RITZ P. LTD, MUMBAI V. ADDL CIT RG 1(3), MUMBAI

ITA 601/MUM/2012

• Counselvise Citation: 60119914 RSA 2012
• Duration Of Justice: 3 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2012
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 14A; 56

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S HRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 4102/MUM/2011 ( / ASSES SMENT YEAR 2005 - 06 ) ./ I.T.A. NO. 600/MUM/2012 ( / ASSESSMENT YEAR 2006 - 07) ./ I.T.A. NO. 601/MUM/2012 ( / ASSESSMENT YEAR 2007 - 08) RITZ PRIVATE LTD., 5, JAMSHEDJI TATA ROAD, CHURCHGATE, MUMBAI 400 0 20 . / VS. ADDL. CIT, RANGE 1(3), AAYKAR BHAVAN, MUMBAI 20. ./ PAN : AAACR 5178D ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI NISHIT GANDHI R E SPONDENT BY : SHRI LOVE KUMAR D.R / DATE OF HEARING : 05 - 05 - 2015 / DATE OF PRONOUNCEMENT : 26 - 06 - 2015 [ / O R D E R PER R.C. SHARMA, AM : TH ESE ARE THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE THREE SEPARATE ORDER S PASSED BY THE LD. CIT(A) - 2 , MUMBAI FOR THE ASSESSMENT YEAR S 2005 - 06, 2006 - 07 & 2007 - 08 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 . 2. THE GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 2005 - 06 IN ITA NO. 4102/MUM/2011 READ AS UNDER: - ITA 4102/11 & 600&601/12 2 1. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE 1.1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 2, MUMBAI ['LD. CIT (A)'], ERRED IN FRAMING THE APPELLATE ORDER WITHOUT AFFORDING REASONABLE AND FAIR OPPORTUNITY OF BEING HEARD. 1.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE APPELLATE ORDER IS REQUIRED TO BE HELD AS BAD IN LAW ON ACCOUNT OF BREACH OF THE PRINCIPLES OF NATURAL JUSTICE. WITHOUT PREJUDICE TO THE ABOVE: 2.1 THE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE U/S. 14A OF THE ACT AT RS.4,27,180 / - . 2.2 WHILE DOING SO, THE CIT (A) ERRED IN: (I) HOLDING THAT THE DISALLOWANCE HAD TO BE ON THE BASIS OF THE PRINCIPLES AS SPELT OUT IN THE RULE 8D OF THE INCOME - TAX RUL ES; (II) COMPUTING THE DISALLOWANCE BY APPLYING HALF PERCENT TO THE TOTAL INVESTMENTS; AND (III) SUMMARILY DISREGARDING AND IGNORING COMPLETELY THE DETAILED FACTUAL SUBMISSIONS MADE BY THE APPELLANT. 2.3 IT IS SUBMITTED THAT IN THE FACTS AND T HE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 2.4 WITHOUT PREJUDICE TO THE ABOVE, ASSUMING - BUT NOT ADMITTING - THAT SOME DISALLOWANCE U/S. 14A WAS CALLED FOR, IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE COMPUTATION OF DISALLOWANCE MADE BY THE LD. CIT (A) IS ARBITRARY, EXCESSIVE AND NOT IN ACCORDANCE WITH THE LAW. 3.1 THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN COMPUTING THE INTEREST INCOME UNDER THE HEAD 'IN COME FROM OTHER SOURCES' INSTEAD OF UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. 3.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ACTION WAS CALLED FOR. 3.3 WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT (A) ERRED IN SUMMARILY DISMISSING THE ALTERNATIVE CLAIM OF THE APPELLANT THAT ITA 4102/11 & 600&601/12 3 ASSUMING - BUT NOT ADMITTING - THAT THE INTEREST INCOME WAS LIABLE TO BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES', THE NECESSARY AND APPROPRIATE DEDUCTIONS, A S AVAILABLE U/S. 56 READ WITH 57 OF THE ACT, SHOULD HAVE BEEN GRANTED TO THE APPELLANT. 