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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI RAJENDRA & SHRI C.N. PRASAD
आदेश / O R D E R PER C.N.PRASAD (J.M.) : These are appeals filed by the Assessee and Revenue and Cross Objection filed by the Assessee for the assessment year 2005-06 against the order of the Ld. CIT (Appeals)-6, Mumbai dated 27.02.2009.
In Assessee’s appeal, the following grounds were raised :
“Ground no I On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the AO in taxing income from sale of units under the head 'Business n me' instead of the head 'Capital Gains', without appreciating, inter-alia, that the units were held by the Appellant as investments and not as stock-in-trade. Ground no 2 In case Ground no I is decided in favour of the Appellant, the Appellant submits that the AO be directed to allow deduction in respect of expenses amounting to Rs 1,690,472. Ground no 3 On the facts and circumstances of the case and in law, in case Ground no I is decided in favour of the Appellant, the AO be directed to treat the capital gains arising on sale of units of mutual funds received by the Appellant on demerger of the Investment division of Dipareena Investments Pvt Ltd as long term capital gains after considering the period of holding of the said units by the demerged company, Dipareena Investments Pvt Ltd. Ground no 4 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in directing the AO to follow the methodology laid down in the Notification No 45/2008 dated March 23, 2008 and accordingly make the
3 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
disallowance in relation to Section 14A of the Act, inter-alia, which would result in enhancement of the income without following the procedure laid down in Section 251(2) of the Act and without appreciating that the facts of the case do not justify the disallowance under Section 14A in excess of what has already been disallowed by the Appellant in the return of income.” 3. At the outset, the Ld. Counsel for the Assessee submits that ground no.1 i.e. whether income from sale of units are to be assessed under the head business income or capital gains was decided by the Co-ordinate Bench in Assessee’s own case for earlier years against the Assessee. Copy of the order is placed on record. We find from the order of the Co-ordinate Bench that this issue has been decided against the Assessee by upholding the action of the Assessing Officer in assessing the income from sale of units under the head income from business as under : 9. We have carefully considered the submissions of the rival parties and perused the material available on record. Section 2(14) of the Act defines “capital asset” to mean property of any kind held by an assessee, whether or not connected with his business or profession. The definition of capital asset does not, however, include stock-in-trade held for the purpose of business. Section 2(22) of the Act defines “dividend” to include any distribution by a company of accumulated profits, whether capitalised or not. Section 2(42A) defines “short-term capital asset” to mean a capital asset held by an assessee for not more than thirty- six months immediately preceding the date of its transfer. Section 2(42B) defines “short-term capital gain” to mean capital gain arising from the transfer of a short-term capital asset. Under section 28(i) of the Act, the profits and gains of any business carried on by the assessee, at any time during the previous year, is chargeable to income-tax under the head “profits and gains of business or profession”. Under section 45(1) of, the Act, any profits or gains arising from the transfer of a capital asset effected in the previous year is deemed to be income of the previous year in which the transfer took place. Section 111A, inserted by the Finance Act, 2004, relates to tax on short-term capital gains in certain cases and, under sub-section (1) thereof, where the total income of an assessee includes any income chargeable under the head “Capital gains”, arising from the transfer of a short-term capital asset being an equity share in a company and such transaction is chargeable to securities transaction tax, the tax payable by the assessee shall be the aggregate of the amount of income tax calculated on such short-term capital
4 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
gains at the rate of fifteen per cent. If the shares purchased by the appellants are held to be capital assets, sale of such shares could fall within the ambit of section 111A of the Act and such capital gains would be subject to tax at a lower rate. If the shares are held by the appellants as stock-in-trade, profit on the sale of such shares would constitute business income and be subject to tax at a higher rate. As noted hereinabove, section 2(14)(i) of the Act defines a capital asset as not including stock-in-trade. If the appellants had held the shares as stock in trade, and not as investment then such shares would stand excluded from the definition of short-term capital asset, and the profit earned on the sale of such shares would not be exigible to tax as short term capital gain but as profits and gains from business. 10. We find that as per memorandum of association main object of the company is as under : “(A) The main objects to be pursued by the company on its incorporation are : 1. To carry on the business of investments and to buy, invest in acquire, subscribe to, hold, dispose off and deal in Shares of only those Companies in which Company has already made investments by way of subscription to the capital of such company, units of Mutual Funds, units of Unit Trust of India or in any other scheme of Unit Trust of India and debentures, debenture stock, bonds deposits obligations securities issued or guaranteed by any Government, State, dominions, sovereign, rulers, commissioners, public body or authority, supreme, municipal, local or otherwise and Government Company, Current Accounts, Term deposits of Scheduled Banks, Financial Institutions and any such securities as may be required for the purpose of any Tax Advantage under applicable Indian Laws. 2. To give unsecured loans to those Companies only in which company has already made investments by way of subscription to the capital of such Company. 3. To act as Agent or Broker for any person or Company either alone or jointly with others in the business of Investment in shares, securities of any kind, term deposits of Banks and financial institutions, mutual funds, as well as securities, loans and bonds of Central and State Government”.
