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TMI Blog2014 (1) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... ds raised in the earlier years and brought forward in the current year were for deployed in the business of the company which means that interest free ICDs were made out of interest free funds of the company – Decided in favour of Assessee. Disallowance of amount paid to ROC towards expenses – Expenses incurred for increasing authorized share capital of the Company – Held that:- Following CIT v. Multi Metals Ltd. [1990 (10) TMI 55 - RAJASTHAN High Court] - expenditure to be eligible u/s 35D(2)(c)(iv) of the Act being allowable as 1/10th of the expenditure for a period of ten years – thus, the assessee can claim only 10% of such expenditure in this year u/s 35D – Decided partly in faovur of Assessee. - ITA No.5990/Del/2012 - - - Dated:- 26-4-2013 - A D Jain and T S Kapoor, JJ. For the Appellant : Shri Gagan Kumar, Adv. For the Respondent : Shri Tarun Seem, Sr. DR ORDER:- Per: T S Kapoor This is an appeal filed by the assessee against the order of Ld CIT(A) dated 25.1.2010. The grounds raised by the assessee are as under:- 1. The order passed by the Ld Assessing Officer is erroneous and bad in law. 2. The Ld Assessing Officer has erred in making the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. In view of the above, the addition of Rs.14,22,219/- was made. 4. The Assessing Officer further observed that assessee had incurred an expenditure of Rs.94,900/- for enhancing its capital base and said expenditure was claimed as revenue expenditure. The Ld Assessing Officer relying upon the decision of the Hon'ble Supreme Court as reported in 225 ITR 792 225 ITR 798 disallowed the same. 5. Dissatisfied with the order, the assessee filed appeal before Ld CIT(A) and reiterated its submissions before Assessing Officer and further explained that amount of ICD was not paid out of interest bearing funds and therefore the addition made by Assessing Officer was not justified. It was further explained before the Ld CIT(A) that the moneys were raised in earlier years and were used for the business purposes and interest paid on it was allowed as business expenditure. It was further explained that during the year under consideration, it had not raised further loans rather it had repaid certain old unsecured loans. The Ld CIT(A), however, did not agree with the contentions of the assessee and upheld the additions made by the Assessing Officer by holding as under:- I have gone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of improving the established business and cannot be said to be for the purpose of new business and therefore was a revenue expenditure and it was argued that same may be allowed u/s 37 as expenditure wholly and exclusively incurred for business purposes. However, ld CIT(A) upheld the addition made by the Assessing Officer by holding as under:- I have gone through the assessment order and the detailed written submissions filed by the AR in this regard. It is an admitted fact that the amount was paid for increasing the share capital. In the light of the decision of Hon'ble Supreme Court in the cases of Punjab State Industrial Corporation Ltd. v. CIT (1997) 93 Taxman 5/225 792 (SC) Brooke Bond Ltd. v. CIT (1997) 91 Taxman 26/225 ITR 798 (SC) as mentioned in the assessment order, the expenses is rightly disallowed by the assessee. Confirmed Rs.94,900/-" 7. Aggrieved with the order of Ld CIT(A), the assessee is in appeal before us. 8. At the outset, the Ld AR took us to page 25 of paper book and invited our attention to the fact that unsecured loan as on 31.3.2005 was of Rs.1,09,41,729/- which had reduced to Rs.43,66,729/- as on 31.3.2006, the reference of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer and Ld CIT(A). 12. We have heard the rival submissions of both the parties and have gone through the material available on record. We find from the record that unsecured loans on which assessee had paid interest were carried over from the earlier year and in the earlier year interest was claimed to the extent of Rs.17,68,200/-. A part of the above unsecured loans which was outstanding at Rs.1,09,41,729/- in the beginning of the year was reduced to Rs.43,66,729/- during the year. It is also observed from paper book page 25 that between the period from April, 2004 to 31st March 2005 the company had raised a significant amount in the form of equity shares and as on 31.3.2005 it had a cash and bank balance amounting to Rs.1,36,17,763/- as is apparent from paper book page 9. Therefore, from the facts and circumstances of the case, it can be concluded that assessee had sufficient interest free funds which were placed as an ICD without interest. This fact is further strengthened from the fact that unsecured loans raised by assessee raised in earlier years were already invested into business assets. The Hon'ble High Court of Mumbai in the case of CIT v. Reliance Utilities Pow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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