4.1 THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN TAXING RS. 41,75,9801 - , BEING THE ALLEGED INCOME ON ACCOUNT OF RECEIPT OF SHARES FROM THE VENTURE CAPITAL COMPANY. 4.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ADDITION WAS CALLED FOR. 5.1 THE LD. CIT (A) ERRED IN NOT ADJUDICATING THE GROUND REGARDING THE BENEFIT OF INDEXATION WHILE COMPUTING THE LONG TERM CAPITAL GAIN. 5.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ACTION WAS CALLED FOR. 5.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE APPELLANT WAS ENTI TLED TO THE BENEFIT OF INDEXATION. 3. THE GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 200 6 - 0 7 IN ITA NO. 600 /MUM/201 2 READ AS UNDER: - 1. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE 1.1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 2, MUMBAI ['LD. CIT (A)'], ERRED IN FRAMING THE APPELLATE ORDER WITHOUT AFFORDING REASONABLE AND FAIR OPPORTUNITY OF BEING HEARD. 1.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE APPELLATE ORDER IS REQUIRED TO BE HELD AS BAD IN LAW ON ACCOUNT OF BREACH OF THE PRINCIPLES OF NATURAL JUSTICE. WITHOUT PREJUDICE TO THE ABOVE: 2. DISALLOWANCE U/S 14 A 2.1 THE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE U/S. 14A OF THE ACT AT RS. 3 ,2 1 , 443 - . 2.2 WHILE DOING SO, THE CIT (A ) ERRED IN: ITA 4102/11 & 600&601/12 4 (I) HOLDING THAT THE DISALLOWANCE HAD TO BE ON THE BASIS OF THE PRINCIPLES AS SPELT OUT IN THE RULE 8D OF THE INCOME - TAX RULES; (II) COMPUTING THE DISALLOWANCE BY APPLYING HALF PERCENT TO THE TOTAL INVESTMENTS; AND (III) SUMMARIL Y DISREGARDING AND IGNORING COMPLETELY THE DETAILED FACTUAL SUBMISSIONS MADE BY THE APPELLANT. 2.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 2.4 WITHOUT PREJUDICE TO THE AB OVE, ASSUMING - BUT NOT ADMITTING - THAT SOME DISALLOWANCE U/S. 14A WAS CALLED FOR, IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE COMPUTATION OF DISALLOWANCE MADE BY THE LD. CIT (A) IS ARBITRARY, EXCESSIVE AND NOT IN ACCORDANCE WITH THE LAW. 3. CHANGE IN HEAD OF INCOME FOR INTEREST INCOME 3.1 THE ID. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER ('THE AO.') WHEREBY THE AO. TREATED THE INTEREST INCOME RECEIVED BY THE APPELLANT, AMOUNTING TO RS . 1,52, 24,114/ - , AS ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AS AGAINST UNDER THE HEAD 'BUSINESS INCOME', DECLARED BY THE APPELLANT IN ITS RETURN OF INCOME. 3.2 WHILE DOING SO, THE CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT HAD EARNE D INTEREST INCOME IN THE COURSE OF ITS REGULAR BUSINESS ACTIVITIES. 3.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ACTION WAS CALLED FOR. 3.4 WITHOUT PREJUDICE TO THE ABOVE, THE ID. CIT (A) ERRED IN SUM MARILY DISMISSING THE ALTERNATIVE CLAIM OF THE APPELLANT THAT ASSUMING - BUT NOT ADMITTING - THAT THE INTEREST INCOME WAS LIABLE TO BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES', THE NECESSARY AND APPROPRIATE DEDUCTIONS, AS AVAILABLE U/S. 56 READ WIT H 57 OF THE ACT, SHOULD HAVE BEEN GRANTED TO THE APPELLANT. 4. DISALLOWANCE OF LOSS 4.1 THE ID. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO. WHEREBY THE AO. DISALLOWED LOSS OF RS. 1, 35,990 / - ON PROPORTIONATE BASIS FROM ITA 4102/11 & 600&601/12 5 THE LOSS ON REDEMPTION UN ITS BY HOLDING THAT THE GROUND WAS NOT PRESSED. 