Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2018 (3) TMI 375

the loan has been borrowed from Prakash Electronics System Ltd in the earlier year and the same has been converted into equity during the year under appeal. Hence the genuinity of the said transactions cannot be questioned by the CIT-A. The said transaction cannot be considered to be in violation of provisions of section 269T of the Act. - We hold that the assessee had properly explained the entire gamut of transactions together with its end use i.e for investment in co-ownership property. It was a conscious business decision taken by the assessee to use the amounts raised through share capital for investing in co-ownership property for the purpose of its business and the businessman (i.e. assessee) cannot be compelled by the revenue to conduct its business as per the whims and fancies of the revenue. - Hence the observation of the ld CIT-A that the assessee could have utilized the amounts raised through share capital from other sources to repay the loan to Prakash Electronics System Ltd would only tantamount to stepping into the shoes of the businessman and we hold that the said observation is not warranted, more so in the penalty proceedings u/s 271E of the Act. The busi .....

X X X X X X X

Full Text of the Document

X X X X X X X

in the assessee company. In other words, the loan was converted into equity by way of book entry without any physical outflow of funds from the side of the assessee. The loan received from Shri Rajesh Bhutoria was squared up by sale of shares of M/s Hiton Indus Engg. Co. Ltd. The loan received from Shri G.P.Bhutoria was repaid in cash and is within the limit prescribed u/s 269T of the Act. 5. The assessee pleaded that the term repayment mentioned in section 269T of the Act refers only to repayment in the form of money and does not apply to repayment in kind or through book adjustments. The ld AO observed that on examination of the balance sheet of the assessee company as on 31.3.2008, that the assessee has claimed loss in operation. It has a small turnover of ₹ 77,210/-. The source of fund with the assessee is share capital of ₹ 7.25 lacs, share premium of ₹ 5.40 lacs and advance of ₹ 4.65 lacs. The entire fund has been invested for acquisition of co-ownership property amounting to ₹ 15.68 lacs. The ld AO further observed that the co-ownership property has been mortgaged with Haryana Financial Corporation, Chandigarh as the additional security against .....

X X X X X X X

Full Text of the Document

X X X X X X X

her submitted that the conclusion of the ld AO in his order that the assessee s plea to repay the loan under compulsion to square up the outstanding amount by conversion into equity is factually incorrect, is based on his assumption which would be evident from the finding as mentioned in his order where he has stated that the assessee could have utilized certain amount as raised to repay back the loan, but instead the shares were allotted. Such conclusion of the ld. AO is nothing but an assumption and his conjectures. The reason for repayment of loan by converting to shares, was explained and submitted by documentary evidences. The assessee placed reliance on the following decisions :- a) Hon ble Bombay High Court in the case of CIT vs Triumph International Finance (I) Ltd reported in 345 ITR 270 (Bom) ; and b) Hon ble Madras High Court in the case of CIT vs Lakshmi Trust Co.vide order dated 18.12.2006 7. The ld CITA held that the transactions of conversion of loan into equity in the sum of ₹ 6,00,000/- in the instant case are not genuine and accordingly upheld the levy of penalty u/s 271 E of the Act by reiterating the same findings of the ld AO. However, he deleted the levy .....

X X X X X X X

Full Text of the Document

X X X X X X X

of raising of share capital with premium during the year, receipt of advance against property and the utilization thereon for investment in co-ownership property was duly explained by the assessee before the ld AO at the time of scrutiny assessment of quantum proceedings. The assessee had duly placed all the relevant data in this regard before the ld AO. Hence the bonafide intention of the assessee in placing all facts on record cannot be doubted with at all in the instant case. The transaction with regard to increase in share capital has been examined by the ld AO in the assessment proceedings at the time of disallowance of fees paid for increase in authorized capital. After this examination, the ld AO in his wisdom had not proceeded to make any addition towards the share capital. Hence it could be safely concluded that the transactions of receipt of share capital and share premium has been accepted as bonafide and genuine by the ld AO in the assessment. While this is so, then how can the very same transaction could be treated as ingenuine and not bonafide for the purpose of levying penalty u/s 271E of the Act alone. Even assuming that the receipt of share capital with premium of .....

X X X X X X X

Full Text of the Document

X X X X X X X

uity during the year under appeal. Hence the genuinity of the said transactions cannot be questioned by the ld CITA. The said transaction cannot be considered to be in violation of provisions of section 269T of the Act. We hold that the assessee had properly explained the entire gamut of transactions together with its end use i.e for investment in co-ownership property. It was a conscious business decision taken by the assessee to use the amounts raised through share capital for investing in co-ownership property for the purpose of its business and the businessman (i.e. assessee) cannot be compelled by the revenue to conduct its business as per the whims and fancies of the revenue. It is well settled that the businessman knows his interest best and the point of commercial expediency had to be viewed from the view point of the assessee and not from the view point of the revenue. Hence the observation of the ld CITA that the assessee could have utilized the amounts raised through share capital from other sources to repay the loan to Prakash Electronics System Ltd would only tantamount to stepping into the shoes of the businessman and we hold that the said observation is not warranted .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||