| SooperKanoon Citation | sooperkanoon.com/74831 |
| Court | Income Tax Appellate Tribunal ITAT Ahmedabad |
| Decided On | Mar-24-2006 |
| Judge | I Bansal, S Arora |
| Reported in | (2007)104ITD122(Ahd.) |
| Appellant | The Addl. Cit, Sr-8 |
| Respondent | Pinnacle Project and |
1. The Id. CIT(A) has erred in law and on facts in deleting the following additions:i) deleting the disallowance of interest expenses Rs. 3,78,72,736/-ii) addition on account of inflated purchases Rs. 5,30,000/- Rs. 3,84,02,766/- 3. The assessee company is engaged in the business activity of financing and trading in shares and securities. It has been incorporated on 03 07.1996 The assessee company has merged and amalgamated with Anmol Denim Ltd. vide order of Hon. Gujarat High Court dated 30^thOctober, 1998 w.e.f. 1.4.1997. It filed its return of income on 17.11.1997 declaring loss of Rs. 39,15,295/-. The return was accompanied by form No. 3CA, 3CD and audited Profit & Loss a/c and balance-sheet as provided under Section 44AB of the IT Act, 1961.
4. On going through the balance-sheet the AO noticed that unsecured loans were mentioned at Rs. 71,25,53,703/- and on these loans the assessee paid interest. Similarly he noticed that on investment side a stock-in-trade was shown at Rs. 54,51,85,726/- which comprises mostly of Arvind Group Companies. Thus assessee was required to submit the details of its interest account and it was submitted before him vide letter dated 4/3/2000 wherein interest received was shown at Rs. 1,70,23,307/- and interest paid was shown at Rs. 5,48,96,043/-. Thus there was a debit of interest of Rs. 3,78,72,736/-.The AO further noticed that interest bearing loans were utilized for investment in shares of Arvind Intex Ltd. and it was to be disallowed. He further found that assessee had raised unsecured loans from six companies belonging to Arvind group and the said funds were utilized in purchasing shares which are shown as stock-in-trade in the other Arvind Group Companies. The AO has prepared two charts in this regard which are placed at page 4 of the assessment order and for the sake of convenience these are reproduced below: Ope Receipt Repayment Interest TDS Closing ning balance1. Anagram Finance Ltd. 0 900000 0 177169 57078 901771692 Arvind C'otspin Ltd. 0 55555000 5555000 627277 171802 6272773 Arvind Polycot Ltd. 0 56185000 56185000 634390 173750 6343904. Lalbhai Reality Finance 0 2750000 0 1004782 116314 285047825. Orbit finmark Ltd. 0 455455000 295570000 20684090 1174922 1805690106. The Arvind Mills Ltd. 0 404680000 19600000 26960995 2995686 412040995Item Opening Stock Addition Sales Closing Stock Qty Amount Rate Qty Amount Rate Qty Amount Rate Qty Amount RateArvind 91135 273404763 3000 - - - - - 91135 273404763 300Arvind 210000 5190000 2417 - - - - - - 210000 5190000 2471 The assessee was required to show cause as to why the interest payments claimed by assessee should not be disallowed for the reasons that the interest bearing funds were utilized for the purpose of acquiring shares of these companies belonging to the same group. The AO inferred that principle laid down by Hon. Supreme Court in the case of Mc Dowell & Co. v. CTO 154 ITR 148 (SC) also applies to the case of assessee and the provisions of Section 77 of the Act regarding violation for providing funds for buying its own shares also come into force.
However, notwithstanding this he found that from the view of income-tax also it is a transaction which is not genuine for the reasons that on the one hand the assessee is paying interest on alleged loans from group companies whereas on the other hand same funds are being parked for acquiring the group company shares. Thus he proceeded to disallow the interest with the following observations: In the light of the above facts and data, the assessee was pointedly asked as to why not the interest payment be disallowed as these even used for the purpose of acquiring shares of these companies belonging to the same group which has advanced funds to the assessee. Even the principle laid down in the case of Mc Dowell Ltd. squarely applies in this case and the provisions of Section 77 of the Companies Act regarding violation for providing funds for buying its own shares also come into force. But notwithstanding this even from IT angle, it is a transaction which is not genuine on the one hand assessee is paying interest on alleged loans from group companies whereas on the other hand same funds are being parked for acquiring the group company shares. In this case it is pertinent to note that in one of the company of the same group i.e. Pankti Polytex Pvt. Ltd. additions disallowing the interest has been made.