4.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 4. THE GROUNDS RAISED BY THE ASSESSEE FOR A.Y. 2007 - 08 IN ITA NO. 601/MUM/2012 READ AS UNDER: - 1. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE 1.1. THE COMMISSIONER OF INCOME - TAX (APPEALS) - 2, MUMBAI ['ID. CIT (A)'], ERRED IN FRAMING THE APPELLATE ORDER WITHOUT AFFORDING REASONABLE AND FAIR OPPORTUNITY OF BEING HEARD. 1.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE APPELLATE ORDER IS REQUIRED TO BE HELD AS BAD IN LAW ON ACCOUNT OF BREACH OF THE PRINCIPLES OF NATURAL JUSTICE. WITHOUT PREJUDICE TO THE ABOVE: 2. CHANGE IN HEAD OF INCOME FOR INTEREST INCOME 2.1 THE ID. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER ('THE A. O .') WHEREBY THE A.O. TREATED THE INTEREST INCOME RECEIVED BY THE APPELLANT, AMOUNTING TO RS. 1,42,37,371/ - , AS ASSESSABLE UNDER THE HEAD 'IN COME FROM OTHER SOURCES' AS AGAINST UNDER THE HEAD 'BUSINESS INCOME', DECLARED BY THE APPELLANT IN ITS RETURN OF INCOME. 2.2 WHILE DOING SO, THE CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT HAD EARNED INTEREST INCOME IN THE COURSE OF ITS REGULAR BUS INESS ACTIVITIES. 2.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH ACTION WAS CALLED FOR. 2.4 WITHOUT PREJUDICE TO THE ABOVE, THE ID. CIT (A) ERRED IN SUMMARILY DISMISSING THE ALTERNATIVE CLAIM OF THE APP ELLANT THAT ASSUMING - BUT NOT ADMITTING - THAT THE INTEREST INCOME WAS LIABLE TO BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES', THE NECESSARY AND APPROPRIATE DEDUCTIONS, AS AVAILABLE U/S. 56 READ WITH 57 OF THE ACT, SHOULD HAVE BEEN GRANTED TO THE A PPELLANT. 3. DISALLOWANCE ULS 14A ITA 4102/11 & 600&601/12 6 3.1 THE ID. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE U/S. 14A OF THE ACT AT RS. 5,13,787/ - . 3.2 WHILE DOING SO, THE CIT (A) ERRED IN: (I) HOLDING THAT THE DISALLOWANCE HAD TO BE ON THE BASIS OF THE PRIN CIPLES AS SPELT OUT IN THE RULE 80 OF THE INCOME - TAX RULES; (II) COMPUTING THE DISALLOWANCE BY APPLYING HALF PERCENT TO THE TOTAL INVESTMENTS; AND (III) SUMMARILY DISREGARDING AND IGNORING COMPLETELY THE DETAILED FACTUAL SUBMISSIONS MADE BY THE A PPELLANT. 3.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 3.4 WITHOUT PREJUDICE TO THE ABOVE, ASSUMING - BUT NOT ADMITTING - THAT SOME DISALLOWANCE U/S. 14A WAS CALLED FOR, I T IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE COMPUTATION OF DISALLOWANCE MADE BY THE ID. CIT (A) IS ARBITRARY, EXCESSIVE AND NOT IN ACCORDANCE WITH THE LAW. 5. COMMON GROUNDS HAVE BEEN TAKEN IN ALL THE YEARS UNDER C ONSIDERATION, THEREFORE, ALL THE APPEALS WERE HEARD TOGETHER AND ARE NOW DECIDED BY THIS CONSOLIDATED ORDER. 6. FIRST GRIEVANCE OF THE ASSESSEE IN ALL THE YEARS PERTAINS TO DISALLOWANCE OF EXPENSES UNDER RULE 8D OF THE IT ACT. 6.1 IN THE ASSESSMENT YEAR 2 005 - 06, THE ASSESSEE RECEIVED DIVIDEND INCOME OF RS. 10.94 LAKHS. THE AO DISALLOWED RS.9.43 LAKHS UNDER RULE 8D BY RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., 328 ITR 81. 6.2 BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE DISALLOWANCE. 