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TMI Blog2012 (7) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... e FY relevant to AY under consideration, the A.O. was not justified in rejecting the books of accounts and in making such addition. Section 69 is attracted when investment is not recorded in books of accounts, assessee fails to explain or explanation is found unsatisfactory. None of conditions are existing. Order of CIT(A) deleting addition upheld - Decided in favor of assessee. Preliminary expenses - establishment expenses - dis-allowance on ground that assessee has not commenced its business activities and as such the question of claiming deduction u/s 35D does not arise - Held that:- Since agreement with M/s Coeclerici Logistics S.P.A. has taken place on 11-2-2006, therefore, business of the assessee has commenced on 11-12-2006 i.e. the year under consideration and hence both the claims made by the assessee are allowable - Decided in favor of assessee. - ITA No.6664/Mum/2010 - - - Dated:- 31-5-2012 - S/SHRI DINESH KUMAR AGARWAL, N.K. BILLIAYA, JJ. Revenue by : Shri A.C. Tejpal Assessee by : Shri Nishant Thakkar O R D E R PER DINESH KUMAR AGARWAL (JM) This appeal preferred by the Revenue is directed against the order dated 20-05-2010 passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r wherein inter alia submitted that the amount of Rs. 4.37 crores was incurred by M/s. Coeclerici Logistic S.P.A. towards other equipments and not expended by the assessee, therefore, the provisions of section 69-B and 145(3) are not applicable in the assessee s case. The AO after considering the assessee s explanation observed that as per Books of Accounts of the assessee company as on 31-03-2007, the value of the asset The Vessel known as Bulk Prosperity is disclosed at Rs. 18.85 crores whereas the holding company has disclosed the value of the same asset as on 31.12.2006 at Rs. 23.22 crores. Having taken note of this fact and also having considered the assessee s submission, the A.O. has made detailed discussion for this addition in para 5 of the assessment order and after rejecting the books of account u/s 145(3) r.w.s. 144 of the I.T. Act. concluded that the assessee company has not disclosed the correct value of the vessel in their books of account as on 31.3.2007 and accordingly added the difference of Rs. 4,36,93,000/- as value of asset u/s 69 of the Act as unexplained investment in the hands of the assessee company. 6. On appeal, the learned CIT(A) after considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers no explanation about the nature and source of the investment or the explanation offered by the assessee is not satisfactory, the value of the investment may be deemed to be the income of the assessee. In this case, the assessee has fully disclosed the investment made upto 31-03-2007 and the balance investment was disclosed in the subsequent year when the assessee has taken the delivery and the AO has accepted the same and also allowed depreciation thereon, therefore, the provisions of Section 69 are not applicable. He therefore submits that the addition made by the AO and was rightly deleted by the learned CIT (A) and his order be upheld. 10. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that during the year under consideration, the assessee has recorded the advance for construction of vessel amounting to Rs. 18,85,31,360/-. We further find that the addition was made by the AO on the ground that as per assessee s balance sheet, the amount advanced for construction of Vessel was shown at Rs. 18,85,31,360/- whereas as per the official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce raised by the Supervisor which will include all interest accrued and calculated in accordance with clause 3.4.3.2 below and (b) the following Supporting documents: (i) evidence that the Equipment has been received at the Shipyard, (ii) a confirmation from the Shipyard that the Equipment fitted on the Vessel have been tested in appropriate manner. 8.9 Having taken note of these Clauses, I am of the considered view that the Appellant Company was not liable to pay for the services as well as Equipment procured by the Supervisor i.e. holding company during this account year i.e. 2006-07, which is relevant in the appeal. I also find that the Appellant Company very categorically in its submission dated 10-12- 2009 addressed to the Income Tax Officer 1(1)(2) has stated that the Appellant company did not make any payment of Rs. 4.37 Crores, hence applying Section 69B in the Appellant s case does not arise at all. Hence, I consider it proper and appropriate to extract the relevant portion of this letter herein below which is found placed in the assessment order from page 4 to page 6 of the assessment order. As far as the amount