M/s Bhoruka Investment Ltd., Kolkata v. DCIT, CIR-10(1), KOLKATA, Kolkata

ITA 129/KOL/2016 | 2012-2013
Pronouncement Date: 29-11-2017 | Result: Allowed

Appeal Details

RSA Number 12923514 RSA 2016
Assessee PAN AABCB9008R
Bench Kolkata
Appeal Number ITA 129/KOL/2016
Duration Of Justice 1 year(s) 10 month(s)
Appellant M/s Bhoruka Investment Ltd., Kolkata
Respondent DCIT, CIR-10(1), KOLKATA, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-11-2017
Last Hearing Date 25-09-2017
First Hearing Date 25-09-2017
Assessment Year 2012-2013
Appeal Filed On 29-01-2016
Judgment Text
ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN JM & DR.ARJUN LAL SAINI AM] I.T.A NO.129/KOL/2016 ASSESSMENT YEAR : 2012-13 M/S. BHORUKA INVESTMENT LTD. . -VS.- D.C.I .T. CIRCLE-10 (1) KOLKATA KOLKATA [PAN : AABCB 9008 R] (APPELLANT) (RESPONDENT) I.T.A NO.329/KOL/2016 ASSESSMENT YEAR : 2012-13 D.C.I.T. CIRCLE-10 (1) -VS- M/S. BHORUKA INVES TMENT LTD. KOLKATA KOLKATA [PAN : AABCB 9008 R] (APPELLANT) (RESPONDENT) FOR THE ASSESSEE : SHRI N.K.PODDAR SR.ADVOCA TE FOR THE RESPONDENT : SHRI SOUMYAJIT DASG UPTA ADDL. CIT SR.DR DATE OF HEARING : 22.11.2017. DATE OF PRONOUNCEMENT : 29.1.2017. ORDER PER N.V.VASUDEVAN JM ITA NO.129/KOL/2016 IS AN APPEAL BY THE ASSESSEE WH ILE ITA NO.329/KOL/2016 IS AN APPEAL BY THE REVENUE. BOTH THESE APPEALS ARE DIRECTED AGAINST THE ORDER DATED.07.12.2015 OF. C.I.T.(A)-5 KOLKAT A RELATING TO A.Y. 2012-13. 2. GROUND NOS. 1 TO 6 RAISED BY THE ASSESSEE IN IT S APPEAL AND GROUND NO.1 RAISED BY THE REVENUE IN ITS APPEAL CAN BE CONVENIENTLY TAKEN UP TOGETHER. THESE GROUNDS RELATE TO DISALLOWANCE U/S 14A OF THE INCOME TAX ACT 1961 (ACT). THEY READ AS FOLLOWS : GROUND NO.1 TO 6 IN ASSESSEES APPEAL: 1.THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN SUSTAINING A DISALLOWANCE OF RS. 4 32 847/- OUT OF A TOTAL DISAL LOWANCE OF RS.43 79 995 MADE IN THE ASSESSMENT UNDER SECTION 14A OF THE INCOME T AX ACT READ WITH RULE 8D. ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 2 THE SUSTAINING OF DISALLOWANCE OF RS. 4 32 847/- IS WITHOUT ANY BASIS AND ON THE FACTS AND IN THE CIRCUMSTANCES THE ENTIRE DISALLOWA NCE MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 2. THAT THE CONSISTENT CASE OF THE APPELLANT SINCE BEGINNING IS THAT NO BORROWED FUNDS HAVE BEEN USED FOR ACQUIRING ANY INVESTMENT I N SHARES AND ALL THE INVESTMENTS HAVE BEEN ACQUIRED OUT OF OWN FUNDS AND ALSO THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING ANY DIVIDEND INCOME O R ANY OTHER EXEMPT INCOME NOT INCLUDIBLE IN THE TOTAL INCOME AND THEREFORE TH E QUESTION OF ANY DISALLOWANCE U/S 14A DOES NOT ARISE. 3. THAT THE ASSESSING OFFICER ERRED IN STRAIGHTWAY PROCEEDING TO APPLY RULE 8D AS IF THE DISALLOWANCE UNDER RULE 8D IS AUTOMATIC. EIT HER ANY INTEREST NOR ANY OTHER EXPENDITURE HAS BEEN INCURRED BY APPELLANT IN RELAT ION TO THE EXEMPT INCOME AND THE ASSESSING OFFICER ERRED IN ASSUMING OTHERWISE. 