9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (10) TMI 195 - AT - Income TaxAddition u/s 35D - expenditure incurred for increase in Authorised Capital of the Company - Held that - The assessee has debited an amount of ₹ 104,000/- as preliminary expenses on account of expenditure incurred in the case of fees and stamp duty payable to increase the authorized capital u/s. 35D of the I.T. Act We find that according to provisions of section 35D(ii) of the Act the kinds of expenses claimed by the assessee are not specifically covered in the section 35D(ii). Hon ble supreme court in the case of Brook Bond India Ltd. 1997 (2) TMI 11 - SUPREME Court has held that the fees paid to registrar for increase in authorized share capital is a capital expenditure.In Commissioner of Income Tax vs. Hindustan Insecticides Ltd (2001 (2) TMI 75 - DELHI High Court ) held that the fee paid to Registrar of Companies for increasing the authorized capital is a capital expenditure. It is not possible to get such deduction under section 35D unless it is coupled with the extension of an industrial undertaking or in connection with setting up of a new industrial undertaking.We find that this disallowance was confirmed by the Ld. Commissioner of Income Tax(A) by giving a specific finding that the assessee is not fulfilling the conditions imposed under sub-sections (1) and (2) of section 35D, we, therefore, uphold the order of the Ld. Commissioner of Income Tax(A) - Decided against assessee Disallowance u/s. 14A - Held that - We find that the assessee submitted before the lower authorities that it has not earned any exempt income during the year. The Assessing Officer has also not provided any detail of exempt income earned by the asssessse during F.Y. 2008-09. The Ld. Commissioner of Income Tax(A) held that the appellant has not been able to show before the Assessing Officer that no interest expenses have been incurred by it in relation to the assets capable of generating exempt income. The ld. counsel relied on the decision of the co-ordinate bench in the case of Shr Nandlal J. Agarwal vs. DCIT, Circle-1 Ahmedabad 2015 (7) TMI 1139 - ITAT AHMEDABAD where it was held that the disallowance under section 14A cannot be made when no income is claimed to be exempt in that particular year after relying on the decision of Hon ble jurisdictional high court in the case of Commissioner of Income Tax vs. Corrtech Energy (P) Ltd. (2014 (3) TMI 856 - GUJARAT HIGH COURT). In view of the above mentioned facts and circumstances and after considering the legal findings, we allow the appeal of the assessee on this ground as lower authority has not pointed out generation of any exempt income during the particular year. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of expenses under Section 35D for increase in authorized share capital. 2. Disallowance under Section 14A read with Rule 8D for investments generating exempt income. Detailed Analysis: Ground No. 1: Disallowance of Expenses under Section 35D Facts and Arguments: - The assessee debited ?1,04,000 as preliminary expenses for fees and stamp duty to increase the authorized capital. - The Assessing Officer (AO) disallowed this claim, citing the jurisdictional High Court decision in M/s Vareli Textiles Ltd and the Supreme Court decision in Brooke Bond India Ltd., which held that such expenses are capital in nature and not deductible as revenue expenses. - The AO further stated that Section 35D(2) does not include expenses for increasing authorized share capital. Commissioner of Income Tax (Appeals) [CIT(A)] Decision: - The CIT(A) upheld the AO's decision, referencing the Supreme Court's ruling in Brook Bond India Ltd. and other cases, which confirmed that fees paid to the registrar for increasing authorized share capital are capital expenditures and not deductible under Section 35D. Tribunal's Analysis: - The Tribunal reviewed the provisions of Section 35D(ii) and confirmed that the expenses claimed by the assessee are not covered under this section. - Citing various judicial precedents, including the Supreme Court and High Court rulings, the Tribunal upheld the CIT(A)'s decision, confirming that the expenses for increasing authorized share capital are capital expenditures and not deductible under Section 35D. Conclusion: - The Tribunal dismissed the appeal on this ground, affirming the disallowance of ?1,04,000 as the expenses did not meet the conditions specified under Section 35D. Ground No. 2: Disallowance under Section 14A read with Rule 8D Facts and Arguments: - The AO noted that the assessee had investments of ?80,12,500, the income from which is exempt from tax, but no disallowance was made under Section 14A. - The assessee argued that since no exempt income was received, Section 14A should not apply. - The AO contended that Section 14A disallows expenses related to income that does not form part of total income, regardless of whether the income was actually earned. Commissioner of Income Tax (Appeals) [CIT(A)] Decision: - The CIT(A) rejected the assessee's claim, stating that Section 14A applies to investments capable of generating exempt income. - The CIT(A) cited judicial precedents, including the Delhi Special Bench decision in Ken Investment Ltd., which supported the AO's disallowance. Tribunal's Analysis: - The Tribunal reviewed the provisions of Section 14A and noted that for disallowance to apply, the assessee must have earned exempt income and incurred related expenses. - The Tribunal found that the assessee did not earn any exempt income during the relevant year, as evidenced by the profit and loss account and return of income. - The Tribunal referenced the jurisdictional High Court decision in Commissioner of Income Tax vs. Corrtech Energy (P) Ltd., which held that disallowance under Section 14A cannot be made if no exempt income is earned. Conclusion: - The Tribunal allowed the appeal on this ground, concluding that Section 14A disallowance is not applicable as the assessee did not earn any exempt income during the year. Final Order: - The appeal of the assessee is partly allowed, with the disallowance under Section 35D upheld and the disallowance under Section 14A reversed.
|
