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TMI Blog2022 (7) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... from the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47 is deemed to be income chargeable under the head Capital gains by virtue of the provisions contained in section 47A, the cost of acquisition of such asset to the transferee company shall be the cost for which such asset was acquired by it. It is admitted fact that the consideration of acquisition of healthcare business was discharged by the Assessee through issue of its equity shares in favor of the MIL. The Assessee company had later allotted shares of S G Investments and Hamlet Investments on 28.11.2003, thereby ceasing to be wholly owned subsidiary of MIL. In view of the this changed of status, by virtue of Section 47A, MIL offered the capital gains u/s. 47(iv) of the Act. Therefore, strictly speaking the provision of section 49(3) of the Act became applicable and the cost of acquisition of the Assessee was to be construed to be the cost, for which assets were acquired by Assessee. Since, it was a slump sale, the Assessee in its wisdom, was right to get the assets revalued and thereafter claim depreciation upon it. CIT(A) has corrected this error committed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of now settled proposition of law. Disallowances of professional fees etc. for obtaining loan from International Finance Corporation or Asian Development Bank - HELD THAT:- As observed that there is no dispute of the fact that the Assessee was in the course of expansion of business activity. Amount spent on appraisal of projects to check feasibility of granting loan does not bring into existence any new capital asset and thus cannot be treated as capital expenses. The Ld. CIT(A) has rightly deleted the addition made in that regard. - ITA Nos. 3506, 3507, 3508 and 3510/Del/2014 - - - Dated:- 30-6-2022 - SHRI G. S. PANNU , HON BLE PRESIDENT And SHRI ANUBHAV SHARMA , JUDICIAL MEMBER For the Appellant : Deepshikha Sharma For the Respondents : Ajay Vohra , Sr. Adv. , Deepesh Jain , Adv. and Shaurya Jain , CA ORDER Per Anubhav Sharma , JM 1. These appeals have been preferred by the revenue against the order dated 28.03.2014 of Ld. Commissioner of Income Tax (Appeals)-IX, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. 'FAA') in appeal No. 138/2008-09 arising out of a appeals before it against the order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t attracted. Accordingly, the Ld. CIT(A) held that actual cost of acquisition in the hands of Assessee shall not be adopted for the purpose of claiming depreciation u/s. 32 read with section 43(1) of the Act. 3. The revenue had challenged this before the ITAT but assessment for the year 2003-04 was settled in VSVS, 2020 scheme. The Ld. AO continued to apply the principles subsequent to Assessment Year for which now the matters is before this tribunal. 4. Apart from above in the relevant Assessment Years there were disallowances of management consultancy fee on ad hoc basis and disallowance of preoperative expenses. Further, in Assessment Year 2005-06 and 2008-09 there was also disallowances of consultancy fee for charges paid to International Finance Corporation and Asian Development Bank in pursuant to loan agreement. Though loan did not materialize. Then, in the assessment year 2008-09 there was also a disallowances u/s. 14A read with Rule 8D. The Ld. First Appellate Authority had deleted these. So now Revenue is in appeal against them. 5. Heard and perused the records. 6. On behalf of the revenue it was submitted that the Ld. CIT(A) has fallen an error in disagreeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of provision of section 47 clause (iv), section 43(1) r/w explanation 6 and section 43(6) r/w explanation (2) of the Act but failed to take note of section 49(3) of the Act which distinguished the case of the Assessee. 8.1. Now taking into consideration these relevant provisions it can be observed that Clause (iv) and (v) of section 47 tenders certain Transfers between Holding and Subsidiary Companies as not amounting to Transfer u/s. 2(47) wherein Capital Gain is not attracted on such transactions, section 47A(1) prescribe certain conditions on which the transactions shall not be considered as Transfer and if such conditions are not complied with, Capital Gain gets levied u.s. 45. If the Assets transacted between the Holding and Subsidiary Companies fall under prescribed conditions, then the exemption granted shall stand withdrawn and the transaction shall be chargeable to Capital Gain Tax in the previous year in which the original Transfer between the group Companies took place. Further, Section 49(3) of the Act provides, where the capital gain arising from the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47 is deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is not wholly and exclusively led out for the purpose of business. 12. In this context it can be observed that the Ld. AO has himself allowed 50% of the expenses. To disallow 50% of total expenses on ad hoc basis mere use of discretion cannot be sustained. Assessment order does not show that any subjective analysis of the matter was done but merely relaying the special audit report, ad hoc disallowance was made. Even if special audit report referred in para 2 of the assessment order is considered same only mentioned that the services of Max India Ltd. were not related to the business of the Assessee alone but also to the subsidiary of the Assessee, Max Medical Services Ltd. (MMS). However, there is no iota of evidence on record to suggest the expenses of the Assessee relates to any extent to MMS. Thus, there is no error in the finding arrived by the Ld. CIT(A). 13. Coming to the disallowances of preoperative expenditure. In regard to this it was submitted that the Ld. AO has disallowed deduction holding that there is no provision in the act to provide for deduction for allowing revenue expenditure for purchase pending capitalization. However, the Ld. DR submitted, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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