4. THAT THERE IS NO PROXIMATE RELATIONSHIP/NEXUS BE TWEEN THE EXPENDITURE DISALLOWED AND THE EXEMPT INCOME JUSTIFYING ANY DIS ALLOWANCE U/S 14A READ WITH RULE 8D AND THE ENTIRE DISALLOWANCE SUSTAINED BY TH E COMMISSIONER OF INCOME TAX (APPEALS) SHOULD BE DELETED. 5. THAT IN ANY EVENT THE SUSTAINING OF DISALLOWANCE OF RS. 4 32 847/- IS EXCESSIVE. 6. THAT DEMAT CHARGES OF RS 3266/- HAS ALREADY BEEN SEPARATELY ADDED IN THE RETURN OF INCOME FILED AND THEREFORE THE SAME DISAL LOWANCE ONCE AGAIN U/S 14A IS NOT JUSTIFIED. BY THE REVENUE 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW IN RESTRICTED THE ADDITION TO RS. 4 32 847/- INSTEAD O F RS. 43 79 995/- DISALLOWANCE U/S. 14A MADE BY THE AO ON A WRONG APPRECIATION OF FACTS IGNORING THE PROVISIONS OF SECTION 14A OF THE IT ACT 1961 READ WITH RULE 8D AND OVER RULE A PLETHORA OF THE JUDICIAL PRONOUNCEMENT LIKE GODREJ & BOYCE MFG. CO. LTD. VS. DCIT RANGE 10(2) MUMBAI REPORTED [2010] 194 TAXMA N 203 (BOMBAY) / [2010] 328 ITR 81 [BOMBAY] / [2010] 234 CTR 19 BOMB AY 'A' BENCH OF CHENNAI ITAT IN THE CASE OF SHIVA INDUSTRIES & HOLI DAYS PVT. LTD. VS. ACIT (IT APPEAL NO. 1917 OF 2011) AND 'K' BENCH OF MUMBAI IT AT IN THE CASE OF STREAM INTERNATIONAL SERVICES PVT. LTD. VS. ACIT (IT APPEA L NO. 8997 OF 2010) AND THE CIRCULAR ISSUED BY CBDT VIDE NO. 5 OF 2014. 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEALING IN SHARES. THE ASSESSEE EARNED DIVIDEND INC OME OF RS.22 16 243/- AND THE SAME WAS CLAIMED AS EXEMPT U/ S 10(34) OF THE INCOM E TAX ACT 1961 (ACT). SIMILARLY ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 3 THE ASSESSEE EARNED CAPITAL GAIN ON SALE OF SHARES AT RS60 84 416/- WHICH WAS CLAIMED AS EXEMPT U/S 10(38) OF THE ACT. IN TERMS OF SECTIO N 14A OF THE ACT THE ASSESSEE WAS OBLIGED TO DISALLOW EXPENSES WHICH WAS DEBITED IN T HE PROFIT AND LOSS ACCOUNT AND CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BU SINESS AND FROM THE TOTAL INCOME. THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT. THE AO DISALLOWED A SUM OF RS.43 79 995/- WHICH WAS WORKED OUT BY THE AO AS FOLLOWS :- 2.5. HENCE IN VIEW OF ABOVE SUBMISSION AND CONFES SION ON THE PART OF THE ASSESSEE THE ALLOWANCE U/S.14A WITH REFERENCE TO TH E CLAUSES - (I) (II) AND (III) TO SUB-RULE (2) OF RULE-8D IS WARRANTED IN THE CASE OF ASSESSEE AND THE DISALLOWABLE AMOUNT IS WORKED OUT ON THE ON THE BASIS OF BALANCE SHEETS DATED 31-03-2011 AND 31-03-2012 IN FOLLOWING MANNER: (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME = RS.3 266/ - [DEMAT CHARGES O F RS.3 266/-] (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED E XPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTR IBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA NAMELY :- A X B/C = 75 34 709 X 7 10 33 364/ 16 06 38 299 = RS.33 31 806/- A = RS.75 34 709/- (IN HIS CASE TOTAL INTEREST ON LOAN PAID RS.92 17 120/- - INTEREST RECEIVED ON LOAN & ADVANCE BEING NBFC OF R S.31 12 422/-) = AMOUNT OF EXPENDITURE BY WAY OF INTEREST INCURRED DURING THE PREVIOUS YEAR BUT NOT SEPARABLE; B= RS.7 10 33 364/- - (OPENING VALUE OF INVESTMENT RS.7 17 70 153/- AND CLOSING VALUE OF INVESTMENT RS.7 02 96 574/- IN THI S CASE) = THE AVERAGE OF VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE AS SESSEE ON FIRST DAY AND LAST DAY OF THE PREVIOUS YEAR. C= RS.16 06 38 299/- (OPENING VALUE OF ASSETS RS.15 79 85 669/- AND CLOSING VALUE OF ASSETS RS.16 32 90 929/- IN THIS CASE) = T HE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE ON THE FIRST DAY AND LAST DAY OF THE PREVIOUS YEAR. (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE AS SESSEE ON THE FIRST DAY AND THE ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 4 LAST DAY OF THE PREVIOUS YEAR. IN THIS CASE % OR 0.5% OF RS.7 10 33 364/- I.E. RS.3 55 167/-. 2.6. THUS THE DISALLOWABLE EXPENSES IS DETERMINED AT RS.43 79 995/- (RS.6 93 022/- + RS.33 31 806/- + RS.3 55 167/-) TO ADD BACK WITH THE TOTAL INCOME OF THE ASSESSEE. SIMULTANEOUSLY THE SAID DISALLOWANCE IS ALSO A SUBJECT MATTER OF ADDITION BY VIRTUE OF CLAUSE-(F) UNDER EX PLANATION [1] TO THE SECTION 115JB FOR DETERMINING THE MAT AMOUNT PAYABLE BY THE ASSESSEE. 4. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT WITH REGARD TO DISALLOWANCE OF INTEREST EXPENSES OF RS.33 31 806/- UNDER RULE 8D(2 )(II) OF INCOME TAX RULES 1962 (RULES) THE ASSESSEE HAD OWN INTEREST FREE FUNDS A ND THEREFORE NO PART OF THE INTEREST EXPENSES WHICH ARE DEBITED IN THE PROFIT AND LOSS A CCOUNT CAN SAID TO HAVE BEEN USED FOR THE PURPOSE OF MAKING INVESTMENTS WHICH YIELDED EXEMPT INCOME. THE ASSESSEE THEREFORE PLEADED THAT NO DISALLOWANCE OF INTEREST EXPENSES SHOULD BE MADE. ON THE ABOVE PLEA THE ASSESSEE GAVE THE FOLLOWING COMPUTAT ION OF OWN FUNDS BASED ON THE BALANCE SHEET FOR THE FINANCIAL YEAR 2007-08 TO 201 1-12. 5. IT CAN BE SEEN FROM THE AFORESAID CHART THAT THE INVESTMENTS DURING THE PREVIOUS YEAR IN SHARES BY THE ASSESSEE WAS A SUM OF RS.7 02 .96 574/- AND NON INTEREST BEARING FUNDS OF THE ASSESSEE WAS RS.10 44 47 811/- WHICH W AS IN EXCESS OF THE INVESTMENT IN SHARES. ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 5 6. THE CIT(A) WAS OF THE VIEW THAT THE AO WAS NOT R IGHT IN COMING TO THE CONCLUSION THAT BORROWED FUNDS OF INTEREST WAS PAID AND WAS UTILISED FOR MAKING INVESTMENTS. HE HOWEVER SUSTAINED ADDITION ON ACCOU NT OF INTEREST EXPENSES TO THE EXTENT THERE WAS A DIFFERENCE BETWEEN THE INTEREST PAID BY THE ASSESSEE WHICH WAS QUANTIFIED BY HIM AT RS.75.35 LAKHS AND INTEREST IN COME EARNED BY THE ASSESSEE WHICH WAS RS.74.60 LAKHS. ADDITION OF RS.33 31 806/- MAD E BY THE AO WAS THEREFORE DIRECTED BY CIT(A) TO BE RESTRICTED TO THE DIFFEREN CE OF INTEREST EXPENSES AND INTEREST INCOME REFERRED TO ABOVE. 