TMI Blog2012 (2) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... Mfg. Co.Ltd. vs DCIT, which had direct support of the judgment dt. 6.7.2010 of the Supreme Court in M/s Walfort Share and Stock Brokers P.Ltd. yet declined to follow the same and instead chose to confirm the disallowance by adopting an adhoc percentage i.e. 10% of the dividend income That the order of the CIT(A) being in derogation to the rule laid down by the Apex Court is not sustainable. 3. That on the facts and circumstances of the case and in law, the CIT(A) has erred in rejecting the contention of the appellant that no interest was payable u/s 234B/234C on short payment of advance tax due to difference of ₹ 60,01,947/- in the valuation of contract-jobs-in progress between the appellant and the revenue. 4. That the order passed is bad in law and void ab-initio. 5. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. 2. The grounds of the department read as under. 1. The order of ld.CIT(A) is wrong, perverse, illegal and against the provisions of law, liable to be set aside. 2. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of ₹ 71,55, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of which it was contended that the conditions laid down in clause (a), (b) (c ) of S.94(7) have to be cumulatively fulfilled. Accordingly out of the total loss of ₹ 72,04,884/- it was stated based on statement filed before the CIT(A) that loss only to the extent of ₹ 18,47,960 could be disallowed u/s 94(7) because in respect of remaining loss of ₹ 53,56,924/- the three conditions were not cumulatively fulfilled. The statement filed before the CIT(A) was included as Annexure A to the impugned order. 3.4. It was further argued that even the loss of ₹ 18,47,960/- could not be disallowed. Reliance was placed on the memo explaining the provisions in the Finance Bill, 2001 whereby new sub-section (7) was inserted in S.94 w.e.f. 1.4.2002 (248 ITR ((Statute) 183)). Based on the same it was argued that insertion was introduced as a measure to curb creation of short term losses by certain transactions in securities and units. The object was to prevent flowing of unintended benefits to the tax payers who enter into purchase and resale of securities with the intention of creating short term losses and set-off those losses against other incomes. It was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within three months prior to the record date is not fulfilled and thereby all the three conditions as per section 94(7) were not fulfilled. The case of the appellant thus is that loss to the extent of Rs. (37,48,620+16,08,304) i.e. of ₹ 53,56,924/- could not be disallowed u/s 94(7). I have looked into the details furnished. The contention of the appellant with regard to the allowability of loss to the extent of ₹ 53,56,924/- is principally acceptable. Accordingly provisions of section 94(7) would not apply to this loss. As a result the addition to the extent of ₹ 53,56,924/- shall be deleted, subject however to the verification of appellants claim as per details filed by him during the appellate proceedings. In this regard the chart of the appellant at Annexure A to this order may be examined. As regards the balance loss of ₹ 18,47,960/- the appellant s contention is not acceptable. It is admitted that in such transactions all the three conditions as above are fulfilled. The provision of section 94(7) has been enacted as a measure to curb tax avoidance via dividend and bonus stripping and therefore are required to be strictly and objectively implem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact that he was of the view that there have to be administrative as well as financial expenses for earning dividend. He further held that no evidence for the claim that no expenses had been earned for earning dividend was filed. Taking note of the fact that total turnover of assessee was ₹ 40,76,27,000/-. Considering the personal expenses, administrative expenses and financial expenses which necessarily would have been incurred for earning of the income whether it is exempt or allowable he was of the view that proportionate disallowance has to be made. He further observed that the net profit of assessee as per P L account is ₹ 2,55,51,000/- which includes dividend and other exempt income to the extent of ₹ 1,26,13,588/- thus it was concluded that it clearly indicated that the major component of the income shown by the assessee is exempted income i.e. dividend from other companies as such assessee s arguments were held to be not acceptable and the expenses were allocated as under. i. Personal expenses 69054000 ii. Admn. Expenses 9262000 iii. Financial exp. 4266000 Total expenses to be allocated : ₹ 8,25,82,000/- The total turn over as pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable on record and no cogent reasons have been given as to why this cannot be believed. Reliance was also placed upon the judgement of Jurisdictional High Court delivered in ITA 687/2009 on 18.11.2011 in the case of Maxopp Investments P.Ltd. vs CIT, New Delhi on the basis of which it was his submission that the issue may go back to the A.O. and the directions of Hon ble High Court rendered in the said case i.e. Maxopp Investments Ltd. may be applied. 4.4. Ld.D.R. had no objection if the issue is restored back. 4.5. In the light of the afore mentioned peculiar facts and circumstances the assessment order and the impugned order on the issue are set aside and the issue is restored back to the file of A.O. with the direction to decide the issue afresh considering the facts, circumstances available on record and the principles laid down by the Jurisdictional High Court in the case of Maxopp Investments Ltd. The A.O. shall pass a speaking order in accordance with law and after giving the assessee a reasonable opportunity of being heard. In the result ground no.2, 2.1 of the assessee and ground no.3 of the department are allowed for statistical purposes. 5. Qua Ground no.3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the persons to whom it was shown that commission had been paid. From the notices so sent 7 returned unserved with the remark no such person . The names of the parties and how much commission was claimed to have been paid details etc. are set out in unnumbered page 5 of the A.O. The Assessing Officer required the assessee s representative to explain the same. In response it was stated that the payments have been made by way of account payee cheques. However since no confirmation from the said persons were filed to the extent of ₹ 2,68,000/- was disallowed by the A.O. 8.2. Apart from that in response to notices issued u/s 133(6) of the Income Tax Act, 1961 which were served confirmation from 11 parties mentioned in para 6.2 were not received by the A.O. As such the assessee was required to substantiate its claim of commission payment. Similarly explanation namely payment having been made by account payee cheque was made here also. However confirmation from the said parties was not filed. In the circumstances the A.O. was of the view that the assessee has not beenb able to furnish evidence to substantiate the claim of payment of commission. Accordingly disallowance was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es rendered. 8.4. Considering the rival stands the CIT(A) came to the following conclusion. 6.4. I have considered the submissions made on behalf of the appellant and looked into the additional evidence. In so far as the admission of additional evidence is concerned, I agree that the appellant was not given adequate opportunity. All the commission agents were outside parties and it was not possible to collect the information in a short period of few days. The additional evidence furnished by the appellant is, therefore, admitted. The additional evidence furnished shows that the identity of the commission agents had been proved by either filing the affidavits or furnishing PAN no./driving licence/election card/passport/ration card etc. The objection of the A.O. that evidence of services has not been furnished, is incorrect. In the affidavits, it has been mentioned that the commission was paid for services like procurement of order of refrigeration machinery and chasing the recovery of payments. The Branch Managers of the appellant company have also filed affidavits stating that the services were performed in respect of respective jobs such as procurements of orders pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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