Since the facts are very similar to that of Pankti Polytex Ltd., I disallow the interest claim made by the assessee as shown above amounting to Rs. 5,47,78,235/- as it is clear that the assessee company is a sort of front company or a facade belonging to Arvind group. The net interest payment of Rs. 3,78,92,736/- (5,48,96,043 - 1,70,23,307) is therefore disallowed. Initiate penalty proceedings Under Section 271(1)(c).
Aggrieved, the assessee filed an appeal before CIT(A) before whom written submissions dated 9th May, 2000 were filed. A copy of these submissions is placed at pages 1 to 22 of the paper book filed by the assessee. The first and preliminary objection taken by the assessee is that as the assessee company had merged with Anmol Denim Ltd. vide order dated 3^rdOctober, 1998 of the Gujarat High Court w.e.f.
1.4.1997, assessment could not be framed on assessee as assessee had lost its existence. However, these submissions were not accepted by CIT(A). On merits for disallowance of Rs. 3,78,72,736/-, it was pleaded that the claim of interest of assessee has been disallowed by AO mainly for the three reasons which are as follows: a) Borrowings were made by the assessee from the group companies and utilized for acquiring shares of the same group.
c) The provisions of Section 77 of the Companies Act, have also been violated.
It was submitted that assessee is a dealer in shares and profits and loss arising from these transactions is shown by the assessee in Profits and Loss a/c as business income. It was pleaded that even in the assessment order the AO has accepted the computation of income based on profits shown as per books of accounts as disallowance of interest only has been made. Thus it was pleaded that undisputed facts of the case are as under: (a) Appellant company is engaged in the business of dealing in shares and securities, finance, investment, etc.
(b) All the transactions of purchase and sale of shares are genuine transactions.
(c) Optionally Convertible Debentures/shares of Arvind Intex Ltd. were listed on various Stock Exchanges.
(d) It has borrowed monies for the purposes of its business and interest was paid during the course of carrying on the business.
(e) Interest on the borrowings was not paid in excess of market rate.
(f) Borrowing made from any of the companies is not utilized for purchasing shares of that company.
Referring to these undisputed facts it was pleaded that as per well settled principle of law, the profit to be assessed are the real profits and they must be ascertained on ordinary principles of commercial trading and commercial accounting. Thus it is clear that profits should be computed after deducting the losses and expenditure incurred for the purpose of business unless, the losses and expenditure are expressly, or by necessary implication disallowed by the Act. It was pleaded that monies were borrowed for the purpose of business hence interest paid thereon is allowable as per provisions of Section 36(1)(iii) of the Act. It was pleaded that the concept of group company has not been defined in Companies Act. It was submitted that amounts were borrowed from Arvind Mills Ltd., which is a company in which public are substantially interested and, therefore, the question of group companies does not arise. Referring to page 6 of assessment order it was submitted that AO has held that the assessee company is a facade company which is factually wrong. It was submitted that assessee company is duly registered under the provisions of Companies Act and Income-tax Department has also allotted Permanent Account No. to it and it is also assessable as a separate entity. It was submitted that Hon.
Gujarat High Court has sanctioned the scheme of amalgamation wherein it had ordered the merger of assessee company with Anmol Denim Ltd. and all these facts prove that assessee company is not a fagade company.
Reference to the decision of ITAT in the case of Manini Niranjan v. ITO in ITA No. 3/Ahd/1989 "SMC" Bench order dated 29^thMay, 1992 (a copy has also been filed before us) was made to contend that the decision of Mc Dowell & Co. Ltd. (supra) was not applicable even regarding transactions "within the group".
