulated profit whether capitalized or not . Therefore it is only the distribution of the accumulated profits which are deemed to be dividend in the hands of the shareholder. Thus, the share prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vs. DCIT. In view of the ratio laid down in the above decisions, we are of the considered view that the addition made is not based on the incriminating material during the search and the assessment which is already attained finality cannot be disturbed. The additional ground also decided in favour of assessee. ITA No.5566/Mum/2012 for A.Y. 2008-09 7. In A.Y. 2008-09 assessee has raised following grounds: 1. The Ld. CIT (Appeals) erred in confirming the addition made by Ld. A.C.I.T. on account of disallowance of ₹ 13,97,843/- u/s.14A r.w.Rule 8D. 2. The Ld. CIT (Appeals) erred in holding that expenses attributed towards earning exempt income even when there were no nexus. 3. The Ld. CIT(Appeals) erred in considering the facts that the major investments were made for acquiring strategic business stake. 7.1 The common issue raised in all the grounds of appeal is with regard to confirming the addition by CIT(A) of ₹ 13,97,843/- u/s.14A r.w.Rule 8D by holding that the expenses related to exempt income by ignoring the fact that the major investment were of strategic nature. 8. The facts of the case are that the assessee s principal busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Twinkle Enviro Tech Ltd. vs. DCIT, wherein it has been held that no disallowance is required to be made in the case of investment which are of strategic nature. The para 10 11 of the said order is reproduced below: 10. We have considered rival contentions and found that the AO has computed disallowance as per Rule 8D by treating entire investment made by the assessee without excluding strategic investment made in the group companies, it was contended by Id. AR that the investment was made as strategic investment for the purpose of business only, therefore, the investment made in the group concerns which is ₹ 11.30 crores in the A.Y.2009-10, ₹ 26.44 crores for A.Y.2008-09 and ₹ 11.30 crores in A.Y.2010-11, respectively, may be excluded. Ld AR also submitted that the Tribunal is taking consistent view to the effect that investment made for strategic purpose in the group concerns are not meant for earning dividend income, therefore, the same are required to excluded from total investment while computing disallowance u/s.14A. Reliance was also placed on the following decisions:- i) M/s Smart Chip Ltd. (ITA Nos.1923, 5196, 5367/Mum/2012, order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce under rule 3D is restored back to the file of AO with a direction to recompute the same by excluding strategic investment made .in the group concerns which is ₹ 11.30 crores in the A.Y.2009-10, ₹ 26.44 crores for A.Y.2008-09 and ₹ 11.30 crores in A.Y.2010-11, respectively. We direct accordingly. The case of the assessee is fully covered by the above decision and we therefore respectfully following the order passed by the co-ordinate Bench in the said ITA, restore back to the file of A.O. the issue of disallowance u/s.14A r.w.Rule8D of the Act with the direction to re-compute the same by excluding strategic investment made in the group concern after allowing a reasonable opportunity of hearing to the assessee. The A.O. is directed accordingly. The appeal of the assessee is partly allowed for statistical purposes. ITA No.5567 5568/Mum/2012 for A.Y. 2009-10 2010-11 12. The issue involved in these appeals is identical to one as decided by us in ITA No.5566/Mum/2012 for A.Y. 2008-09 and therefore, facts being same, our decision in the ITA No.5566/Mum/2012 shall apply to these appeals, as well. Accordingly, the issue is restored back to the file o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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