of Rs. 4.37 crores is concerned, there is no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Coeclerici Logistic S.P.A. has procured all these equipments and services of the value of Rs. 4,36,93,000/- and provided in terms of the agreement dated 11/12/06. The Appellant company also stated that the holding company put the value of Rs 4,36,93,000/- in their books of accounts as the holding company has to show their investment incurred by them on behalf of the Appellant company for the procurement of equipments and services related to the Shipbuilding contract. Therefore, I find that having taken note of all these submissions which was all along available with the AO, AO s action was not at all justified of taxing the same u/s. 69 of the Act as deemed income. The AO has not made any case in the assessment order that the Appellant company has invested the sum by any proof or documentation. Merely that the holding company has shown the value of investment as on 31-12-2006 of the vessel more than what the Appellant company has disclosed in the books of accounts will not give right to AO to make such addition. The Appellant company has very categorically explained the sources of investment made by its holding company which was duly recorded in the books of holding company as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed copy of statement showing the matching of balance with assessee and M/s Coeclerici Logistics S.P.A. appearing at page 46 of the assessee s paper book which is also reproduced as under:- STATEMENT SHOWING HOW BALANCES MATCH AS ON 31ST DECEMBER, 2008. AS PER COECLERICI S.P.A. ( 000) EUROS WIP RECLASSIFIED AS FLEET (OPENTING BALANCE) 8720 ADDITIONAL DURING THE YEAR 3004 TOTAL 11724 LESS: DEPRECIATION 576 NET VALUE AS ON 31ST DECEMBER 2008 111478 RATE OF CONVERSION: 69 VALUE IN INDIAN RUPEES 769212 AS PER CGU S BALANCE SHEET AS ON 31/12/2008 769212 From the above, it is clear that the assessee has filed all the relevant details/documents before the A.O. As regards filing of confirmation letter dtd. 16-2-2010 appearing at page 51 of the assessee s paper book which was not filed during the course of assessment proceedings but the same was filed in the post assessment proceedings confirming that the balance payment was made up to 31st March 2008 and not up to 31st December, 2006 we find that, in fact, the said letter tallies with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 18,85,31,360/- and such investment is fully supported by relevant material, simply because M/s Coeclerici Logistics S.P.A. has recorded different amount i.e. Rs. 23,22,24,360/- in its balance sheet for the year ended on 31st March 2006 on the basis of its own accounting method and considering the fact that the assessee was not required to make such payment before the delivery of the vessel and further the assessee has filed relevant material to show that such payment was made by the assessee as per the terms of the agreement in the subsequent assessment years which has also accepted by the Revenue in the said assessment years, we are of the view that in the absence of any material to show that the assessee has made such payment of Rs. 4,36,93,000/- during the financial year relevant to assessment year under consideration, the A.O. was not justified in rejecting the books of accounts and in making such addition. Accordingly we are inclined to uphold the findings of the ld. CIT(A) in deleting the addition of Rs. 4,36,93,000/-. The grounds taken by the Revenue are therefore rejected. 13. Ground No. 2 reads as under:- Whether on the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to assessment year 2007-08 i.e. the year under consideration and therefore the ld. CIT(A) was fully justified in deleting the disallowance made by the A.O. by following the decision of Hon ble Delhi High Court in ESPN Software India (P) Ltd. (supra). He, therefore, submits that the order passed by the ld. CIT(A) be upheld. 18. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that as per the supervision and technical management agreement dtd. 11-12-2006, the assessee has entered into an agreement with M/s Coeclerici Logistics S.P.A. for erection of vessel, therefore, the business was set up in the financial year 2006-07 relevant to A.Y. 2007-08 i.e. the year under consideration. In ESPN Software India (P) Ltd. (supra) it has been observed and held (Headnote page 370 of ITR): Held, dismissing the appeal, that since the assessee had acquired the licence on August 15, 1995, and commenced its business on or after August 15, 1995, there was no infirmity in the view taken by the Tribunal. 19. In the case of the assessee, the agreement with M/s Coeclerici Logistics S.P.A. has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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