Case Law Details
Brief of the Case
ITAT Kolkata held In the case of ITO vs. M/s LGW Ltd that share application money is only in the nature of an offer to buy shares made by the assessee. It is only after the offer is accepted by the company; the Assessee becomes the shareholder in a company. Till this time the Assessee becomes a shareholder, the assessee cannot have any rights to claim any dividend that may be declared by the company. In such circumstances we are of the view that while working out the average value of the investments u/s 14A read with rule 8D (2)(iii), the share application money should not be included.
Facts of the Case
The assessee is a company engaged in the business of manufacture export and trading of goods. The assessee was in receipt of exempt income of Rs.84, 154/-. The Assessee computed the disallowance of expenses incurred in relation to income which does not form part of the total income u/s 14A of the Act r.w. Rule 8D (2)(iii) of the Rules, a sum of Rs.91,360/-. The AO on perusal of the aforesaid computation noticed that the assessee while working out the average value of investments for the purpose of application of Rule 8D (2)(iii) of the Rules had not considered the share application money to the extent of Rs.2,08,00,000/- .According to the Assessee share application money cannot be considered as investment made by the assessee in earning tax payer income. The AO however was in the view that share application money ought to have been considered while determining the average value of investment.
Deduction on account of forex forward contracts
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