5 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
In the present case, the AO while treating the transactions from shares/units of mutual funds as income from business has relied on finding recorded in the assessment order for the assessment year 2001-02. The said reasons for treating the income as business income have been mentioned by the Tribunal vide paragraph 4 of the order in assessee’s own case in ITA No.6695/Mum/2004 for the A.Y.2001-02, dated 27.5.2005 as under: “4. The AO has mainly given the following reasons for treating the said income as business income: (i) As per the Memorandum of association of the assessee- company, the only business of the assessee is to buy, invest acquire, subscribe to, hold and dispose off and deal in shares, units etc. (ii) During the year, the assessee has carried on in a systematic and an organized manner, buying and selling of shares/units of large number with volumes of over Rs.100 crores. Most of the transactions are completed in a span of 4-5 days. This clearly shows the motive of the assessee-company while buying and selling of units was to earn profits. (iii) The investments which were held for a period of three years in order to claim exemption under section 54EA were sold immediately after the holding period of three years, as stipulated in Section 54EA, was over. (iv) The assessee had engaged in numerous transactions of purchasing and selling of large quantities of units in a systematic and organized manner in association with its sister concerns, not only in the relevant financial year but also in the earlier years. (v) The assessee has made investment since 1984-85 from borrowed funds and interest is paid on these borrowings and debited to the profit and loss account.” 12. We further find that the ld. CIT(A) while holding that the transaction of purchases and sales of shares/units of mutual fund except the sale of units of Birla Sun Life Plus, is income from business or profession has observed as under (para 16):
6 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
“In the light of above discussions, it has to be seen as to what exactly is the nature of various transaction of purchase and sales of shares and units made by the appellant Admittedly, as also discussed in detail in the assessment order and submissions of the AR reproduced above, it is seen that appellant has in the past and, is in the present heavily engaged in the purchase and sale of shares/units. AR’s contention that appellant has purchased and sold shares of private limited Cos. and units of Mutual Fund which are not tradeable and, therefore, same do not amount to business transactions, in my opinion, is not tenable. More than the nature of item “purchased and sold”. It is the frequency volume, regularity and consistency with which the items/goods are purchased and sold that are relevant considerations to decide whether the assessee is engaged in the business activity. The facts discussed above clearly show that appellant has entered into transactions of purchase and sale of share/units in the past many years in a very systematic, regular an consistent manner. The frequency, quantum and volume of transaction and the regularity and consistency with which they have been undertaken clearly belie the AR’s claim that appellant is not dealing in business of purchase and sale of shares/units. Appellant has paid a price for acquisition of shares/ units. Appellant has paid a price for acquisition of shares/units. When the acquisition even by allotment is for a consideration, it is sale. Therefore, when a price is paid even for allotment and more so for acquiring shares or units, it is a purchase of shares and units in general law……” 13. We further find that the Tribunal in the assessee’ s own case (supra) vide paragraph 10 of the order observed and held : “10. We have heard both the parties in detail and are of the view that the sale proceeds of M/s MDS Switchgear were invested in the unit of Mutual funds as required u/s 54EA with the intention to save capital gain tax. It cannot be stated that these units were purchased with the intention to deal in them for making profit as these were non-transferable for three years. The case law as relied on by the AO lays down certain principles of law but we have to see whether these are applicable to the facts of the case of the assessee or not?. The intention of the assessee for investing in the unit eligible u/s 54EA was to save capital gins tax and as such the income on account of disinvestments of such units cannot be assessed
7 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
