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2018 (1) TMI 1399 - AT - Income TaxMAT computation - Addition towards amortisation of subsidised cost to the book profit computed u/s 115JB - Held that:- It is an admitted fact that the assessee has prepared its accounts in accordance with Parts II and III of Schedule VI of the Companies’Act, 1956. The accounts of the assessee has been audited by the statutory auditors and also approved by the Board. Once, accounts are prepared in accordance with Parts II and III of Schedule VI of the Companies’Act and such accounts have been approved by the Board of directors of the company, then there is no scope for the AO to make any adjustment towards book profit computed u/s 115JB. In this case, such adjustment is not in accordance with Explanation 1 to section 115JB. We further notice that the adjustments made by the AO towards amortisation of subsidised cost is not an item of positive adjustment provided under Explanation 1 to section 115JB of the Act. Therefore, we are of the considered view that the AO was incorrect in making adjustments towards book profit in respect of amortisation of subsidised cost. See case of Apollo Tyres Ltd vs CIT (2002 (5) TMI 5 - SUPREME COURT) wherein it was observed that the AO is not permitted to make any adjustment towards book profit, once the accounts are prepared in accordance with Parts II and III of Schedule VI of the Companies’ Act, 1956. Addition towards share capital and share premium u/s 68 - unexplained cash credit - assessee failed to justify issue of shares at a premium and no evidence / documents have been filed to prove the identity, genuineness of transactions and creditworthiness of the parties - Held that:- There is no reason for the AO to doubt the genuineness of transaction only on the basis of issue of shares at a premium when the issue of shares at a premium is not at all relevant for the purpose of addition made u/s 68 of the Act. What needs to be considered for the purpose of unexplained cash credit u/s 68 is, identity, genuineness of transaction and creditworthiness of the parties. In this case, the assessee has proved all the 3 ingredients by filing necessary evidences and hence, there is no reason for the AO to make addition towards share premium when share premium cannot be considered as unexplained credit u/s 68 of the Act. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. Disallowance of expenditure for setting up of UAE branch - AO disallowed expenditure incurred for setting up of UAE branch on the ground that the assessee has not carried out any commercial activity; hence, expenditure is to be considered as preliminary and preoperative expenses u/s 35D - Held that:- We find merits in the arguments of the assessee for the reason that the assessee has incurred various expenditure including registration charges, rent of premises, travelling expenses of its personnel and other miscellaneous expenses to set up a branch office in UAE in connection with its existing business. The assessee is already in the business of sales in UAE and only for facilitation of its business has set up a branch office - expenditure incurred by the assessee is a revenue expenditure which cannot be considered as preliminary and preoperative expenses coming within the purview of section 35D of the Act. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. Disallowance of interest expenses - assessee has diverted interest bearing funds to give loans to group companies - Held that:- We find merits in the arguments of the assessee for the reason that the assessee has demonstrated with evidence that loans to group companies are out of its own funds and also such loans has been given in commercial interest, therefore, the AO was incorrect in disallowing proportionate interest on loans given to group companies. The assessee is holding more than 33% equity stake in the company for which loans have been given and also derived commercial benefit. Therefore, the AO was incorrect in holding that the assessee has diverted interest bearing funds to give loans to group companies. The CIT(A), after considering relevant submissions has rightly deleted addition made by the AO. We do not find any error in the order of CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and dismiss ground raised by the revenue. Addition of outstanding sundry creditors u/s 41(1) - Held that:- AO has made addition towards sundry creditors without bringing on record any evidence to prove that there is cessation of liability in the impugned financial year and also, the assessee has derived benefit out of such cessation of liability. Therefore, we are of the considered view that the CIT(A) was right in deleting addition made by the AO towards sundry creditors u/s 41(1) - no error in the order of the CIT(A) and therefore, we are inclined to uphold the order of the CIT(A) and reject ground raised by the revenue. Short deduction of tds u/s 194C or 194J - digital print fee is incurred for the services rendered which is professional / technical service - Held that:- we find merits in the arguments of the assessee for the reason that once there is compliance to TDS provisions, even if there is short deduction of TDS or TDS has been deducted under different sections, there is no scope for the AO to disallow expenditure u/s 40(a)(ia) of the Act as the provisions u/s 40(a)(ia) is applicable only when there is no TDS deduction. This legal proposition is supported by the decision in the case of CIT vs SK Tekriwal (2012 (12) TMI 873 - CALCUTTA HIGH COURT) wherein it was held that if there is lesser deduction of TDS due to any difference of opinion, no disallowance can be made u/s 40(a)(ia) of the Act. If there is short deduction, the revenue is free to proceed to pass an order u/s 201 of the Act, but no disallowance can be made u/s 40(a)(ia) Addition made towards AIR mismatch - the assessee has made TDS claim of ₹ 1,258 without considering corresponding receipts in the books of account - contention of the assessee that it has furnished reconciliation of TDS difference and explained that certain parties have deducted excess TDS - Held that:- We find merits in the argument of the assessee for the reason that when the assessee has filed reconciliation statement explaining difference in TDS claim, there is no reason for the AO to resort to notional addition on the basis of TDS claim. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. We do not find any error or infirmity in the order of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and reject ground raised by the revenue. - Assessee appeal allowed.
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