7. AS FAR AS DISALLOWANCE OF OTHER EXPENSES IN TER MS OF RULE 8D(2)(III) OF THE RULES IS CONCERNED THE ASSESSEE PLEADED THAT 0.5% OF THE AVERAGE VALUE OF INVESTMENT SHOULD BE WORKED OUT BY TAKING ONLY THE INVESTMENTS WHICH YIELDED TAX FREE EXEMPT INCOME AND NOT THE ENTIRE INVESTMENTS. THE DETAILS OF THE INVESTMENTS WHICH YIELDED TAX FREE DIVIDEND INCOME WAS GIVEN BY THE ASSESSEE AS FOLLOWS :- ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 6 8. ON THE ABOVE SUBMISSION THE CIT(A) WAS OF THE V IEW THAT THE SAME IS NOT ACCEPTABLE AND HE THEREFORE UPHELD THE DISALLOWANCE MADE BY THE AO. 9. THUS THE DISALLOWANCE MADE BY THE AO WAS RESTRI CTED TO THE FOLLOWING SUM BY CIT(A) :- 2.7. AS REGARDS THE AMOUNT OF INTEREST TO BE DISAL LOWED FOR THE PURPOSE OF RULE 8D(2)(II) I RESTRICT THE SAME TO THE NET INTEREST E XPENSE BEING EQUAL TO THE DIFFERENCE OF RS.75 34 709/- AND RS.74 60 295/- BE ING EQUAL TO RS.74 414/- . THUS THE TOTAL DISALLOWANCE UPHELD BY ME AS DETAIL ED ABOVE COMES TO RS.4 32 847/- (RS.3 366 + 74 414 + 3 55 167/-. 10. AGGRIEVED BY THE RELIEF GRANTED BY CIT(A) THE R EVENUE HAS RAISED GROUND NO.1 IN ITS APPEAL. AGGRIEVED BY THE ORDER OF CIT(A) IN NOT DELETING THE DISALLOWANCE OF INTEREST EXPENSES IN FULL AND IN NOT ACCEPTING THE PLEA OF THE ASSESSEE THAT WHILE WORKING THE AVERAGE VALUE OF THE INVESTMENTS FOR TH E PURPOSE OF RULE 8D(2)(III) OF THE RULES ONLY INVESTMENTS WHICH YIELD DIVIDEND INCOME SHOULD BE CONSIDERED AND NOT DELETING THE ADDITION OF RS.3 266/- WHICH WAS THE D EMAT CHARGES WHICH WAS ALREADY SHOWN BY THE ASSESSEE IN ITS COMPUTATION OF INCOME THE ASSESSEE HAS RAISED GROUND NOS. 1 TO 6 BEFORE THE TRIBUNAL. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. CO UNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE CIT( A) BESIDES REFERRING TO A CERTAIN DECIDED CASES. THE LD. DR RELIED ON THE ORDER OF TH E AO. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. AS FAR AS DISALLOWANCE OF RS.3 266/- BEING DEMAT CHARGES IS CONCERNED IT IS C LEAR FROM PAGE-7 OF THE ORDER OF AO WHICH IS THE COMPUTATION OF TOTAL INCOME BY THE AO THAT A SUM OF RS.3 266/- HAS ALREADY BEEN ADDED TO THE PROFIT AS PER PROFIT AND LOSS ACCOUNT. MAKING THE ADDITION OF THE VERY SAME SUM AS DISALLOWANCE U/S 14A OF THE AC T WOULD BE A DOUBLE ADDITION AND THEREFORE THE ADDITION OF RS.3 266/- IS DIRECTED TO BE DELETED. ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 7 13. AS FAR AS DISALLOWANCE OF INTEREST EXPENSES UND ER RULE 8D(2)(II) OF THE RULES IS CONCERNED IT IS CLEAR FROM THE SUMMARISED BALANCE SHEET OF THE ASSESSEE FROM THE FINANCIAL YEARS 2008-09 TO 2011-12 THAT THE ASSESSE E HAD NON-INTEREST BEARING FUNDS SUFFICIENT TO COVER THE INVESTMENTS MADE IN SHARES. IT HAS BEEN HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RELIANCE UT ILITIES AND POWER LTD. (2009) 313 TR 340 (BOM) AND CIT VS HDFC BANK LTD (2014) 49 TAXMANN.COM 335 (BOM) THAT WHERE INTEREST FREE FUNDS AND OVERDRAFT AND LO ANS TAKEN ARE AVAILABLE WITH AN ASSESSEE THEN A PRESUMPTION WOULD ARISE THAT THE I NVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE ASSESSEE IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. THE AFORES AID VIEW HAS BEEN FOLLOWED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRINCIPA L CIT VS RASOI LTD. IN ITAT O.109 OF 2016 IN GA NO.633 OF 2016 JUDGMENT DATED 15.02.2 017. IN VIEW OF THE AFORESAID LEGAL POSITION AND THE VIEW OF THE FACT THAT THE AS SESSEE HAD ENOUGH OWN FUNDS WHICH WAS MORE THAN THE INVESTMENTS WHICH YIELDED TAX FRE E INCOME THERE CAN BE NO DISALLOWANCE OF INTEREST EXPENSES IN TERMS OF RULE 8D(2)(II) OF THE RULE. 14. AS FAR AS RULE 8D(2)(III) OF THE RULES IS CONCE RNED IT HAS BEEN HELD BY THE HONBLE ITAT KOLKATA BENCH IN THE CASE OF DCIT VS R EI AGRO LTD. IN ITA NO.1811/KOL/2012 DATED 14.05.2013 THAT IT IS ONLY T HE INVESTMENT WHICH YIELDED TAX FREE INCOME THAT SHOULD BE CONSIDERED FOR WORKING O UT THE AVERAGE VALUE OF INVESTMENT WHILE APPLYING THE RULE 8D(2)(III) OF THE RULES. TH IS ORDER OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE DECISION OF HONBLE CALCUTTA HIGH COURT IN G.A. NO.3022 OF 2013 JUDGEMENT DATED 23.12.2013. IN VIEW OF THE AFORESA ID LEGAL POSITION WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THIS ISSUE CAN NOT BE SUSTAINED. IT HAS ALSO BEEN HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD VS CIT (2015) 378 ITR 33 (DEL) THAT WHEN THERE IS NO EXEMPT INCOM E THEN THERE CAN BE NO QUESTION OF DISALLOWANCE U/S 14A OF THE ACT. IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS WE ARE OF THE VIEW THAT THE PLEA OF THE ASSESSEE TO EXCLUD E INVESTMENTS WHICH HAD NOT YIELDED ANY EXEMPT DIVIDEND INCOME DURING THE PREVIOUS YEAR WHILE WORKING OUT THE AVERAGE ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 8 VALUE OF INVESTMENTS FOR THE PURPOSE OF APPLYING RU LE 8D(2)(III) OF THE RULES SHOULD BE ACCEPTED. WE HOLD AND DIRECT ACCORDINGLY. 15. FOR THE REASONS GIVEN ABOVE WE ALLOW GROUND NOS . 1 TO 6 RAISED BY THE ASSESSEE IN PART AND DISMISS GROUND NO.1 RAISED BY THE REVEN UE. 16. THE NEXT ISSUE THAT ARISES FOR CONSIDERATION IN THESE APPEALS IS THE ISSUE OF TAKING DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT. TH E RELEVANT GROUNDS OF APPEAL OF THE ASSESSEE ARE 7 TO 13 AND GROUNDS OF APPEAL OF THE R EVENUE IS GROUND NO.2 IN ITS APPEAL. THESE GROUNDS READ AS FOLLOWS :- GROUNDS OF APPEAL OF THE ASSESSEE: 7. THAT THE LEARNED ASSESSING OFFICER ERRED IN ARB ITRARILY INVOKING THE PROVISIONS OF SECTION 2(22) (E) OF THE INCOME TAX A CT 1961 EVEN WHEN THE SAID PROVISIONS ARE NOT APPLICABLE. IN CASE OF THE APPEL LANT AND ON THE FACTS AND CIRCUMSTANCES THE COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN SUSTAINING THE SAID ACTION OF THE ASSESSING OFFICER. 8. THAT TCI BHORUKA PROJECTS LTD IS A COMPANY IN WH ICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED AND IS LISTED WITH KOLKATA STOCK EXCHANGE AND BANGALORE STOCK EXCHANGE AND THEREFORE PROVISIONS OF SECTION 2(22)( E) ARE NOT APPLICABLE ON THE FACTS AND IN THE CIRCUMSTANCES. 9. BHORUKA INVESTMENT LTD HELD 12.75% OF THE SHARE CAPITAL OF TCI BHORUKA PROJECTS LTD AS ON 31.12.12 BUT HELD ONLY FOR A PA RT OF THE YEAR. 10. APPELLANT HAD A RUNNING CURRENT ACCOUNT WITH TC I BHORUKA PROJECTS LTD. AND FOR MOST PART OF THE YEAR THERE WAS A DEBIT BALANCE IN THE NAME OF TCI BHORUKA PROJECTS LTD IN THE BOOKS OF THE APPELLANT AND ONL Y FOR A FEW DAYS TOWARDS THE END OF THE YEAR THERE WAS A CREDIT BALANCE. ON THE FACTS AND IN THE CIRCUMSTANCES THE SAID CREDIT BALANCE SHOULD NOT BE TREATED AS AN ADVANCE/LOAN. 11. THE TRANSACTIONS WITH TCI BHORUKA PROJECTS LTD. DEBIT AS WELL AS CREDIT HAVE BEEN CARRIED OUT IN THE ORDINARY COURSE OF THE BUSI NESS OF BHORUKA PROJECTS LTD. WHICH IS ALSO A SUBSTANTIAL PART OF THE BUSINESS. 12. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF RS. 12 08 616/- BEING 12.75% OF RS. 94 79 3401- IN CASE OF BHORUKA PROJECTS LTD U/S 2(22) (E) OF THE INCOME TAX ACT. ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 9 13.THAT IN ANY EVENT THE DISALLOWANCE OF RS. 12 08 616/- U/S 2(22)(E) IS EXCESSIVE. BY THE REVENUE 2. ON THE FACT AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION OF RS. 10 21 302/- AND RESTRI CTED THE ADDITION TO RS. 12 08 816/- INSTEAD OF RS. 94 79 340/- UNDER THE HE AD DEEMED DIVIDEND U/S. 2(22)(E) MADE BY THE AO ON A WRONG APPRECIATION OF FACTS IGNORING THE PROVISIONS OF LAW. 17. THE ASSESSEE HAD TAKEN A LOAN OF RS.94 79 346/- FROM A COMPANY TCI BHORUKA PROJECTS LIMITED. THE ASSESSEE ALSO TOOK A LOAN OF RS.10 21 302/- FROM A COMPANY BY NAME TRANSCORP ENTERPRISES LTD. IT IS NOT IN DISPU TE THAT THE ASSESSEE HELD 41.33% OF SHARES IN TRANSCORP ENTERPRISES LTD AND 12.75% IN T CI BHORUKA PROJECTS LTD. IN TERMS OF SECTION 2(22)(E) OF THE ACT ANY LOAN OR A DVANCE FROM A COMPANY BY WHICH THE ASSESSEE IS A BENEFICIAL SHAREHOLDER HOLDING NOT LESS THAN 10% OF THE VOTING POWER OF THE LENDING COMPANY SUCH LOAN OR ADVANCE HAS TO BE CONSTRUED AS DIVIDEND AND TAXED IN THE HANDS OF THE ASSESSEE I.E. RECIPI ENT OF THE LOAN OR ADVANCE TO THE EXTENT THE LENDING COMPANY POSSESSES ACCUMULATED PR OFITS. THE AO HELD THAT THE LOAN RECEIVED FROM THE AFORESAID TWO COMPANIES ARE TO BE CONSTRUED AS DEEMED DIVIDEND AND ACCORDINGLY BROUGHT THE SAME TO TAX AS DEEMED D IVIDEND. 