5. The details regarding borrowed funds and utilization thereof were also submitted and it was pleaded that from the utilization it can be seen that the borrowings were used only for the purpose of business such as purchase of shares and repayment of loans, advances given for interest ranging from 18% to 21% advances to employees, advances for shares, investment in assets, shares application money and investment in shares. It was submitted that all these activities are established to be for business and thus the borrowings were made only for the purpose of business. Keeping in view the activities of business of the assessee which is to deal in shares, disallowance of interest is not justified as interest is an allowable deduction. Reference was made to the decision of Hon. Supreme Court in the case of Madhav Prasad Jatia v. CIT 118 ITR 200 to contend that where following three conditions were fulfilled the interest was to be allowable as business expenditure under the provisions of Section 10(2)(iii): (c) that the assessee must have paid interest on the said amount and claimed it as a deduction.
It was pleaded that where all these three conditions are fulfilled interest could not be disallowed and for this purpose reliance was also placed on following decisions:D & H Secheron Electrodes (P) Ltd. v. CIT Referring to these decisions it was pleaded that once it is found that capital is borrowed for the purpose of business the assessee is entitled to interest as claimed thereon as deduction under Section 36(1)(iii) of the Act regardless of even the fact that the assessee himself charges interest at the lower rates on monies advanced out of such borrowed loan or even provides interest free advances to the sister concern etc. and the only condition laid down by Section 36(1)(iii) is that the amount should be borrowed for the purpose of business and the assessee must have paid the interest on the said amount and claimed it as a deduction. Thus it was pleaded that deduction on account of interest could not be disallowed.
6. Referring to the application of decision of Hon. Supreme Court in the case of McDowell & Co. Ltd. (supra) it was pleaded that the same could not be applied to the facts of the present case. Reference in this regard was made to the decision of Hon. Gujarat High Court in the case of Banyan & Berry v. CIT 222 ITR 831 (Guj) wherein their Lordships of Gujarat High Court have discussed the effect of the decision of Hon.
Supreme Court in the case of Mc. Dowell & Co. Ltd. and it was observed by Hon. Gujarat High Court that the Supreme Court in the aforecited decision has nowhere said that every action or inaction on the part of the tax payer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act. Their Lordships observed that ratio of any decision has to be understood in the context it has been made. The ratio in the above decision has not affected the freedom of citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the frame work of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity. Then their Lordships have defined that colourable device', 'dubious methods' or 'subterfuge' have special significance in legal world.7. Thus it was pleaded that the ratio of the decision in the case of McDowell & Co. Ltd. (supra) was wrongly applied by the AO particularly when nothing has been brought on record to establish that there are provisions which bar the assessee from borrowing funds for the purpose of its business from the market including the group companies at rate of interest prevailing in the market. Reference was also made to the decision of Hon. Supreme Court in the case of Arvind Narottam 173 ITR 479. Thus it was pleaded that claim of assessee could not be disallowed by application of the decision of Supreme Court in the case of Mc Dowell & Co. Ltd.(supra).
8. As regards the applicability of provisions of Section 77 of the Companies Act, it was pleaded that borrowings made by the assessee were not prohibited by the provisions of Section 77 of the Companies Act as the borrowings were never for the specific object of buy back of shares of the company who advanced loan to the assessee company at the market rate. It is thus the disallowance of interest was agitated before CIT(A). The CIT(A) after considering all these submissions has deleted the disallowance as per paragraph 3.12 of the impugned order which is reproduced below for the sake of convenience: 3.12 I have gone through the assessment order and I have considered the contentions raised by the appellant. I am of the considered opinion that the borrowings are for the business of the appellant, that on perusal of the details of the funds are utilized for the purpose of business therefore the appellant is justified in claiming that the borrowings are held to be for the purpose of the business of the appellant. Once those borrowings are made for the purpose of business and in view of the ratio of the Supreme Court decision in Madhav Prasad Jatia (supra) and other decisions cited by the appellant as reproduced above there is absolutely no justification for disallowance of the claim either in full or in part. I also agree with the Id. Counsel of the appellant that the reliance placed on the Hon. Supreme Court in Mc Dowell is misplaced and does not support the action of the Assessing Officer. I also find that on the facts and in law that the AO is not justified in holding that the appellant company has violated the provisions of Section 77 of the Companies Act. Thus, having regard to the facts and circumstances of the case as well as the law on the subject the AO is not justified in disallowing the sum of Rs. 3,78,72,736/-. The same is deleted.
