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TMI Blog2017 (12) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... as “assessee” in default and no disallowance u/s.40(a)(ia) is required. Furthermore, the case laws referred in this regard also need to be taken into account. Moreover, this aspect needs reference to factual records. Hence, I remit this issue of the ld. Commissioner of Income Tax (Appeals) to consider this aspect and pass a speaking order after giving the assessee proper opportunity of being heard. - I.T.A. No.1791/Mum/2017 - - - Dated:- 14-12-2017 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER For The Appellant : Shri Ketan K. Ved For The Respondent : Ms. N. Hemalatha ORDER Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) dated 28.11.2016 and pertains to the assessment year 2011-12. 2. The grounds of appeal read as under: 1. The order passed by the learned C I T (A) is bad in law on facts and therefore it is required to be quashed. . 2. The learned CIT (A) erred in confirming the disallowance made by the AO of the amortized expenses of ₹ 49,367/- claimed u/s 35D of the Act treating the same as capital in nature. 3. The learned CIT (A) erred on facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Corpn. Ltd. vs. CIT [1995] 225 ITR 792. Accordingly, the Assessing Officer disallowed the preliminary expenses of ₹ 49,367/- claimed by the assessee and added to the total income of the assessee. 4. Upon the assessee s appeal, the ld. Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer by holding as under: I have perused the assessment order and submissions made by the appellant in this regard. It is noted that the Hon'ble Apex Court in the cases of Brooke Bond India Ltd vs CIT [1997] 225 ITR 798 and Punjab State Industrial Development Corpn. Ltd vs CIT [1997] 225 ITR 792 have held that expenses which were incurred for increase in authorized share capital are not allowable as business expenses as those are capital in nature. It is seen that the case of the assessee is squarely covered by the case of Brooke Bond India Ltd. (supra) and there is no scope for allowance of the claim of these expenses against the taxable income for the year. The disallowance of the preliminary expenses of ₹ 49,367/- claimed by the assessee and added to the total income of the assessee by the AO is found to be in order and is uphel d. 5. Again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in sub-section (1) shall be the expenditure specified in any one or more of the following clauses namely :- ( a) . ( b) ..... ( c) where the assessee is a company, also expenditure - ( i) .. ( ii) .. ( iii) by way of fees for registering the company under the provisions of Companies Act 1956 (1 of 1956); ( iv) .. ( d) such other items of expenditure (not being expenditure eligible for any allowance or deduction under any other provisions of this Act) as may be prescribed. 4) The appellant would like to draw the attention of your Honour that the appellant company was incorporated under the Companies Act, 1956 on 20 March, 2009 with the minimum capital of ₹ 1,00,000/-, being 10,000 shares of ₹ 10 each. However, before commencing the business, the authorized capital was increased to ₹ 1,00,00,000/- being 10,00,000 equity shares of ₹ 10/- each. In this regard, resolution was passed in the extra-ordinary general meeting held on 18th June, 2009 for alteration of capital clause of Memorandum of Association and Articles of Association. In an explanatory statement attached to the resolution u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Memorandum of Understanding (MOU) made with Seamen Foundation, the scope of which is divided in two parts - Part A and Part B. Part A * Seamen Foundation shall grant the shipping company the privilege to be the first party to conduct campus interviews of every batch after completion of the training of the seafares both ratings and officer cadets. It is however, understood that the Seamen Foundation would be free to invite others for campus interview of its cadets after the shipping company has finished its round of interviews or does not wish to induct any further trainees. The Shipping company has agreed to pay; Rs.16 lacs for the year commencing from 1st October, 2010 Rs.20 lacs p.a for the next five years Further, the shipping company has agreed to pay the sum equal to the above mentioned consideration in advance out of which appropriate as specified above will be made by the Seamen Foundation. Part B The Seamen Foundation has agreed to make available the following facilities to the shipping company. Getting new recruits trained under a specially structured training program; Getting its seafarers tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses which were incurred for recruitment and training and in absence of TDS these expenses cannot be allowed as business expenses for violation of section 40(a)(ia). It is seen that the case of the assessee is squarely covered by the case of Bajaj Consumer Care Ltd. (supra) and there is no scope for allowance of the claim of these expenses against the expenses of ₹ 16,00,000/- by the A.O. is found to be in order and is upheld. 15. Against the above order, the assessee is in appeal before the ITAT. 16. The various submissions of the assessee in this regard which were also noted by the ld. Commissioner of Income Tax (Appeals) read as under: 1. As submitted in the facts above, the amount of ₹ 16,00,000 paid to Seamen Foundation is nothing but the amount paid for getting exclusive privilege over other companies for being the first party to conduct campus interviews completing the course of the batch of seafarers. The amount is paid so that the appellant company can recruit the best trainees of the Institution. 2. The AO has contended that the above payment falls under Clause (va) of section 28 and hence the liable for deduction of TDS. Clause (va) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person fails to deduct the tax shall not be deemed to be an assessee in default in respect of such tax, if payee ( 1) Has furnished return of Income u/s. 139 ( 2) Has taken in to account such sum for computing income in such return of income ( 3) Has paid the tax due on the income declared by him in such return of income ( 4) Furnished a certificate to this effect from Chartered Accountant, In the present case, payee Sir Mohmed Yusuf Seamen Welfare Foundation has filed return of Income u/s 139(1) and taken in account such sum for computing income in such return of Income. As Sir Mohmed Yusuf Seamen Welfare Foundation has claimed exemption u/s. 10(23C), no tax was required to be paid. A copy of above documents are attached herewith at Annexure The appellant fulfilled terms and conditions of first provision to section 201(1) of the Act. It should not be treated as assessee in default and no disallowance should be made u/s. 40(a)(ia). 5.1 The second proviso to section 40(a)(ia) has been inserted by Finance Act 2012 w.e.f. 1-1-2013 Therefore, issue would arise whether it would be applicable for the year under consideration, In this regard, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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