under the head income from business and profession. However, as far other income from the sale of shares/units, the AO has correctly treated the same as income from business. The AO is directed to recompute the income of the assessee after treating the income from disinvestments of units held u/s 55EA. Ground No.1 and 2 of the appeal are partly allowed.” 14. From the combined reading of the objects of the company, findings of the AO and ld. CIT(A) and the order of the Tribunal in assessee’s own case for the A.Y.2001-02 (supra) we observe that the main objects of the assessee’s business are to deal in Shares/Units and Mutual Funds of the Companies and others, and the assessee has placed no material on record to show that the main object of the assessee’s business is to invest in Shares/Units and Mutual Funds. Merely because the purpose of redemption, according to the ld. Counsel for the assessee, is different i.e. other than business and the average period of holding is 413 days do not mean that the assessee is not carrying on business in Shares/Units and Mutual Funds of the Companies and others. 15. In all the decisions relied on by the ld. Counsel for the assessee (cited supra), the assessee was engaged in business other than income arisen out of short term and long term capital gain and there is no material on records to show that in all those cases the only business of the assessee was income from purchase and sales of mutual funds/shares/units, therefore, we are of the view that the decisions relied on by the ld. counsel for the assessee are distinguishable and not applicable to the facts of the present case. 16. In this view of the matter and keeping in view the rule of consistency, we hold that the ld. CIT(A) was fully justified in treating the income from purchase and sale of shares/mutual fund/unit except units of Birla Sun Life Plus as income from business. The ground taken by the assessee is, therefore, rejected.”
Respectfully following the said decision, we reject the grounds of appeal raised by the Assessee on this issue.
Coming to ground no.2, the Ld. Counsel submits that this ground becomes infructuous for the reason that the ground no. 1 was decided against the
8 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
Assessee holding that the same is assessable under the head business income. Thus this ground is dismissed as infructuous.
Coming to ground no.3, the Ld. Counsel submits that this ground becomes academic in view of the decision of the Tribunal in ground no. 1 as it was decided against the Assessee. Therefore this ground is dismissed as academic.
Coming to ground no.4, regarding the disallowance u/s 14A of the Act, the Ld. Counsel submits that Assessee disallowed Rs.2,35,755/- being the expenses attributable for earning exempt income. However, the Assessing Officer disallowed Rs.4,48,256/- towards expenditure for earning exempt income on the ratio of dividend income bears to the total income, which is coming to around 13.06%. The Ld. Counsel for the Assessee submits that the Ld. CIT (Appeals) directed the Assessing Officer to compute the disallowance following Rule 8D. The Ld. Counsel submits that in view of the jurisdictional High Court’s decision in the case of Godrej and Boyce Mfg. Co. Ltd. Vs. DCIT [328 ITR 81] Rule 8D has no application prior to Assessment Year 2008-09. The assessment year for consideration in question being 2005-06, the said rule has no application. The Ld. Counsel further submits that the income from sale of units etc. have been considered as business income by the Assessing Officer and therefore in such circumstances, if the units are held to be stock in trade, no disallowance u/s should be made u/s 14A of the Act. He placed reliance on the decision of the jurisdictional High Court in the case of CIT Vs. India Advantage Securities Ltd.
9 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
The Ld. DR placed reliance on the orders of the authorities below.
We have heard the rival submissions, perused the orders of the authorities below. In view of the decision of the jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (supra), the provisions of Rule 8D have no application to the assessment year under consideration. Hence, we reverse the order of the Ld. CIT (Appeals) in directing the A.O. to apply Rule 8D. We also find that the income from sale of units, shares, mutual funds have been assessed under the head income from business which was also confirmed by this Tribunal. In the circumstances, the investments sold by the Assessee are stock in trade and should not be forming part of investments and outside the purview of computation of disallowance u/s14A of the Act. Therefore taking the totality of facts into consideration, we direct the Assessing Officer to delete the addition made u/s 14A as the Assessee itself has disallowed Rs.2,35,755/- as the expenditure attributable for earning exempt income which in our view is reasonable. This ground is allowed.
Coming to the Revenue’s appeal, the only issue is the Ld. CIT (Appeals) erred in deleting the addition made u/s 2(22)(a) of the Act. The Ld. DR referring to the assessment order submits that the Assessing Officer while completing the assessment made addition u/s 2(22)(a) of the Act as deemed dividend. The Ld. DR submits that the Assessing Officer observed that there was a demerger and the Assessee has received certain amount from M/s Deeparina Investment Pvt. Ltd. by virtue of demerger which was approved by the Hon’ble High Court by order dated 10.06.2005 w.e.f. 01.04.2004. Therefore,
10 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
the Assessing Officer required the Assessee to explain as to why the amount received from M/s Deeparina Investment Pvt. Ltd. should not be considered as deemed dividend in the hands of the Assessee company. The Ld. DR submits that the Assessee filed a reply stating that demerger was duly approved by the High Court and was in accordance with 72A of the Companies Act, therefore, the question of deemed dividend does not arise. The Ld. DR submits that not convinced with the reply, the Assessing Officer has not accepted that there is a demerger in view of the provisions of Section 2(19AA) of the Act and therefore, there is no demerger. The Ld. DR submits that on appeal, the Ld. CIT (Appeals) deleted the addition. He strongly placed reliance on the assessment order.
The Ld. Counsel for the Assessee submits that the Assessee issued shares in consideration for merger. It was acquisition by the Assessee Company and the provisions of Section 2(22)(a) can have no application. He vehemently supported the orders of the Ld. CIT (Appeals).
We have heard the rival submissions, perused the orders of the authorities below. This aspect of the matter has been considered elaborately by the L.d. CIT (Appeals) with reference to the submissions and the averments of the Assessing Officer and held as under. 6.1 In the assessment order, the A.O. has noted that the assessee has shown receipt of investments in units of mutual fund of Rs.18,09,91,230/- and advances to Legrand. India Pvt. Ltd. of Rs.1,29,49,956/- from M/s.Deeparina Investments :Pvt. Ltd. (DIPL). The A.O. has further noted that Ms.Urvashi D. Morarji holds 4350 shares out of 24,000 shares in M/s.Deepárina Investments Pvt. Ltd. and Mrs.Heena B. Kamte holds 6500 shares. Another share of 3,042 shares are held by Mrs..Heena B. Kamte and Ms.Urvashi D. Morarji jointly. Accordingly, the A.O. has arrived at the conclusion that both the company are
11 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
effectively held by Mrs.Heena B. Kamte and Ms. Urvashi D. Morarji. Since the assessee has received these investments from DIPL by way of merger, the amount received by the assessee on account of demerger of these two companies is to be taxed as deemed dividend U/s.2(22)(a). According to A.O., DIPL has just transferred two individual assets to MTPL. i.e. its investment in mutual funds and its advance to Legrand India Pvt. Ltd. and has not transferred the commensurate liability thereon in the form of borrowed funds, the use of which DIPL has already accepted and has also not transferred the short term and long term capital losses pertaining for the transactions in mutual funds which has been considered by assessee as undertaking. Assessee has given the wrong information even to the Hon. High Court that entire undertaking including all assets and liabilities are being demerged with MTPL, which is wrong for the reasons discussed in detail above that DIPL has not transferred commensurate liability regarding these assets as defined in section 2(19AA)(ii) r.w.s. ExpI 2 (clause a, b & c) the I.T. Act. Assessee has also given wrong information to the Hon’ble High Court that so called investment division plus advance to Legrand India Pvt. Ltd. is separate undertaking despite the fact that these two assets were neither forming any undertaking nor forming any part of business of the DIPL, as DIPL was showing the investments under the head long term investments and showing the income from same as capital gain and the advances to Legrand India Pvt. Ltd. was forming part of loans and advances of DIPL without having separate identity. The capital losses regarding the mutual fund transactions of DIPL were not transferred to MTPL and were claimed by the DIPL as carried forward Iosses in its return of income of A.Y. 2005-06. Accordingly, the A.O. has arrived at the conclusion that the demerger is not a valid demerger and therefore the amount of Rs.19,39,41,186/- is required to be considered as deemed dividend in the hands of the assessee company i.e. Maanraj Tradina Pvt. Ltd. u/s 2(22)(a). .According to the A.O., DIPL was having reserves and surplus to the extent of Rs.22,90,87,566/-. Accordingly, the A.O. treated the entire amount of Rs.19,39,41,186/- as deemed dividend in the hands of the appellant. 6.2 The A.R. submitted that the A.O. is not justified in treating the demerger u.s.2(19AA)(ii) as invalid. The A.R. submitted that the investment division of DIPL was demerged pursuant to a Scheme of Arrangement between DIPL and
