TMI Blog2018 (4) TMI 1970X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision making of that company and fetch construction contract and also to gain capital appreciation in value of shares by selling the same when execution risk is overcome. Therefore even presuming that the same was out of borrowed funds, it is clearly manifested that there has been no dividend but the income from acquiring contract was offered to tax. Also capital gains on sale of shares were offered to tax. Therefore in the peculiar facts and circumstances, it is demonstrated by the assessee by actually offering the income to taxation then it cannot be said that shares were intended to earn income which is tax exempt.If the investment has a potential to earn non exempt income 14A cannot be invoked. The visit to 14A (2) or (3) is permissible only when the claim of the assessee has been held to be incorrect by showing cogent reason. Satisfaction or dissatisfaction is to be supported by valid reasons From the order of the Ld. CIT(A), it is evident that the Ld. CIT(A) has examined the factual aspects of the case. The Revenue has not rebutted the finding by placing any contrary material on record. Therefore, we do not see any reason to interfere with the orders of the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the assessment year 2008-09 was revised by the Learned Commissioner of Income-tax vide order dated 22nd March, 2017. This order of the Learned Commissioner of Income-tax passed u/s 263 was challenged before the Coordinate Bench of this Tribunal in I.T.A.No. 301/Ind/2017 and the order passed u/s 263 was quashed. The Ld. Counsel for the assessee, therefore, submitted that this issue being identical is covered in favour of the assessee in both the appeals. 7. On the contrary, the Ld. Departmental Representative opposed the submission of the Ld. Counsel for the assessee. 8. We have considered the facts, rival submissions and perused the material available on record. We find that the Ld. CIT(A) has given finding of facts from para 3.8 to 3.13, which are reproduced as under :- 3.8 Based on the similar facts the Hon'ble CIT (Appeal)-II in the assessment year 2009-10 vide appeal No. IT- 784/1-12/9 dated 30.04.2015 have allowed the wrong disallowance of ₹ 1,80,71,675/- made u/s 14A of the Act with the finding that appellant s had not used the borrowed funds for making subject investments and it was directed to delete the above addition. 3.9 The appellant fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A . The Hon ble High Court also considered the findings made in case of CIT vs. Hero Cycles Ltd. (2010) 233 CTR (P H) 74 reproduced here. It is clear that the expenditure on interest was set off against the income from interest and the investments in the share and funds were out of the dividend proceeds. In view of this finding of fact, disallowance under s.14A was not sustainable. Whether, in a given situation, any expenditure was incurred which was to be disallowed, is a question of fact. The contention of the Revenue that directly or indirectly some expenditure is always incurred which must be disallowed under s. 14A and the impact of expenditure so incurred cannot be allowed to be set off against the business income which may nullify the mandate of s. 14A, cannot be accepted. Disallowance under s.14A requires finding of incurring of expenditure; where it is found that for earning exempted income no expenditure has been incurred, disallowance under s.14A cannot stand. In the present case finding on this aspect, against the Revenue, is not shown to be perverse. Consequently, disallowance is not permissible. We have taken this view earlier also in IT Appeal No. 504 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc., cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax. What is also noticeable is that the entire or whole expenditure has been disallowed as if there was no expenditure incurred by the assessee for conducting business. The CIT (A) has positively held that the business was set up and had commenced. The said finding is accepted. The assessee, therefore, had to incur expenditure for the business in the form of investment in shares of cement companies and to further expand and consolidate their business. Expenditure had to be also incurred to protect the investment mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in case of S.A. Builder Ltd. Vs CIT . g. There is no doubt that SPV was formed for the each BOT projects taken by the group. The appellant company is also in the business of infrastructure development and road construction. The testimony of its engagement in the BOT projects of Road is that NHAI being the apex body in infrastructure development being satisfied allotted to it the contract. Had it not been in the business of road construction, the NHAI would not have prequalified it for the tender. Therefore it is beyond dispute that appellant is in business of construction. The Company also enjoys deduction u/s 80IA which further amplify its business character being engaged in road construction and infrastructure development projects business. If there is a condition being imposed by the NHAI to form a separate company in view of the reason that JV is not a person in the eye of the law unlike a company or partnership and therefore if an assessee form a separate company and hold a controlling stake (nearly 50%) in the same together with another shareholder, it cannot be said that this was not the business of the Company. The pith and substance of the amount being given is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts that no interest bearing fund were used for investment in shares/mutual fund and internal accrual were sufficient for investment. 3.12 Thereafter the appellant submitted and I reproduced the same for clarity:- that if cherubs for investment in shares are given from CC/OD revolving facility account which is in the nature of a revolving loan account, it cannot be said that loan fund was used. Business receipts are credited to the same and expenditure is debited in this account concurrently. It is submitted that in a combined account one to one correspondence of every outgo with the inflow cannot be established. In a chest various rupee are being dumped and while payment is made, there can be no distinction as to which rupee notes are used whether given by customer ram, given by bank etc. Once it is being mixed in a common hotchpotch there is no mechanism to distinguish. Therefore it is humbly prayed that disallowance of interest expenditure made by the Ld. A.O. invoking Section 14A read with rule 8D be deleted by appreciation of following factual and legal position; a. There are ample interest free funds available for investment in shares. A table showing ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