9. Ld. DR after narrating the facts relied on the order of AO and pleaded that disallowance was rightly made by AO and Id. CIT(A) has wrongly deleted the same.
10. On the other hand, Id. Counsel of the assessee pleaded that the business of the assessee company as mentioned in the assessment order is financing and trading in shares and securities. In the course of its business the assessee company had borrowed funds which were utilized for various activities relating to business of the assessee. No part of the borrowed funds was utilized for any purpose other than business.
Thus he pleaded that the provisions of Section 36(1)(iii) were applicable and the claim of assessee was legally allowable. He further submitted that there is no provision in the Income-tax Act which restrain the assessee from purchasing the shares of the group companies and from investing in these shares. The act of assessee for purchasing of shares of various companies was in accordance with its business activities and therefore, interest was allowable as per various decisions relied upon before the CIT(A). He contended that the decision in the case of Mc. Dowell & Co. Ltd. (supra) was not applicable to the facts of assessee's case as no material has been brought on record by AO to prove that the borrowings made by assessee and the utilization of borrowed funds were in the nature of colourable device, dubious method or subterfuge as defined by Hon. Gujarat High Court in the case of Banyan & Berry (supra). He contended that it has also not been shown by the AO that how there was a violation of provisions of Section 77 of the Companies Act, 1956. He contended that even if there was any violation of Section 77 for that reason interest could not be disallowed which is claimed by assessee under the provisions of Section 36(1)(iii) of the Act. Thus he pleaded that Id. CIT(A) has rightly deleted the addition and his order should be upheld.11 We have carefully considered the rival submissions in the light of material placed before us. The borrowing of funds and utilization thereof for the purpose of business activity of the assessee is not disputed even by A.O. The only objection of AO is that the borrowed funds were utilized by the assessee for the purpose of purchasing shares of group companies and, therefore, the principle laid down by the decision of Hon. Supreme Court in the case of Me. Dowell & Co. Ltd. (supra) was applicable. It is, therefore, the AO has disallowed the interest being a device adopted by assessee for reducing its income.
One other ground on which the AO proceeded to disallow the claim of interest is the applicability of provisions of Section 77 of Companies Act, 1956.
12 As per the decision of Hon. Supreme Court in the case of Mc. Dowell & Co. Ltd. (supra) that it is open to every one to show arrange his affairs as to reduce the brunt of taxation to the minimum and such a process does not constitute tax evasion; nor does it carry any ignominy. Tax planning may be legitimate provided it is within frame work of the law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. This decision of Hon. Supreme Court was considered by their Lordships of Hon. Gujarat High Court in the case of Banyan & Berry (supra) and considering the said decision it was observed by their Lordships that the said decision has not affected the freedom of an assessee to plan his business affairs within the frame work of law unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity and the decision in the case of Mc Dowell & Co.
Ltd. (supra) does not lay down that tax payers must arrange his affairs so as to arrange maximum tax liability and every act resulting in tax reduction, exemption or not attracting tax should be treated as device of tax avoidance. This principle laid down by Hon. Gujarat High Court has been approved by Hon. Supreme Court in the case of Union of India and Anr. v. Azadi Bachao Andolan and Anr. 263 ITR 706 (SC). It will be relevant to reproduce below the observations of Hon. Supreme Court in the case of Union of India and Anr. v. Azadi Bachao Andolan and Anr.
(at page 759 of the report) (supra): 108. We may also refer to the judgment of Gujarat High Court in Banyan & Berry v. CIT where referring to McDowell (supra), the Court observed: The Court nowhere said that every action or inaction on the part of the tax payer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell & Co. Ltd. v. CTO .
The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity.
13. Further in the above decision in the case of Banyan & Berry (supra) while defining the words 'colourable device', 'dubious methods' or 'subterfuge', their Lordships have observed that these words have special significance in legal world. The definition given to 'colourable' in Brown's Judicial Dictionary is as 'reverse of bona fide'. Referring to Black's Dictionary the word 'colourable' to mean that which is in appearance only and not in reality, what it purports to be hence, counterfeit, feigned having the appearance of truth.