12 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
MTPL and was transferred to and vested w.e.f. 1.04.2004. The aforesaid Scheme of Arrangement was approved by the High Court of Judicature of Bombay vide order dated 10.06.2005. The said demerger of the investment division of DIPL was fully compliant with the provisions of section 2(19AA) of the Act and accordingly, the question of treating the transfer of the assets of the investment division of DIPL as deemed dividend in the hands of assessee does not arise. The A.R. further submitted in the assessment order, itself the transfer of assets has been held to be deemed dividend u/s 2(22)(a) That being so then, at best DIPL ought to have paid dividend distribution tax u/s 115-O and the said deemed dividend ought to have been considered as exempt u/s 10(34) in the hands of the assessee. In this connection, the A R invited the attention to the provisions of section 115-O(3) of the Act which reads as under - (1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-; tax chargeable in respect of the total income Of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise on or after the 15th day of April 2003 whether but of current or accumulated profits shall be chargeable to additional income-tax (hereafter, referred to as tax on distributed profits) at the rate of twelve and one half per cent. (3) the principal officer of the domestic company and the company shall be liable to pay tax on distributed profits to the credit of the Central Govt. within fourteen days from the date of (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend. Whichever is earliest. Further, the explanation to section 115-Q reads as under :- “For the purposes of this Chapter, the expression dividends shall have the meaning as is given to dividend in clause (22) of section 2 but shall include sub-clause (e) thereof".
13 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
Therefore, the provisions of section 115-0 in respect of dividend distribution tax are applicable even to deemed dividend u/s.2(22)(a)as per the explanation reproduced above. Hence, if at all the said amount is taxable u/s.2(22)(a) of the Act. DIPL would be liable to pay dividend distribution tax in respect of the same. Further, attention is invited to provisions of section 10(34) of the Act which reads as under :- "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included': (34) any income by way of dividends referred to in Section 115-0” Accordingly, the assets transferred by DIPL taxed as deemed dividend u/s.2(22)(a) in the hands of our clients ought to be considered as exempt u/s.10(34) of the Act. In view of the above facts, the A.R. submitted that addition of Rs.19,39,41,186/- in respect of deemed dividend u/s.2(22)(a) ought to be deleted. 6.3. I have duly considered the submission of the A.R. and I agree with the submission of the A.R. that the demerger was in accordance with the.. Bombay High courts decision which cannot be questioned and the fund received on account of demerger cannot be taxed u/s.2(22)(a) as deemed dividend. For the sake of convenience, the provisions of section 2(22)(a) is reproduced hereunder :- "2(22) dividend includes – (a) any distribution by a company of accumulated profits, whether capitalized or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company". The plain reading of the aforesaid provisions of the dividend includes istribution by any company of accumulated profit. In this case, there is no distribution of accumulated profit. In Income Tax Act it is also been defined what is not dividend as per section 2(22)(e)(iv) any payment made by the assessee company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A of the Companies Act, 1956. In this case, the assessee company has
14 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
received a payment on account of demerger of DIPL which cannot be treated as dividend. It is pertinent to mention here that as per clause 2(22)(e)(iii) any dividend paid by the company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e) to the extent to which it is - so set off, would not include dividend. Accordingly, it can be clearly concluded that receipt of amount on account of demerger cannot be treated as deemed dividend u/s.2(22)(a). or 2(22)(e). The A.O. is directed to delete this addition. This ground of appeal is allowed.”
