2013 (6) TMI 19 - AT - Income Tax

Fees paid to ROC for increase in authorized share capital - CIT(A) allowed part relief - Held that - There is no dispute that there was no fresh inflow of funds to the extent of Rs. 35 crores in regard to increase in equity shares capital of the company and therefore ROC fees and other related expenses on this account of increase in authorized share capital was revenue in nature in view of the decision of General Insurance Corporation Ltd. 2006 (9) TMI 116 - SUPREME Court . As regards the fresh cash infusion during the year towards preference share CIT(A) has treated the expenditure incurred towards ROC fees etc. as capital in nature as relying on Punjab State Industrial Development Corporation Ltd. vs. CIT (1996 (12) TMI 6 - SUPREME Court) and Brooke Bond India Ltd vs. CIT (1997 (2) TMI 11 - SUPREME Court) - No interference in CIT(A) conclusion required. Against revenue. Contribution to the employees provident fund - was required to be deposited on 20.02.2005 but was deposited on 21.02.2005 as 20.02.2005 was Sunday - CIT(A) allowed the claim - Held that - No reason to interfere with his order of CIT(A) because as rightly observed by him even otherwise the deduction was allowable to assessee by the decision of CIT vs. Aimil Ltd 2009 (12) TMI 38 - DELHI HIGH COURT . The grievance of the department that since assessee had not claimed in the return of income this deduction the same was not allowable in view of the decision of the Goetze India Ltd (2006 (3) TMI 75 - SUPREME Court) is misplaced because this decision does not put any embargo on the powers of appellate authority to allow a legally. In favour of assessee. Related party transaction - Addition computed at the rte of 6% towards interest - CIT (A) deleted the addition following the order of assessment year 2007-08 - Held that - As department has not brought on record for distinguishing features from the earlier year to persuade a different view therefore respectfully following the decision for assessment year 2007-08 wherein held that there is no nexus between the borrowings made by the assessee company and advance given to M/s. Hero Global Design Ltd. Similarly the outstanding sums extracted represents the sales consideration of assets technical know-how rent etc. which are not the advance given by the assessee out of the borrowed funds. In such circumstances no disallowance can be made. In favour of assessee.

Summary

Issues:
1. Disallowance of fees paid to ROC for increase in authorized share capital for assessment year 2005-06.
2. Deduction of employee's contribution to provident fund for assessment year 2005-06.

Analysis:
1. Disallowance of Fees Paid to ROC:
The department filed an appeal against the order of Ld. CIT(A) for the assessment year 2005-06 regarding the disallowance of fees paid to ROC for the increase in authorized share capital. The assessing officer held the expenses as capital in nature, relying on Supreme Court decisions. The Ld. CIT(A) directed the AO to allow the deduction, considering the circumstances of the case. The department appealed, arguing that the expenses were incurred for the increase in authorized capital, unlike the bonus shares issue in the Supreme Court case. The Ld. CIT(A) analyzed the increase in authorized share capital post a court-approved scheme, distinguishing between equity and preference capital. He allowed the disallowance to the extent of Rs. 30,18,293 for the preference capital. The ITAT upheld the Ld. CIT(A)'s decision, stating that the expenses for the equity capital were revenue in nature due to no fresh fund inflow, as per the Supreme Court's decision.

2. Deduction of Employee's Contribution to Provident Fund:
The second issue involved the deduction of Rs. 3,17,016 being the employee's contribution to provident fund for the assessment year 2005-06. The contribution was deposited a day late due to a Sunday. The Ld. CIT(A) directed to allow the deduction, citing a Delhi High Court decision. The department contended that since the deduction was not claimed in the return, it was not allowable as per a Supreme Court decision. The ITAT dismissed the department's appeal, stating that the appellate authority can allow a legally admissible claim even if not claimed in the return, as per legal precedents.

3. Interest on Advances to Related Concern:
In the appeal for the assessment year 2008-09, the assessing officer made an addition towards interest on advances to a related concern. The Ld. CIT(A) deleted the addition based on the order for the previous year, where the Tribunal found no nexus between borrowings and the advances. The department failed to provide distinguishing features to alter the decision, leading to the dismissal of the appeal by the ITAT.

In conclusion, both appeals were dismissed by the ITAT, upholding the decisions of the Ld. CIT(A) on the disallowance of fees paid to ROC and the deduction of employee's contribution to provident fund, as well as the deletion of interest on advances to a related concern for the respective assessment years.