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03-07-2019, Adventure Market ing, Section 69, 69B, 28(iv), Tribunal Mumbai

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3 months 1 week ago #9973 by amit
Section - 69, 69B, 28(iv), 56(2)(viia), 2(18)
Order Date - 03-07-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - DCIT
Respondent - Adventure Market ing Pvt . Ltd.
Justice - C.N. PRASAD, JM & MANOJ KUMAR AGGARWAL, AM
Citation - 719Taxpundit62
Appeal No. - I .T.A. No.6091/Mum/2017
Asstt. Year - 2013-14

Order

PER : Manoj Kumar Aggarwal

1. Aforesaid cross-appeals for Assessment Year [AY] 2013-14 contest the order Ld. Commissioner of Income-Tax (Appeals)-2, Mumbai [CIT(A)], Appeal No. CIT(A)-2/IT/247/2016-17 dated 14/07/2017.

The grounds raised by the assessee reads as under: -

The Commissioner of Income Tax (Appeals) -3, Mumbai [hereinafter referred to as CIT(A)] erred in directing the AO to not allow set off of losses under the head ‘Income from Other Source’ against the income under the head ‘Income from business & profession’.

The appellant submits that the Ld. CIT(A) once having accepted the claim of the appellant for deduction u/s 57(iii), the resultant losses under the head ‘Income from Other Sources’ are eligible for set off against the ‘Income from business & profession’; hence the AO shall be directed to allow the set off of losses under ‘Income from Other Sources’ against income under the head ‘Income from business & profession’.

The grounds raised by the revenue reads as under: -

1. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was ustified in deleting the addition of Rs. 23.17 crore made by the AO on account of acquisition of quoted shares through off-market, below the market price?

2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was justified in deleting the addition of Rs. 23.17 crore made by the AO on account of acquisition of quoted shares through off-market, below the market price though the same was resulted in accrual of benefit to the assessee taxable u/s. 28(iv) of the I. T. Act, 1961?

3. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was justified in deleting disallowance made by the AO u/s. 14A of the Act read with Rule 8D of the Income-tax Rules in relation to investment made by the assessee in listed equity shares of Network 18 Media & Investments Ltd., by ignoring the Board's circular No. 5 of 2014 dated 11.02.2014? Revenue’s Appeal, ITA No. 6091/Mum/2017

2.1 Facts leading to the same are that the assessee being resident corporate assessee stated to be engaged in manufacturing of ready-mix concrete was assessed for impugned AY u/s 143(3) on 18/03/2016 wherein the income of the assessee was determined at Rs.2611.94 Lacs after certain disallowances as against Nil return filed by the assessee on 16/09/2013. The following quantum additions are the subject matter of revenue’s appeal before us: -

2.2 Facts qua the same are that during assessment proceedings, it transpired that the assessee acquired 12,75,27 787 shares of an entity namely M/s Network 18 Media & Investment Ltd. for a sum of Rs.361.88 Crores. Out of this, the shares numbering 82,78,180 were purchased in off-market transaction from different shareholders @Rs.5/- per share whereas 11,92,49,607 shares were acquired by the assessee in the right issue @Rs.30/- per share. It was observed that the payment of shares acquired in off-market transaction was made after more than one year. whereas the period of off market transaction and right-issue was less
than 3 months.

2.3 In the above background, Ld. AO show-caused the assessee as to why the investment made in 82,78,180 shares stated to be made @Rs.5/- per shares, was not to be considered @Rs.30/- per share and the differential amount of Rs.25/- be brought to tax in assessee’s handas undisclosed investments. In defense, the assessee submitted that all the investments were recorded in books of account and the provisions of Section 69 were not applicable. The assessee also filed declaration from the sellers that the shares were sold at Rs.5/- per share. However, rejecting the same, Ld. AO opined that investments were under-valued since the market price of the share on the date of transfer was much higher and therefore, an amount of Rs.28/- per share [being the difference between market price per share i.e. Rs.33/- & price at which the shares were acquired i.e. Rs.5/- per share] was to be added as undisclosed income u/s 69B. The same worked out to be Rs.23.17 Crores.

2.4 The second addition i.e. disallowance u/s 14A stem from the fact that it was noted that the assessee debited ROC fees of Rs.25,000/- each on 14/09/2012 & 06/11/2012. The said sums were stated to be paid to SEBI for submission of post issue report u/r 10 of Takeover Code for investment in Right issue of TV18 Broadcast Ltd. and Network18 Media & Investment Ltd. Since the assessee had investments in its Balance Sheet, the same called for disallowance u/s 14A. The assessee defended the same by submitting that no exempt income was received during the year and no expenditure was incurred towards the investment. However, not convinced, Ld. AO, applying Rule 8D, computed aggregate disallowance of Rs.96.18 Lacs, which comprised-off of aforesaid direct expenditure of Rs 50,000/- u/r 8D(2)(i) and indirect expenditure disallowance u/r 8D(2)(iii) for Rs.95.68 Lacs, being 0.5% of average investment.

3.1 Aggrieved, the assessee agitated the same before Ld. CIT(A) vide impugned order dated 14/07/2017. Regarding addition u/s 69B, it was submitted that the additions were made on mere presumption, surmises and conjectures. The attention was drawn to the fact that 82,78,180 shares were purchased from 4 parties which were the assessee’s promoters or promoters group entities. It was submitted that these

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