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TMI Blog2016 (2) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the disallowance of sales promotion expenses. ITA No.6429/Mum/2013(AY : 2010-2011) 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in manufacturing of various pharmaceuticals products and having sales within and outside India. During the year under consideration, the assessee had debited an amount of Rs. 4,32,11,406/- under the head „sales promotion expenses‟. Accordingly the details were called for and noticed that an amount of Rs. 22,45,000/- was relating to freebies given to medical practitioners. The AO disallowed Rs. 22,45,000/- by invoking Explanation to Section 37(1) and CBDT Circular dated 1-8-2012. 4. By the impugned order the CIT(A) confirmed the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promoter family. Assessee received 10% of warrant price on allotment, that is, Rs. 4.60 per warrant aggregating to Rs. 14,95,000/-. Balance amount was to be received within 18 months as per SEBI guidelines. However, due to fall in share price of company, warrant holders did not avail the option for conversion of the warrants into equity shares within the stipulated time as per SEBI(DIP) guidelines and as per the terms of the issue within a period of 18 months from the date of allotment i.e. 28th Sept., 2009 resulting in violation of terms of the issue and accordingly the upfront amount of Rs. 4.60 per warrant paid by the warrant holder was forfeited by the company. The forfeited amount was credited to capital reserve in its audited accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to profit & loss account. In the case of Solid Containers Ltd., it was a case of write back of loan taken for business purposes. Thus, both the cases deal with the amounts credited to profits and loss account which amounts were initially received in the course of trading and business activities, therefore, not relevant to the facts of the present case. In the present case, the amount was received for increase in share capital i.e. capital account and that the forfeited amount was disclosed as capital reserve and not credited to the profit & loss account. The AR has also relied on a number of decisions cited above and also the decision of hon'ble Supreme Court in case of Travancore Rubber & Tea Company Ltd. Vs. CIT 243 ITR 158. Thus, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its account as capital receipt, that being so the forfeited amounts must also be treated as capital receipts. Since the facts of the present case are squarely covered by the decision of hon'ble Supreme Court, therefore, the addition made by the AO. is not sustainable, hence deleted. Ground of appeal is allowed." Against the above order of CIT(A), the revenue is in further appeal before us. 9. We found that warrants were converted into shares, however, money contributions did not contribute these warrants into shares, therefore, their contributions were forfeited which was treated by assessee as capital receipts. The issue is squarely covered by the decision of Hon‟ble Supreme Court in the case of Travencore Rubber & Tea Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t answers the question framed by holding that the expression does not form part of the total income' in Section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year." Respectfully following the decision of the Hon‟ble Delhi High Court and other High Courts, as discussed above, we do not find any merit for the disallowance so made u/s.14A, when there is no exempt income during the year under consideration. 12. In the result, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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