6.3 WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION ARE 2005 - 06 TO 2007 - 08 IN WHICH RULE 8D IS NOT APPLICABLE, HOWEVER, REASONABLE DISALLOWANCE IS WARRANTED. THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997 - 98 & 2000 - 01 ITA 4102/11 & 600&601/12 7 & 2001 - 02 HAS DECIDED THE SIMILAR ISSUE AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5% OF THE DIVIDEND INCOME. AS THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SAME, WE DIRECT THE AO TO RE STRICT THE DISALLOWANCE TO 5% OF THE DIVIDEND INCOME. 7. THE NEXT ISSUE PERTAINS TO TAXING INTEREST INCOME AS INCOME FROM OTHER SOURCES. IT WAS CONTENDED BY LD. AR THAT ONE OF THE MAIN OBJECT OF THE ASSESSEE COMPANY WAS LENDING MONEY. HE INVITED OUR ATTEN TION TO THE TOTAL INTEREST INCOME RECEIVED DURING THE YEAR OUT OF WHICH 90% INTEREST INCOME WAS FROM ICD. LD. AR ALSO RELIED ON DECISION OF HON BLE SUPREME COURT IN THE CASE OF M/S CHENNAI PROPERTIES & INVESTMENT LTD. (CIVIL APPEAL NO. 4494 OF 2004, VIDE O RDER DATED 9 - 4 - 2015 . 7.1 WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT MAJOR PORTION OF THE INTEREST INCOME WAS RECEIVED BY THE ASSESSEE THROUGH ICD AND NOT FROM SECURITIES AS IS STATED U/S.56 OF THE I.T.ACT. IN CASE OF M/S CHENNAI PROPERTIES & INVES TMENT LTD. (SUPRA), THE HON BLE SUPREME COURT HELD THAT WHE RE THE MAIN OBJECT OF THE COMPANY IS LETTING OUT OF THE PROPERTY, RENTAL INCOME RECEIVED FROM SUCH LETTING OUT, IS ASSESSABLE AS BUSINESS INCOME AND NOT UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY . IN THIS CAS E ALSO ONE OF THE MAIN OBJECTION S OF THE ASSESSEE COMPANY WAS LENDING MONEY ON INTEREST. ACCORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR DECIDING AFRESH THE NATURE OF INCOME RECEIVED , KEEPING IN VIEW THE PROPOSI TION OF L AW LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF M/S CHENNAI PROPERTIES & INVESTMENT LTD. (SUPRA) . WE DIRECT ACCORDINGLY. 8. IN THE ASSESSMENT YEAR 2005 - 06 , THE AO HAS ALSO TAXED RS. 41,75, 980/ - ON ACCOUNT OF RECEIPT OF SHARE FROM VENTURE CAPITAL CO MPANY . THE FACTS ARE THAT THE ASSESSEE HAD MADE INVESTMENT IN THE VENTURE CAPITAL COMPANY IN THE EARLIER YEARS. DURING THE FINANCIAL YEAR 2004 - 05 THE ACC OUNT OF ASSESSEE WAS SQUARED WITH THE VENTURE CAPITAL COMPANY. AT THIS TIME, ASSESSEE WAS GIVEN SHARES OF CORPORATE ENTITY, BIOCON LTD, VALUING RS.53,25,061 / - . AT THE SAME TIME AN AMOUNT OF RS. 11 ,49,081 / - WAS CHARGED FROM ASSESSEE ON ITA 4102/11 & 600&601/12 8 ACCOUN T OF EXPENSES. ASSESSEE RECEIVED A NET AMOUNT OF RS.41,75,980 / - AND THE ACCOUNT OF ASSESSEE WAS SQUARED UP. IN THE ORIG INAL RETURN OF INCOME THIS AMOUNT WAS OFFERED TO TAX. IN THE COURSE OF ASSESSMENT PROCEEDINGS, A FRESH COMPUTATION OF INCOME WAS FILED WHICH WAS BASED UPON FORM NO.64 ISSUED BY THE VENTURE CAPITAL COMPANY WHEREIN THIS AMOUNT UNDER CONSIDERATION WAS SHOWN A S UNREALIZED CAPITAL GAIN. ACCORDINGLY, BEFORE THE ASSESSING OFFICER THE CLAIM WAS PUT UP THAT THE AMOUNT UNDER CONSIDERATION .WAS NOT CHARGEABLE TO TAX. IT WAS CONTENDED THAT SECTION 155 U OF THE INCOME. TAX ACT WAS APPLICABLE AND THE CALCULATION IS CONTA INED IN FORM 64 DEPICTED THE CORRECT INCOME CHARGEABLE TO TAX AND ACCORDINGLY, THE AMOUNT UNDER CONSIDERATION SHOULD' NOT BE CHARGED TO TAX ASSESSING OFFICER HAS N OT CONCURRED WITH THE CONTENTION. ACCORDING TO HIM, AT THE TIME OF SQUARING UP THE ACCOUNT OF ASSESSEE , THE VENTURE CAPITAL COMPANY HAS TRANSFERRED THE SURPLUS/PROFIT IN KIND, THAT IS, 10594 EQUITY SHARES OF BIOCON LTD, FOR THE VALUE OF RS.53,25,061 / - , WHICH IS IN LIEU OF PAYMENT DUE TO ASSESSEE . ACCORDING TO ASSESSING OFFICER THIS IS NOTHING BUT PROFIT EARNED ON BEHALF OF ASSESSEE AND IS REQUIRED TO BE BROUGHT TO CHARGE OF TAX. 8.1 BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO . 8.2 THE CONTENTION OF LD. AR WAS THAT PROFIT WOULD ACCRUE TO ASSESSEE ONLY AT THE TIME SALE OF THE SH ARES ON THE GROUND THAT THE VALUE OF RS.53,25,061 / - SHALL BE AN INTEGRAL PART OF COST OF THESE EQUITY SHARES TO THE ASSESSEE FOR COMPUTATION OF CAPITAL GAINS AT THE TIME OF SALE OF THESE SHARES. IT WAS ALSO CONTENDED THAT UNDER PROVISIONS OF SECTION 155 U OF THE INCOME TAX ACT, THE FORM NO.64 IS THE FINAL DETERMINING FACTOR FOR CHARGEABILITY TO TAX. IT HAS BEEN CONTENDED THAT THE SHARES UNDER CONSIDERATION WERE PURCHASED ON BEHALF OF ASSESSEE COMPANY AND IN THE ABSENCE OF ANY SALE OF THE SHARES, NO INCOME C AN ACCRUE TO THE ASSESSEE AND THEREFORE NOTHING SHOULD BE BROUGHT TO CHARGE OF TAX. IT HAS BEEN CONTENDED THAT FORM NO.64 HAS BEEN DRAWN AND SHOULD BE ACCEPTED . 8.3 ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES. ITA 4102/11 & 600&601/12 9 8.4 WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE INSTANT CASE BEFORE US WHAT HAS BEEN DISTRIBUTED BY THE VENTURE CAPITAL COMPANY TO ASSESSEE IS THE SURPLUS IN THE ACCOUNT OF ASSESSEE WITH THE VENTURE CAPITAL COMPANY. THE DIST RIBUTION OF THE SURPLUS IS DEFINITELY CHARGEABLE TO TAX. IN THE PRESENT CASE A DOUBT HAS ARISEN ONLY BECAUSE THIS DISTRIBUTION HAS BEEN DONE NOT IN TERMS OF MONEY BUT IN TERMS OF KIND, SHAREHOLDING IN A CORPORATE ENTITY. HOWEVER, THE NATURE OF DISTRIBUTION OF SURPLUS CAN NEITHER DECIDE NOR GOVERN THE TAXABILITY OF INCOME IN THE HANDS OF ASSESSEE . INCOME HAS DEFINITELY BEEN EARNED IN TERMS OF KIND. IN THE PRESENT FACTS THE INCOME HAS REALLY BEEN EARNED IN TERMS OF KIND AS SHARES OF THE CORPORATE ENTITY. NEVE RTHELESS THE NATURE OF RECEIPTS IN THE HANDS OF ASSESSEE IS INCOME BEING SURPLUS IN ITS ACCOUNT HELD WITH THE VENTURE CAPITAL COMPANY DISTRIBUTED TO ASSESSEE AT THE TIME OF SQUARING UP THE ACCOUNT OF ASSESSEE WITH THE VENTURE CAPITAL COMPANY . ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITIES FOR TAXING THE AMOUNT DISTRIBUTED BY VENTURE CAPITAL COMPANY TO THE ASSESSEE. 9. AS WE HAVE ALREADY DISMISSED GROUND NO.4 IN THE ASSESSMENT YEAR 2005 - 06, GROUND NO.5 IS CONSEQUENTIAL, THEREFORE , THE SAME IS ALSO DISMISSED. 10. GROUND WITH REGARD TO DISALLOWANCE OF RS. 11,35,990/ - FROM THE LOSS ON REDEMPTION OF UNIT IS RESTORED BACK TO THE FILE OF CIT(A) FOR DECIDING AFRESH ON MERIT. 11. IN THE RESULT, ALL APPEAL S OF THE ASSESSEE ARE ALLOWED IN PA RT, IN TERMS INDICATED HEREIN ABOVE . O RDER PRONOUNCED IN THE OPEN COURT ON 26/06 /2015 . SD/ - SD/ - ( SANJAY GARG ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 26/06 /2015 . . ./ RK , SR. PS /PKM,PS ITA 4102/11 & 600&601/12 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) CONCER NED , , MUMBAI 4. / CIT - CONCERNED , MUMBAI 5. , , / DR, ITAT, MUMBA I E BENCH 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI