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TMI Blog2013 (3) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... of business in connection with expansion of the undertaking or in connection with the set up of a new unit has to be allowed as a deduction over a period of five years from the previous year in which the expansion of the undertaking is completed or the new unit commences production or operation is to be allowed as deduction u/s.35D of the Act. The nature of expenses that will be allowed is set out in Sec.35D(2) of the Act. Since the issue has not been considered in its proper perspective with reference to provisions of section 35D of the Act, we deem it appropriate to set aside the order of the CIT(A) and remand the issue to the Assessing Officer for fresh consideration. - ITA Nos.951 to 954/Bang/2011 & 1401/Bang/2012, ITA Nos.938 to 940/Bang/2011 & 1530/Bang/2012 - - - Dated:- 8-3-2013 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER Appellant by : Shri B.N. Sudarshan, C.A. Respondent by : Shri Bijoy Kumar Panda, Addl. CIT(DR) ORDER Per Bench ITA 951/11 952/11 These are appeals by the assessee against the common order dated 30.08.2011 of the CIT(Appeals)-I, Bangalore relating to assessment years 2002-03 2003-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not aware of the order u/s. 271(1)(c) of the Act. (ii) The assessee applied to the AO by letter dated 29.04.2011 for issue of copy of order of penalty which was given to the AO on 2.5.2011. The same was given by the AO immediately. (iii) Thereafter the assessee filed an appeal for the A.Y. 2002- 03 and 2003-04 on 24.05.2011 and 23.05.2011 respectively. (iv) It was explained that the assessee s AR in the income-tax proceedings, M/s. K.P. Rao, C.As., did not represent the case properly and therefore they had engaged M/s. B.N. Sudarshan Co., C.As., as authorized representatives. (v) It was also mentioned that the previous AR did not guide the assessee properly. (vi) Due to merger of EDL with the assessee, there was some confusion with regard to the tax matters of the old company and this also contributed to the delay in filing the appeals. 6. The CIT(Appeals) called for a remand report on the question as to the date on which the penalty orders u/s. 271(1)(c) of the Act dated 30.12.2008 for both the assessment years was served on the assessee. The AO in response to the query of the CIT(A), submitted that the penalty orders dated 30.12.2008 for AYs 2002-03 2003-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .P. Rao, did not give the orders of penalty to the assessee and the employee of the assessee also did not give the orders of imposing penalty to the assessee. It was only due to these circumstances that the assessee could not file the appeals in time. The assessee came to know about the orders when recovery proceedings were initiated against the assessee and when a notice u/s. 179 was issued to the directors holding them responsible for recovery of the penalties imposed by the AO. 10. The ld. DR, however, pointed out that the proceedings for recovery against the directors were initiated in November, 2010 and it was only in April, 2011 that the assessee asked for copies of the penalty orders from the AO. According to him, even here there was a lapse on the part of the assessee. 11. The ld. counsel for the assessee, however, pointed out that the erstwhile C.A., M/s. K.P. Rao were handling the matter and did not advice the Assessee properly. The assessee thereafter approached the present AR, who filed the required application before the AO for issue of orders imposing penalty for A.Y. 2002-03 2003-04. 12. We have considered the entire factual aspect of the case. It is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 15. These appeals by the assessee and the revenue as well as the cross objection by the assessee are directed against the order dated 19.08.2011 of the CIT(Appeals)-I, Bangalore relating to A.Y. 2006-07. ITA 953/11 16. The only ground which arises for consideration in this appeal by the assessee is as to whether the revenue authorities were justified in refusing to consider the claim of the assessee for deduction u/s. 80IB of the Act. 17. The assessee filed a return of income claiming deduction u/s. 80IB of the Act in respect of the profits derived by the Korakadu Colour division of ₹ 73,75,490 and Korakadu Health division of ₹ 4,36,537. The due date for filing the return of income for the A.Y. 2006-07 was 30.11.2006. The assessee had filed the return of income and claimed the deduction u/s. 80IB of the Act in the said return of income which was filed on 27.02.2007. Under the provisions of section 80AC of the Act, where the assessee claims deduction u/s. 80IB of the Act, no deduction shall be allowed to the assessee unless the return of income for the assessment year for which the claim is made is filed on or before the due date specified in sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi Bench of the Tribunal in the case of Dhir Global Industries Ltd. (supra). 