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TMI Blog2018 (7) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... t the revenue in light of the decision of the Hon’ble Supreme Court in the case of Shasun Chemicals & Drugs Ltd vs. Commissioner of Income TaxII, Chennai reported in (2016 (9) TMI 1199 - SUPREME COURT OF INDIA) wherein the issue was with respect to claim under Section 35D and it was found that expenses claimed by the assessee for first two assessments years were allowed by the Assessing Officer, the Assessing Officer in the subsequent assessment year could not have disallowed the same. Under the circumstances, no error has been committed by the learned Tribunal in deleting the disallowance - Decided in favour of assessee - ITA No.450/Hyd/2017 - - - Dated:- 18-7-2018 - Smt. P. Madhavi Devi, Judicial Member And Shri S.Rifaur Rahman, Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of ₹ 55, 61, 743. Subsequently, the assessee filed revised return of income on 27. 09. 2012 admitting an income of ₹ 51, 45, 828. During the assessment proceedings u/s 143(3) of the Act, the AO observed from the balance sheet of the company, that an amount of ₹ 26, 60, 52, 000 has been shown under the head investments as on 31. 03. 2011 and that no income has been offered in the computation of income from the said investments. He presumed that income is not offered for the reason that the same is exempt from tax. Observing that the assessee is likely to earn dividend income which is exempt from tax, he sought to make the disallowance u/s 14A of the Act. The assessee submitted that it has not earned any dividend inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed a sum of ₹ 22, 20, 400 and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A), who granted relief to the assessee and the Revenue is in appeal before us by raising the grounds reproduced in Para-1 above. 4. As far as Ground No. 1 is concerned, though the learned DR supported the order of the AO, it is seen that this issue is covered in favour of the assessee by the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd vs. CIT reported in 378 ITR 33 (Del. ) wherein it has been held that if there is no dividend income (which is exempt from tax) earned during the relevant period, no disallowance u/s 14A can be made. Respectfully following the same, we see no reason to inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... com 455 (P H) in support of allowability of assessee s claim. 7. Having regard to the rival contentions and the material on record, we find that a sum of ₹ 1, 11, 02, 000 was paid by the assessee to the Registrar of Companies towards increase in authorized capital and has debited the same to the P L A/c. The assessee has amortized the said expenditure and has claimed 1/5th of the same as deduction u/s 35D of the Act. It is also therefore, to be seen whether the sum is allowable u/s 35D of the Act. The Hon'ble Supreme Court in the cases cited by the learned DR has held that the expenditure incurred for increase in the authorized share capital, is capital in nature. 8. From the facts of the case before us, we find that undisp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ension of the industrial undertaking is completed or the new industrial unit commences production or operation . 10. We find that similar issue had arisen before the Hon'ble Supreme Court in the case of M/s. Shasun Chemicals Drugs Ltd vs. CIT, reported in 225 ITR 798 (S. C) and the Hon'ble Supreme Court held as under: 12 . Question No . 1: Whether expenditure incurred on issue of shares is eligible to be amortized under Section 35D of the Act? As already noted above, the Assessing Officer had allowed the claim of the assessee in this behalf for the Assessment Years 1994-95 and 1996 - 97 . Such expenses which are incurred and amortization whereof is sought under Section 35D of the Act, it is allowed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that basis 1/10th share issue expenses was allowed under Section 35D of the Act . When it was again claimed for the Assessment Year 1996-97, though it was disallowed and on directions of the Appellate Authority, the Assessing Officer made physical verification of the factory premises . He was satisfied that there was expansion of the facilities to the industrial undertaking of the assesseee . It is on this satisfaction that for the Assessment Year 1996-97 also the expenses were allowed . Once, this position is accepted and the clock had started running in favour of the assessee, it had to complete the entire period of 10 years and benefit granted in first two years could not have been denied in the subsequent years as the bl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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