9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (2) TMI 279 - AT - Income TaxExpenditure Incurred on Increasing authorized Share Capital - Capital OR Revenue - Held That - When expenses are incurred to increase the share capital and it was immaterial for what purpose the share capital was utilized by the assessee. Reliance placed on CIT vs Kotak India (2001 -TMI - 6052 - SUPREME Court). - Decided against the assessee. Employees contribution to the provident fund after the due date under relevant act - Held That - CIT Vs. Nexus Computer P. Ltd.(2008 - TMI - 33881 - MADRAS HIGH COURT) and in view of Vinay Cement (2007 - TMI - 102762 - Supreme Court of India), payments made before date of filing return under 139(1), deduction allowed. Deemed Dividends - Deposits from common shareholders having more than 20% equity - Deposits for office space - Held That - It could not be brought to notice that assessee and the creditor were in the line of the same business of garment export and as to whether there was any business relation earlier to this transaction. As the facts are not clear we remand the matter back to AO.
Issues Involved:
1. Disallowance of Rs. 62,500 for expenses related to the increase in share capital. 2. Disallowance of Rs. 1,01,391 for delayed remittance of employees' contribution to the Provident Fund. 3. Addition of Rs. 66 lakhs as deemed dividend under section 2(22)(e) of the Income Tax Act. 4. Levy of interest under sections 234B and 234C of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance of Rs. 62,500 for Expenses Related to the Increase in Share Capital: The assessee incurred Rs. 62,500 for increasing its authorized share capital and claimed it as revenue expenditure. The Assessing Officer (A.O.) treated this expenditure as capital in nature, relying on the Supreme Court's judgment in Brook Bond India Ltd. vs. CIT (1997) 225 ITR 798. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the A.O.'s decision, citing several judgments, including CIT vs. Kodak India Co. Ltd. (2002) 253 ITR 445 (SC), which held that expenses related to increasing share capital are capital expenditures. The Tribunal confirmed the CIT(A)'s decision, stating that the expenses were directly related to increasing share capital and thus were capital in nature, not allowable as revenue expenditure. 2. Disallowance of Rs. 1,01,391 for Delayed Remittance of Employees' Contribution to the Provident Fund: The A.O. disallowed Rs. 1,01,391 due to delayed remittance of employees' contributions to the Provident Fund, invoking section 2(24)(x) read with section 36(1)(va) of the Income Tax Act. The CIT(A) upheld this disallowance, distinguishing it from section 43B, which pertains to the employer's contribution. However, the Tribunal set aside the CIT(A)'s order, referencing judgments from various High Courts, including CIT vs. Desh Rakshak Aushdhalaya Ltd. (2009) 313 ITR 140 (Uttarakhand) and CIT vs. P.M. Electronics Ltd. (2009) 313 ITR 161 (Del), which allowed deductions for contributions made before filing the return. The Tribunal directed the A.O. to allow the deduction as the payments were made before the due date for filing the return. 3. Addition of Rs. 66 Lakhs as Deemed Dividend under Section 2(22)(e) of the Income Tax Act: The A.O. treated Rs. 66 lakhs received by the assessee from M/s. Primetex Apparels India Pvt. Ltd. as deemed dividend under section 2(22)(e), as there were common shareholders holding substantial interest in both companies. The assessee contended that the amount was a business transaction for providing office space, not a loan or advance. The CIT(A) upheld the A.O.'s decision, considering it a fund diversion for the benefit of common shareholders. The Tribunal found the facts unclear and noted that neither the A.O. nor the CIT(A) provided sufficient evidence to substantiate the nature of the transaction. The Tribunal remanded the issue back to the A.O. for fresh adjudication, emphasizing the need for clear facts and proper opportunity for the assessee to present its case. 4. Levy of Interest under Sections 234B and 234C of the Income Tax Act: The levy of interest under sections 234B and 234C was acknowledged as consequential by both parties. The Tribunal ordered accordingly, indicating that the interest calculation would depend on the final tax liability determined after adjudicating the other issues. Conclusion: The appeal was partly allowed for statistical purposes, with specific directions for fresh adjudication on the deemed dividend issue and directions to allow the Provident Fund contribution deduction. The Tribunal upheld the disallowance of expenses related to increasing share capital and acknowledged the consequential nature of the interest levy.
|