21. We have considered the rival submissions and are of the view that the provisions of section 10A(1A) of the Act which were considered by the Rajkot Special Bench of the ITAT in the case of M/s. Sapphire Garments (supra) are identical to the provisions of section 80AC of the Act. The ratio laid down by the Special Bench is binding on us. In such circumstances, we are of the view that the CIT(Appeals) was justified in refusing to consider the claim of the assessee for deduction u/s. 80IB of the Act, because of the assessee s failure to furnish the return of income on or before the due date specified u/s. 139(1) of the Act. We therefore do not find any merits in the appeal by the assessee, consequently the same is dismissed. ITA 938/11 CO 14/13 22. The issue raised by the revenue in its appeal in ITA No.938/B/11 is with regard to the action of the CIT(Appeals) in allowing the claim of the assessee for deduction of capital expenditure of ₹ 2,71,52,618 u/s. 35(1)(iv) of the Act. The factual background of the aforesaid claim made by the assessee, as we have already seen is, that a company b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but the technology, they found, was of the ISRO and also developed therein i.e. ISRO and no research or development of such technology was being conducted by M/s. Elbeam Devises Ltd. and therefore upheld the disallowance claim of expenditure by the A.O. However, I find here facts are different. By virtue of the order of Karnataka High Court dated 11-8-2005 in Company Petitions No. 80 and 74 to 79 of 2005. M/s Elbeam Devises Ltd. got merged with the appellant company which was incorporated by ROC Karnataka on 9-3-1987 under No. 8228 of 1986-87. One of its main objects as per the Memorandum is - to undertake Research Development Programmes - in the field of electricity and other allied fields. It is continuously carrying on research work in the field of electric heat management and doing project work for Nuclear Reactors at BARC. Besides, it is completely a entity other than the Elbeam Devisers Ltd whose case the A.O. has relied upon to make the disallowance here also. The A.O. has not found out specifically that this company has no research organisation or not equipped with the manpower, machine or technology to conduct such research in manufacturing heat plugs used in nuclear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cide the issue afresh in accordance with the law. The assessee will also be entitled to file additional evidence to support its claim. 28. The cross objection by the assessee, in our view, is only supportive of the order of the CIT(A) and the additional evidence sought to be filed through the CO can also be relied upon by the assessee in the set aside proceedings before the Assessing Officer. 29. Thus, the appeal of the revenue and the cross objection by the assessee are treated as allowed for statistical purposes. 30. In the result, ITA No.953/B/11 is dismissed, while ITA No.938/B/11 and CO 14/B/13 are allowed for statistical purposes. ITAs 939/11 940/B/11 and COs 15 16/13 31. ITA Nos.939 940/11 are appeals by the revenue and COs 15 16/B/13 are directed against the common order dated 19.08.2011 of the CIT(Appeals)-I, Bangalore relating to AYs 2007-08 2008-09 respectively. The grounds raised by the revenue in these appeals and the grounds raised by the assessee in these cross objections are identical to the grounds by the revenue in ITA No.938/B/11 and the CO by the assessee in CO No.14/B/13 for the A.Y. 2006-07 and for the reasons stated therein, these app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Service tax 10,27,192 Net expenses : 1,01,59,162 35. It is thus clear that the CIT(A) has proceeded on an erroneous basis with regard to the nature of expenses. The AO has proceeded under the assumption that capital expenditure cannot be allowed u/s. 35D of the Act. The provisions of section 35D does not make any distinction between capital and revenue expenditure. Any expenditure incurred after commencement of business in connection with expansion of the undertaking or in connection with the set up of a new unit has to be allowed as a deduction over a period of five years from the previous year in which the expansion of the undertaking is completed or the new unit commences production or operation is to be allowed as deduction u/s.35D of the Act. The nature of expenses that will be allowed is set out in Sec.35D(2) of the Act. Since the issue has not been considered in its proper perspective with reference to provisions of section 35D of the Act, we deem it appropriate to set aside the order of the CIT(A) and remand the issue to the Assessing Officer for fresh consideration. The AO will afford opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in nature and cannot be allowed as a deduction. 41. We have considered the rival submissions and we find that u/s. 35D(2)(c)(iv) of the Act, any expenses in connection with the issue, for public subscription, of shares or debentures of the company will also be allowed as a deduction. This is of course subject to assessee fulfilling the conditions mentioned in section 35D(1)(ii) of the Act. From the orders of the revenue authorities, it is not clear as to which is the year in which the share issue expenses are incurred. We are of the view that it would be just and proper to set aside the order of the CIT(A) and remand the issue to the AO for fresh consideration. The Assessing Officer will consider the issue afresh in the light of the provisions of section 35D after affording due opportunity of being heard to the assessee and decide the issue in accordance with the law. For statistical purposes, the appeal by the assessee is allowed. 42. The second issue raised by the Assessee in its appeal with regard to disallowance of ₹ 8,77,010/- being amalgamation expenses was not pressed and the same is dismissed as not pressed. 43. The appeals in ITA 1401/12 is treated as part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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