18. ON APPEAL BY THE ASSESSEE THE CIT(A) REDUCED TH E QUANTUM OF DEEMED DIVIDEND IN RESPECT OF LOAN FROM TCI BHORUKA PROJECTS LTD OF RS.12 08 616/- (TO THE EXTENT OF ACCUMULATED PROFITS OF TCI BHORUKA PROJECTS LTD.) A ND DELETED THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND IN RESPECT OF LOANS FROM TRANSCORP ENTERPRISES LTD. ON THE GROUND THAT THE LOAN AND ADVANCE GIVEN BY TRANS CORP ENTERPRISES LTD. IN THE ORDINARY COURSE OF ITS PRINCIPAL BUSINESS OF MONEY LENDING. 19. AGGRIEVED BY THE ORDERS OF CIT(A) IN ALLOWING R ELIEF TO THE ASSESSEE THE REVENUE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. AGGRIEVED BY THE ORDER OF CIT(A) IN NOT DELETING THE ENTIRE ADDITION OF THE DEEMED D IVIDEND IN RESPECT OF LOANS RECEIVED ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 10 FROM TCI BHORUKA PROJECTS LTD. THE ASSESSEE HAS R AISED GROUNDS NO.7 TO 13 IN ITS APPEAL. 20. IT IS THE CASE OF THE ASSESSEE THAT AS FAR AS TSI BHORUKA PROJECTS LTD. IS CONCERNED THE SAID COMPANIES SHARES ARE LISTED IN THE CALCUTTA STOCK EXCHANGE AND THE PROVISIONS OF SEC.2(22)(E) OF THE ACT DOES NOT APPLY TO A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED. SEC.2(18)(B)( A) OF THE ACT LAYS DOWN THAT SHARES OF A COMPANY WHICH IS NOT A PRIVATE COMPANY IF THE Y ARE LISTED IN A RECOGNISED STOCK EXCHANGE THEY ARE TO BE REGARDED AS COMPANY IN WHI CH PUBLIC ARE SUBSTANTIALLY INTERESTED. THE LOAN OR ADVANCE WHICH A COMPANY IS SUBSTANTIALLY INTERESTED IS OUTSIDE THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. AS FAR AS LOAN FROM TRANSCORP ENTERPRISES LTD. IS CONCERNED THE LD. COUNSEL FOR THE ASSESSE E BROUGHT TO OUR NOTICE THAT ONE OF THE EXCEPTIONS U/.S 2(22)(E) IS THAT IF LOANS AND A DVANCES ARE MADE TO A SHAREHOLDER BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS WH ERE LENDING OF MONEY IS SUBSTANTIAL PART OF THE BUSINESS OF THE LENDING COMPANY THEN SU CH LOAN OR ADVANCE IS OUTSIDE THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. IN THIS REG ARD THE LD. COUNSEL DREW OUR ATTENTION TO PAGE 119 OF THE PAPER BOOK WHICH SHOWS THE SUMMARISED BALANCE SHEET OF TRANSCORP ENTERPRISES LD. FOR FINANCIAL YEAR 2008-0 9 TO 2011-12. THE SAME IS AS FOLLOWS :- ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 11 21. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT TO THE AFORESAID CHART AND HIGHLIGHTED THAT 80% OF THE ASSETS ARE LOANS AND A DVANCES AND THAT WOULD BE SUFFICIENT TO CONCLUDE THAT THE SUBSTANTIAL PART OF THE BUSINE SS OF THE ASSESSEE IS LENDING AND THE SUM IN QUESTION HAS BEEN GIVE AS A LOAN IN THE ORDI NARY COURSE OF BUSINESS . 22. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. THE LD. COUNSEL HAS FILED BEFORE US THE EVIDENCE IN THE FOR M OF A COMPUTER PRINT OUT OF THE LIST OF COMPANIES LISTED IN THE CALCUTTA STOCK EXCHANGE AND THE ASSESSEES NAME FIGURES AS A LISTED COMPANY IN CALCUTTA STOCK EXCHANGE WHICH I S A RECOGNISED STOCK EXCHANGE. THOUGH TRADING IN SHARES OF THE ASSESSEE COMPANY RE MAINS SUSPENDED FOR NON PAYMENT OF FEES TO THE STOCK EXCHANGE THE FACT REMAINS THA T THE ASSESEES SHARES HAVE NOT BEEN DELISTED IN CALCUTTA STOCK EXCHANGE. IN THESE CIRCU MSTANCES IT HAS BEEN CONSTRUED THAT TCI BORUKHA PROJECTS LTD IS A COMPANY IN WHICH PUBL IC OR SUBSTANTIALLY INTERESTED AND THEREFORE THE PAYMENT OF LOAN OR ADVANCE BY TCI BOR UKHA PROJECTS LTD. EVEN TO A BENEFICIARY SHAREHOLDER HAVING NOT LESS THAN 10% OF THE VOTING POWER IS OUTSIDE THE PROVISION OF SECTION 2(22)(E) OF THE ACT. THEREFORE WE HOLD THAT NO PART OF THE LOAN GIVEN BY TCI BORUKA PROJECTS LTD. CAN BE TAXED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE. 23. AS FAR AS LOANS OR ADVANCE BY TRANSCORP ENTERPR ISES LTD IS CONCERNED IT IS CLEAR FROM PAGE 119 OF THE PAPER BOOK VOL.I WHICH WE HAVE EXTRACTED IN THE EARLIER PART OF THIS ORDER THAT SUBSTANTIAL PART OF THE BUSINESS OF THIS COMPANY IS LENDING OF MONEY. IT IS NOT DISPUTED THAT THE LENDING OF MONEY TO THE AS SESSEE IS IN THE ORDINARY COURSE OF THE BUSINESS OF TRANSCORP ENTERPRISES LTD. IN SUCH CIRCUMSTANCES NO PART OF THE ADVANCE OR LOAN CAN BE CONSTRUED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. WE THEREFORE ARE OF THE VIEW T HAT CIT(A) WAS FULLY JUSTIFIED IN GIVING RELIEF TO THE ASSESSEE IN THIS REGARD. ON TH E QUESTION AS TO WHAT CAN BE REGARDED AS SUBSTANTIAL PART OF BUSINESS OF THE ASSESSEE TH E LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE CALCUTTA HIG H COURT IN THE CASE OF CIT VS SHREE BALAJI GLASS MANUFACTURING PVT. LTD 386 ITR 128(CAL ). THE SAID DECISION SUPPORTS ITA NO.129 & 329/KOL/2016 M/S BHORUKA INVESTMENT LT D. A.Y.2012-13 12 THE PLEA OF THE ASSESSEE WITH REGARD TO DETERMINATI ON OF THE QUESTION WITH REGARD TO WHAT IS SUBSTANTIAL PART OF BUSINESS OF AN ASSESSE E VIZ. LOOKING AT THE COMPOSITION OF THE DEPLOYMENT OF FUNDS TOWARDS LOANS AND ADVANCES TO THE TOTAL FUNDS AVAILABLE. THUS GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED WHIL E GROUND NOS. 7 TO 13 RAISED BY THE ASSESSEE ARE ALLOWED. 24. IN THE RESULT THE APPEAL BY THE ASSESSEE IS ALL OWED AND THE APPEAL BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON29 .11.2017. SD/- SD/- [DR.A.L.SAINI] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29.11.2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. BHORUKA INVESTMENT LTD. P-10 NEW C.I.T. R OAD KOLKATA-700073. 2. D.C.I.T. CIRCLE-10(1) KOLKATA. 3. C.I.T. (A)-5 KOLKATA. 4. C.I.T.-5 KOL KATA. 5. CIT(DR) KOLKATA BENCHES KOLKATA. TRUE COPY BY ORDER SR. PRIVA TE SECRETARY HEAD OF OFFICE/DDO ITAT KOLKATA BENCHES