Seeing from that angle so as to find out that what is "colourable" in the present case, it is to be established that the transactions of payment of interest by the assessee were "reverse bona fide" or which were in appearance only and not in reality and they were having feigned appearance of truth. A perusal of the chart will reveal that assessee has deducted a substantial amount of TDS out of all the payments of interest and the funds have also been borrowed through banking channels. Unless it is shown that all these were 'reverse bona fide' or interest was paid for only for appearance and not reality the transactions entered into by the assessee could not be held to be "colourable" so as to fall these transactions within the ambit of "colourable device" as defined by Hon. Jurisdictional High Court. A perusal of assessment order will reveal that no material has been brought on record by AO to show that the interest payment by the assessee and receipt of loan and transactions of purchases and sales of shares entered into by the assessee were 'reverse bona fide' or these were the transactions which were for appearance and not in reality and they were feigned of having the appearance of truth. In absence of any material on record to establish such circumstances, mere saying will not make the transactions of the assessee recorded in the books of accounts as "colourable device." 14. Examining the word 'device', their Lordships found that as per Shorter Oxford Dictionary it means inneuity, something device, arrangement, plan, contrivance, a plot or a trick and as per Black's Dictionary 'device' is referred as contrivance, a scheme, trick. Here also no material has been brought on record by AO to suggest that it was a device, arrangement, plan or contrivance there is no material on record to suggest that any of the sales or purchases of the shares made by the assessee was found by the revenue authorities to be the transaction in contrivance of any law, thus the same were in the nature of device. In absence of any such material it cannot be held that the transaction entered into by the assessee for sale and purchase of shares for borrowing and lending of money was in the nature of "device".
15. Similarly referring to the word 'subterfuge' reference was made to Shorter Oxford English Dictionary which defines as to which one refers for escape or concealment. On historical principles it means an article or device to which a person refers in order to escape the force of an argument, an excuse with which conceals a clue. As pointed out earlier there is no material on record brought by the AO to show that the transaction entered into by the assessee were in the nature of subterfuge. So also the expression "dubious" refers to a doubtful or questionable character. Here also there is no material on record to establish that there was anything doubtful or a questionable character.
16. As explained by Jurisdictional High Court in the case of Banyan & Berry (supra) and approved by Hon. Supreme Court in Azadi Bachao Andolan and Anr. (supra) that even by the decision in the case of Mc Dowell, the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the frame work of law has not been affected. If such trade, activity or planning falls within the frame work of law, the same cannot be discarded unless that falls in the category of colourable device which may properly be called a device or a dubious method or subterfuge clothed with apparent dignity.
Thus the assessee is free to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection and which is within the frame work of law. The assessee thus is entitled to do so and there is no prohibition put by the above mentioned decision of Hon. Supreme Court in the case of Mc Dowell (supra). It has already been held that the transactions on the basis of which the AO has disallowed the interest have not been shown or established to be the colourable device or dubious method or subterfuge clothed with apparent dignity. No single instance has been brought on record to prove the existence of "colourable device", "dubious method" or "subterfuge" as these are the ingredients to bring the planning of the assessee within the purview of falling the same in the ambit of situation described in the case of Mc Dowell & Co. (supra). Thus we hold that there is absence of any material to say that the transactions entered into by the assessee with regard to which interest has been paid by the assessee to fall within the category of "colourable device", "dubious method" or "subterfuge" to bring the applicability of decision in the case of Mc Dowell & Co.
(supra). So by applying the ratio of Mc Dowell and Co. (supra) the interest could not be disallowed.
17. Now as it relates to the applicability of Section 77 of the Companies Act, 1956 to the transaction by the assessee on which the interest has been paid it is observed that the said contravention has not been proved or established by the AO. Section of Companies Act, 1956 is reproduced below for the sake of convenience: Section 77 Restrictions on purchase by company, or loans by company for purchase, of its own or is holding company's shares-(1) No company limited by shares and no company limited by guarantee and having a share capital, shall have power to buy its own shares, unless the consequent reduction of capital is effected and sanctioned in pursuance of Section 100 to 104 or of Section 402.
