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TMI Blog2016 (10) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 2. The Ld. CIT(A) XI has further erred on facts in confirming the addition of Rs. 3,26,457 made by the Ld. Assessing Officer while making the assessment u/s 143(3), being disallowance u/s 14-A rwr 8-D. The appellant prays that the order being bad on facts may kindly be quashed and the addition may kindly be deleted." Ground No. 1 3. The fact of the case is that the Assessing Officer on perusal of the P &L A/c of the Company, noticed that the assessee has debited a sum of Rs. 1,04,000/- as preliminary expenses written off. On query, the assessee submitted before the Assessing Officer that preliminary expenses incurred in the year 2005-06 is in the nature of increase in the capital of the company hence qualify to be amortized as stipulated in section 35D of Income-Tax Act, 1961. The assessee also stated that the details of the additions to fixed assets made by the company during that year is a part of extension of the industrial undertaking. He further stated tha bank loan was taken and also increased the authorized capital for further issuance of shares. He explained that the assessee- company was therefore required to incur expenses in the nature of fees and stamp duty payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich provides that for registration of any existing commpany, except such companies as are by the Companies Act exempted from payment of fees in respect of registration under Companies Act, the same fee as is charged for registering a new company is payable. Sec. 35D (2}(c)(iii) deals with expenditure incurred by way of fees for registration of a company under the Act. As the analysis of the position above would go to show, fees paid under item 3 of Sch. X cannot be stated to be fees paid for registering a company. That being the position s. 35D(2)(c)(iii) has no application to the facts of the case." Similar view has been taken in the case of Shakti Finance Ltd. 250 JTR 488 Madras. 2.3 From the above discussion what emerges is the fact that the fees paid to registrar for increase in the authorised share capital is a capital expenditure and is therefore not allowed under the general provisions of sec. 37 of the I.T. Act. The same is not allowed under the specific provisions of sec.35D of the I.T. Act also. Accordingly, the disallowance made by the A.O. of Rs. 1 ,04,000/- u/s. 35D of the I.T. Act is held to be correct. This ground of appeal is dismissed." 4. The ld. counsel c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment of Rs. 80,12,500/- both at the beginning of the year and at the end of the year, the dividend income from which are exempt from tax. In the computation of income, the assessee has not disallowed any amount towards disallowance u/s 14A. On being queried as to why the provisions of Section 14A r.w. Rule 8D be not applied to the facts of the present case, the assessee contended that since the company has not received any income exempt from tax, the provisions of sec. 14A are not applicable. The assessee further submitted that provisions of 14A r.ws. 8D are applicable only when the assessee has any income which is exempt from tax. The Assessing Officer stated that the contention of the assessee is not correct. He pointed out that the assessee has not stated anything in its reply as to whether any expenditure has been incurred by it in relation to the exempt income (whether earned or not). The Assessing Officer further stated that it is to be noted that section 14A disallows expenditure "in relation to income which does not form part of total income" and in order to disallow the expenditure actual income need not be earned. He relied on the judgment in the case of Cheminvest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to the case of the assessee. The ld. counsel further stated it is also evident from the profit and loss account and return of income that assesse-company has not earned any exempt income. He also relied on the decision of co-ordinate bench of this tribunal. On the other hand, the ld. departmental representative relied on the order of the lower authorities. We have considered the submission of both the parties and perused the material on record. The provisions of section 14-A are being reproduced as under: "(1) For the purpose of computing the total income under this chapter no deduction shall be allowed in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The assessing officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance and with such method as may be prescribed if the assessing officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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