On a careful consideration of the matter and the findings of the Ld. CIT (Appeals), we do not find any valid reason to interfere in the findings of the Ld. CIT (Appeals) who held that there is a valid demerger according to the judgement of the Hon’ble Mumbai High Court and the fund received by the Assessee on account of demerger cannot be taxed under section 2(22)(a) of the Act as deemed dividend. Provisions of Section 2(22)(a) speaks of any distribution by the Company of accumulated profits. In the Assessee’s case, there is no distribution of profits. The reasoning given by the Ld. CIT (Appeals) in deleting the addition is upheld. This ground of revenue is rejected.
The next issue in the appeal of the Revenue is that the Ld. CIT (Appeals) erred in deleting the disallowance of deduction u/s 35DD of the Act. The Ld. DR vehemently supporting the orders of the Assessing Officer submits that the Assessee claimed Rs.3,90,402/- being 1/5th of expenses for merger and amalgamation as allowable expenditures u/s 35DD of the Act. The Ld. DR
15 M/s Maanraj Trading Pvt. Ltd. ITA Nos.3414 & 3095/Mum/2009, CO No.247/Mum/2009 A.Y.2005-06.
submits that since the Assessing Officer upheld that there is no de merger, the expenses were disallowed.
The Ld. Counsel for the Assessee submits that the demerger expenses should be allowed as deduction u/s 35DD of the Act or in the alternative, if not u/s 35DD, they should be allowed as revenue expenditure, in view of the decision of Hon’ble Supreme Court in the case of CIT Vs. Bombay Dyeing Manufacturing Company Ltd.[219 ITR 521], wherein, it was held that expenditure incurred towards provisional charges of the solicitors firm for the services rendered in connection with the amalgamation was in the course of carrying on all Assessee’s business, therefore, deductible as revenue expenditure.
We have heard the rival submissions, perused the orders of the authorities below. As we have upheld the order of the Ld. CIT (Appeals) in holding that the demerger is valid by virtue of Hon’ble High Court’s order, the expenditure incurred on demerger should be allowed as deduction. The Assessee claimed 1/5th of the said expenditure u/s 35DD of the Act and we do not find any reason to disallow the said expenditure. Thus we upheld the order of the Ld. CIT (Appeals) and reject ground of appeal of the revenue.
Coming to the Cross Objection filed by the Assessee, the Ld. Counsel for the Assessee submits that the grounds in cross objection become academic if the order of the order of the Ld. CIT (Appeals) is affirmed on the aspect of deemed dividend. As we have upheld the order of the Ld. CIT (Appeals) in
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deleting the addition made u/s 2(22)(a) of the Act, the grounds raised by the Assessee in its cross objection becomes academic and hence cross objection is dismissed.
In the result, appeal of the Assessee is partly allowed, appeal of the Revenue and Cross Objection of the Assessee are dismissed.
Order pronounced in the open court on the 12th day of April 2017.
Sd/- Sd/- (RAJENDRA) (C.N.PRASAD) लेखा सदस्य / न्याधयक सदस्य / ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई / Mumbai; नििाुंक / Dated 12.04.2017 LR, SPS
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आदेश की प्रधिधलधप अग्रेधिि / Copy of the Order forwarded to :
अपीलार्थी / The Appellant 1. प्रत्यर्थी / The Respondent. 2. 3. आयकि आयुक्त(अपील) / The CIT(A), Mumbai. 4. आयकि आयुक्त / CIT 5. नवभागीय प्रनतनिनर्, आयकि अपीलीय अनर्किण, मुंबई / DR, ITAT, Mumbai गार्ा फाईल / Guard file. 6. सत्यानपत प्रनत //True Copy// आदेशान सार/ BY ORDER,
सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुंबई / ITAT, Mum