(2) No public company, and no private company which is a subsidiary of a public company, shall give, whether directly or indirectly; and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase of subscription made or to be made by any person of or for any shares in the company or in its holding company: Provided that nothing in this sub-section shall be taken to prohibit - (a) the lending of money by a banking company in the ordinary course of its business; or (b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid up shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees of the company, including any director holding a salaried office or employment in the company; or (c) the making by a company of loans, within the limit laid down in Sub-section (3) to persons (other than directors, or managers) bona fide in the employment of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves by way of beneficial ownership.
(3) No loan made to any person in pursuance of Clause (c) of the foregoing proviso shall exceed in amount his salary or wages at that time for a period of six months.
(4) If a company acts in contravention of Sub-section (1) to (3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one thousand rupees.
(5) Nothing in this section shall affect the right of a company to redeem any shares issued under Section 80 or under any corresponding provision in any previous companies law.
Sub-section (1) is not applicable to the facts of the case as it is not a case where company has bought its own shares. Sub-section (2) prohibits public companies and private companies which are their subsidiaries giving financial assistance to persons for purchasing their shares. In the present case, the assessee company has not given any financial assistance to persons for purchase of its shares. Thus there is no contravention of Section 77 of the Companies Act, 1956. The contravention, if any, may be in the hands of companies who have advanced the money to the assessee company. Thus Section 77 of Companies Act is not applicable to the case of assessee company, therefore, disallowance of interest based on contravention of Section 77 holds no ground.
18. It is not disputed that sale and purchase of shares and to receive money on interest and lending thereof are the business activities of the assessee company. Therefore, the transactions entered into by the assessee were the transactions entered into by it in the normal course of its business. It is not the case of revenue that the money obtained by assessee company on interest was utilized for any purpose other than its business. In other words, it is not the case of revenue that interest bearing funds were utilized by the assessee for the purpose other than its business. If it is so, interest has to be allowed under Section 36(1)(iii) of the Act and has rightly been held to be allowable by CIT(A). We confirm his order and this ground of the department is dismissed.
19. The next issue raised by revenue is regarding addition of Rs. 5,30,030/- which is made on account of inflated purchases. From the perusal of P & L a/c the AO found that purchases were shown at Rs. 66,82,89,965/- but as per quantitative details furnished with regard to purchases, the purchases were shown at Rs. 66,77,59,935/-. Thus he found that there was a difference of Rs. 5,30,030/- and addition of Rs. 5,30,030/- was made on account of inflation in the purchases. CIT(A) has deleted this addition on the ground that assessee had incurred the expenditure of Rs. 5,30,030/- on stamp charges of share purchases and it was also explained during the course of assessment proceedings but it lost sight of A.O. Necessary details and reconciliation figures were submitted before CIT(A); and the details were duly certified by the auditors wherein they had clarified the facts on the matter. Thus CIT(A) observed that addition has been made on improper verification and appreciation. The revenue is aggrieved hence in appeal before us.
20. After narrating the facts, Id. DR pleaded that it was never explained by the assessee before AO that a sum of Rs. 5,30,030/- represented expenses incurred by assessee on shares transfer stamp charges. A new plea was taken before CIT(A) and thus the factual verification was not done by AO. Thus he pleaded that disallowance has wrongly been deleted by CIT(A).
21. Ld. Counsel of the assessee drew our attention towards the chart enclosed at page 27 of the paper book to show that a sum of Rs. 5,30,029/-related to share transfer stamp. The said chart is reproduced below for the sake of convenience:SI. Particulars Share transfer stamp DateNo. Rs.1.
10,00,304 shares of Pinnacle Finance Ltd. 225089 10.10.1996 64,000/-@ 0.5% 320 14.02.1997 0.5% 265265 20.03.1997 @0.5% 39375 26.03.1997 22. After hearing both the parties, we consider it proper to restore this issue to the file of AO as it is not clear from the record that whether or not necessary details were furnished before AO. It is also seen that AO was also not present in the appellate proceedings before CIT(A). In the circumstances, we restore this issue to the file of AO for factual verification of the contention of assessee. After factual verification, the AO will decide the question of disallowance as per provisions of law. With these directions we restore this issue to the file of A.O.23. In the result, appeal filed by revenue is partly allowed for statistical purposes.