2017 (3) TMI 330 - AT - Income Tax

Addition u/s 68 - non admitting additional evidence with respect to investment in share capital by Cavere Trading Private Limited - Held that - CIT(A) did not consider the confirmation in respect of the Cavere Trading Pvt. Ltd. on the ground that why the same was not filed before the Assessing Officer but we are of the view that by not considering the said documents, the prejudice would be caused to the assessee if an opportunity of being heard was not granted. Moreover, these documents are relevant and are necessary for the adjudication of the matter of controversy in the interest of justice, therefore, we set aside the finding of the CIT(A) in this regard and direct the Assessing Officer to decide the matter afresh by giving an opportunity of being heard to the assessee by considering the relevant documents produced by the assessee in connection with the Cavere Trading Pvt. Ltd. in accordance with law. Accordingly this issue is being decided in favour of assessee. Disallowance of office renovation expenses - Held that - The company has incurred one time renovation expenses like civil work, electrification etc for setting up the network of the branches which has been included in repair and maintenance expenses shown under the group Office and other expenses . It is not in dispute that the said expenditure was incurred in respect of running of office premises. Anyhow, it is to be seen whether such type of expenditure is required to be treated as capital expenditure or revenue expenditure. In this regard the law relied by the representative of the assessee speaks that the repair and renovation of leased business premises is liable to be considered as revenue expenditure. In view of the above mentioned law i.e. Thiru Arooran Sugars Ltd. Vs. DCIT (2013 (2) TMI 450 - Madras High Court )we are of the view that the expenditure to the tune of ₹ 23,66,226/- is revenue in nature which is allowable in accordance with law. - Decided in favour of assessee. Disallowance of residential renovation expenses - Held that - The Assessing Officer declined the same on the ground that no business connection was established in connection with Directors. No evidence of any kind was found, however, nothing new was produced before CIT(A). After filing the appeal before us no new material has been produced before us. Any how alternative ground is quite reasonable, therefore, depreciation in accordance with law is liable to be allowed on the amount expended for the renovation of residential. Accordingly, these issues are decided in favour of the assessee against the revenue.

Summary

Issues Involved:
1. Admissibility of additional evidence for investment in share capital by Cavere Trading Private Limited.
2. Disallowance of professional fees for obtaining FIPB approval.
3. Disallowance of office renovation expenses.
4. Disallowance of residential renovation expenses.
5. Depreciation on residential renovation expenses.
6. Addition due to difference in books of account.

Issue No. 1:
The assessee appealed against the CIT(A)'s decision not to admit additional evidence regarding the investment in share capital by Cavere Trading Private Limited. The ITAT found that the CIT(A) did not consider the confirmation documents for Cavere Trading Pvt. Ltd., causing prejudice to the assessee. The ITAT set aside the CIT(A)'s decision and directed the Assessing Officer to reconsider the matter, granting the assessee an opportunity to be heard and considering the relevant documents provided. The issue was decided in favor of the assessee.

Issue No. 2 & 3:
These issues were not pressed by the assessee and were dismissed.

Issue No. 4:
The assessee challenged the disallowance of office renovation expenses treated as capital expenditure. The ITAT found that the renovation expenses were incurred for setting up branches and were revenue in nature based on relevant legal precedents. The CIT(A)'s decision was set aside, and the issue was decided in favor of the assessee.

Issue No. 5 & 6:
The assessee contested the disallowance of residential renovation expenses and claimed depreciation. The ITAT ruled in favor of the assessee, allowing depreciation on the amount spent on residential renovation, as it was a reasonable claim and in accordance with the law.

Issue No. 7:
The assessee did not pursue this issue, leading to its dismissal.

In conclusion, the ITAT partially allowed the appeal filed by the assessee, with decisions made in favor of the assessee on various issues related to the admissibility of evidence, treatment of renovation expenses, and allowance of depreciation. The order was pronounced on 28th February 2017.