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TMI Blog2015 (1) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... est on loan - CIT(A) deleted the addition - Held that:- Ld. CIT(A) has concluded that this ground of appeal is consequential to the fourth ground of appeal dealt while deleting the addition of ₹ 12,20,000/- above. Since relief has been allowed in the main ground, the consequential ground as to allowed. The disallowance of interest paid he deleted. - Decided in favour of assessee. Fee paid to ROC - Revenue v/s Capital - Held that:- The expenditure on issue of shares and the fees paid to the Registrar of the Company is capital in nature. Expenditure incurred by a company in connection with issue of share with a view to increase its share capital, is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profit making. Hence, the same cannot be allowed as revenue expense. See PSIDC vs. CIT [1996 (12) TMI 6 - SUPREME Court] Brooke Bond vs. CIT [1997 (2) TMI 11 - SUPREME Court] and CIT vs. Kodak India Ltd. [2001 (10) TMI 7 - SUPREME Court]. - Decided in favour of revenue. - I.T.A. Nos.4635 & 4708/Del/2013, I.T.A. No. 4713/Del/2013 - - - Dated:- 19-1-2015 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any / all the grounds of appeal before or during the course of hearing of the appeal. 4. The grounds raised in the Assessee s Appeal 4713/Del/2013 (A.Y. 2008-09) read as under:- 1. On the facts and in the circumstances of the case the Ld. CIT(A) is not justified in treating the fee paid to ROC as capital expenditure when the increase in authorize capital was of the purpose of raising money to meet working capital needs of the company. 2. The appellant craves leave to alter, amend or add any other ground of appeal either before or during the hearing. REVENUE S APPEAL (ITA NO. 4635/DEL/2013) 5. Briefly stated the facts are that a search and seizure operation u/s. 132(1) of the I.T. Act, 1961 was carried on 28.2.20078 at the premises of Sh. Suresh Nanda and Associate companies. The office / residential premises of M/s Russian Technology Centre Pvt. Ltd., at A-1/20, Safdarjung Enclave, New Delhi was also covered under search proceedings. The case was centralized in this charge by order passed by CIT-5, New Delhi dated 6.11.2007. Notice u/s. 153A of the I.T. Act dated 9.9.2008 was issued and served upon the assessee to file income tax return for the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee to establish its claim which it failed to do. He further observed that as per Para 3 of the assessment order, the assessee was required to furnish the following details: Procedure the evidence to prove the identity, capacity and genuineness of the persons related with the increase in the share capital and increase in unsecured loans. Please furnish the details of the bank accounts of the depositor with cheque no. and date copy of the acknowledgement of return of income. Give the details of the cheque numbers through which the repayment, if made along with the copy of your bank account showing the withdrawal such cheque. (details related to unsecured loans/ advances as well as share capital addition, if any.) Furnish the same details in respect of increase in unsecured loans including squared up loans also. 8.1 He further observed that as per Para 3.1 of the assessment order, the following reply was filed by the assessee: During the year the assessee company has accepted loan of ₹ 10,50,000/- from M/s Ahura Exports P Ltd. by DD No. 080587 dated 23.2.2004, interest of ₹ 87413/- has been paid during the FY 2014-15. The loan has been repaid durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 12.1 With regard to deleting the addition of ₹ 2,18,74,410/- made by the AO on account of unexplained share capital received by the assessee company is concerned, we find that AO has noticed that these details submitted by the AO do not prove the creditworthiness of the investors. The onus is on the assessee to prove that the said parties, have the financial capacity and the creditworthiness to give such a huge amounts. By not filing the complete details called for, the assessee company has not discharged its onus. Therefore, in view of the partial details furnished by the assessee company, the share capital addition amounting to ₹ 2,18,74,410/- is treated as unexplained and added to the income of the assessee company. We also find that during the appellate proceedings Ld. AR drawn attention to the Ld. CIT(A) towards the decision of the ITAT, Delhi dated 12.4.2013 in assessee s own case in Appeal Nos. 4923, 4933, 5390 5391/Del/2011, wherein various aspects of the matter have been examined by the ITAT, as under:- (i) Whether the evidence adduced by the Appellant as mentioned in comparative chart attached in support of identity of the lender/investor, genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction. 3. The second issue regarding applicability of section 68 to receipt of money towards share capital from non-resident was discussed in para no.l1.4, 11.5 at pg.22 as under:- 11.4 The proviso of section 68 though inserted with effect from 1.4.2013 also reveals legislative intent that if the share holder is a non-resident and the money is by way of remittance from his account, the rigor of section 68 would not be applicable. 11.5 We find merit in the contentions of Id. Counsel and reliance on the decisions of the ITAT in the cases of Finlay Corporation, Smt. Sushila Ramaswamy and Saraswati Holding (supra) and the import of CBDT Circular referred to above. Whenever remittances are made by the nonresident holding company for purchase of shares of its subsidiary in India, the money undoubtedly is capital in the nature and, if documents like FIRC etc. are produced, it can safely be stated that the said money came in through banking channels. 11.6 In the absence of any evidence to show that the money remitted by the non-resident accrued in India, it cannot be held to be taxable in India. Hence, moneys remitted by non-residents whose identify is not in question t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd merit in the argument of the Id. Counsel for the assessee that the primary burden cast on the assessee was duly discharged. The issue of primary onus is to be weighed on the scale of evidence available on the record and the discharge of burden by the assessee is also to be decided on the basis of documents filed by the assessee and facts and circumstances of each case and on that basis a reasonable view is to be taken as to whether the assessee has discharged the primary onus of establishing the identity of share applicant, its creditworthiness and genuineness of the transaction. From the documents filed during the course of assessment and before CIT(A), the independent existence of the share applicants in Russia .is clearly established. The assessee's application to FIPB for raising the capital contains all the relevant details which is favourably accepted by the Board, particularly by allowing the assessee to raise further the capital without approaching the FIPB. The transactions are through banking channels. Thus the gamut of evidence does not leave any doubt in the discharge of primary burden of the assessee. On the issue CBDT Circular and Finlay Corporation judgment (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old the same. 12.3 With regard to deleting the addition of ₹ 30,511/- made by the AO on account of disallowance of interest on loan as claimed by the assessee company is concerned, we find that AO on perusal of the profit and loss accounts and the other details submitted by the assessee has observed that the assessee has paid ₹ 3200/- as interest to M/s United Marketing and ₹ 27311/- as interest to Mr. S. Sreekanth. Since the loans received from these parties have already been treated as unexplained, the interest on the same cannot be allowed as an expenses. Hence, a total amount of ₹ 30,511/- he disallowed. We find that Ld. CIT(A) has concluded that this ground of appeal is consequential to the fourth ground of appeal dealt while deleting the addition of ₹ 12,20,000/- above. Since relief has been allowed in the main ground, the consequential ground as to allowed. The disallowance of interest paid he deleted. In view of above, we do not find any infirmity in the order of the Ld. CIT(A) and hence, we uphold the same. In the result, the appeal filed by the Revenue stands dismissed. ASSESSEE S APPEAL (ITA NO. 4713/DEL/2013) 13. With regard to add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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