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2019 (4) TMI 1101 - AT - Income TaxAddition of preliminary expenses u/s.35D(2) - Treated as Capital expenses - HELD THAT - Admittedly this expenditure pertain to filing and stamping charges of ROC for increase in the authorized capital is nothing but a capital expenditure. In the judgment of CIT-vs-Tungabhadra Industries Ltd. 1991 (11) TMI 6 - CALCUTTA HIGH COURT categorically held that fees paid for increasing authorized capital is a capital expenditure. Thus, the same are not eligible for deduction u/s 35D of the Act. In Punjab State Industrial Development Corporation Ltd.-vs-CIT 1996 (12) TMI 6 - SUPREME COURT dealing with the issue further held that the expenses incurred on increasing the share capital and fees paid to Registrar of Companies for increase in authorized capital is capital expenditure and cannot be allowed for revenue expenditure which was duly taken care of by the Learned CIT(A) while confirming such addition. - Decided against assessee Addition u/s 43B - Disallowance u/s 2(24)(x) - certain PF and ESIC payments on behalf of the employees were made by the assessee beyond the stipulated due date - HELD THAT - Admittedly the PF received from the employees were deposited by the assessee company in the PF account beyond the due dates as prescribed in PF Act. In the case of CIT vs. Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT pleased to hold that where the employer has not credited the sum received by it as employees contribution to employees account in relevant funds on or before due date as prescribed in Explanation to Section 36(1)(va), the assessee shall not be entitled to deduction of such amount though he deposits the said sum before the due date prescribe u/s 43B i.e. prior to filing of return u/s 139(1) of the Act. Since in this particular case, the employees contribution toward PF was not deposited before due date in terms of statutory rules as mentioned hereinabove, the Learned CIT(A) confirmed such addition - Decided against assessee Disallowance of the claim of deduction u/s 80IB - assessee has not claimed deduction in respect of its windmill unit u/s 80IA(4) neither filed a revised return within the stipulated time - HELD THAT - As decided in assessee's own case 2017 (2) TMI 730 - ITAT AHMEDABAD the appellant has made claim for deduction u7s.80IB in the original return and it was revised during the assessment proceedings. Since the appellant has not made a fresh claim of deduction u/s.80IB during the assessment proceedings, accordingly, I am of the considered opinion that ratio of Goetz India Ltd. 2006 (3) TMI 75 - SUPREME COURT will not be applicable. Assessing Officer has merely disallowed the claim for not filing revised return of income. It is an established proposition of law that the correct income of the assessee has to be assessed by the Assessing Officer and if there is a rightful claim then the same should be allowed to the assessee. More particularly in this case of assessee claimed a deduction u/s 80IB of the Act in the return of income so there is no new claim made during the course of assessment proceedings but it is just a correct claim which has been put forward with due supporting before ld. Assessing Officer and the same should have been allowed to the assessee. - Decided in favour of assessee. Defect apparent on the face of the records of the assessment order - instead of the figure of declared income available with the revised return the figure appearing in the original return has been taken into account without rejecting the revised return so filed by the assessee - not adjudicating the ground of appeal as raised by the appellant challenging the action of the Assessing officer in computing the total income - HELD THAT - Error as committed by the Learned AO needs to be rectified. Rather the same ought to have been directed to be rectified by the Learned First Appellate Authority when the same was brought to his notice in appeal by the appellant. Having not doing so, we are of the considered opinion that the issue is to be set aside to the file of the AO for de novo proceeding taking into consideration the figure appearing for the revised return filed on 28.02.2013 by the appellant. In that view of the matter, the additions made on the basis of a wrong calculation is deleted.
Issues Involved:
1. Disallowance of preliminary expenses under Section 35D(2). 2. Disallowance of late payments of Employees' contribution to Provident Fund under Section 2(24)(x). 3. Re-computation and disallowance of deduction under Section 80IB. 4. Disallowance of deduction under Section 80IB(5) for Windmill business. 5. Rejection of claim under Section 80IB due to non-filing of revised return. Detailed Analysis: Ground No. 1: Disallowance of Preliminary Expenses under Section 35D(2) The assessee, engaged in the business of manufacturing Vitrified Tiles, claimed ?1,13,068 as preliminary expenses written off, which was disallowed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The expenses were related to ROC charges for increasing share capital, deemed as capital expenses, not deductible as revenue expenses. The decision was supported by the Supreme Court ruling in Brooke Bond India vs. CIT (225 ITR 798) and the Gujarat High Court in M/s. Vareli Textile Ltd. (284 ITR 238). The tribunal upheld the disallowance, confirming it as a capital expenditure not eligible for deduction under Section 35D. Ground No. 2: Disallowance of Late Payments of Employees' Contribution to Provident Fund under Section 2(24)(x) The AO disallowed ?55,776 due to late payment of employees' PF contributions, treating it as income under Section 2(24)(x). The CIT(A) upheld this disallowance. The assessee argued that similar disallowances in previous years were deleted by CIT(A). However, the tribunal noted that the payments were made beyond the due dates prescribed in the PF Act, referencing the Gujarat High Court ruling in CIT vs. Gujarat State Road Transport Corporation (265 CTR 64), and confirmed the disallowance. Ground No. 3, 4 & 5: Re-computation and Disallowance of Deduction under Section 80IB The assessee claimed ?1,35,24,691 as deduction under Section 80IB, including profits from a windmill unit. The AO recomputed the deduction, excluding the windmill profits, and allowed only ?1,26,86,992, disallowing ?8,37,699. The AO also rejected the claim for additional deduction under Section 80IA(4) for the windmill profits, citing the Supreme Court judgment in Goetze India Ltd. (157 Taxman 1) for not filing a revised return. The tribunal noted that the issue was covered by a previous ITAT decision in the assessee's favor for A.Y. 2009-10, allowing the revised claim without the need for a revised return. Consequently, the tribunal deleted the disallowance of ?8,37,699 and allowed the deduction of ?20,52,724 under Section 80IA(4). Ground for A.Y. 2011-12: Computation of Total Income Ignoring Revised Return The assessee filed a revised return declaring income of ?3,69,65,780, but the AO computed the total income as per the original return at ?3,80,52,880. The CIT(A) dismissed the ground as general in nature. The tribunal found this to be an error apparent on record and directed the AO to recompute the total income based on the revised return, setting aside the assessment for de novo proceedings. Conclusion: - Appeal in ITA No. 744/Ahd/2015 is partly allowed. - Appeal in ITA No. 745/Ahd/2015 is allowed for statistical purposes. Order Pronounced in Open Court on 24/01/2019.
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