2020 (6) TMI 318 - Income Tax

Head Note / Extract:
Computation of lease rental - addition of notional rent on the plant and machinery leased to sister concerns - Addition on this basis that fair market value (FMV) of lease rental is 8% of WDV plus interest expense and depreciation as per Income Tax Act - HELD THAT:- As decided in HIGHWAYS CONSTRUCTION CO. PVT. LIMITED VERSUS COMMISSIONER OF INCOME-TAX [1992 (11) TMI 86 - GAUHATI HIGH COURT] it comes out that in a case where the income is not actually received by the assessee and it has not accrued to the assessee, then under no provisions of Income Tax Act, the income tax authorities are authorized to include such income which was neither due nor collected. In the present case also, this is not the case of the AO that higher amount of lease rental was received by the assessee or it has accrued to the assessee and therefore, in our considered opinion, this judgment of Hon’ble Gauhati High Court is squarely applicable in the present case. - Additions deleted. Addition by invoking the provisions of section 56(2)(viib) - assessee has obtained valuation report of Shri. P. Chandrasekhar, Chartered Accountant, where the value of the shares of the assessee company was recommended at ₹ 527/- per share as per DCF method but the AO adopted FMV method and made this addition - HELD THAT:- In the present case we prefer to follow the judgment of Hon’ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT [2018 (3) TMI 530 - BOMBAY HIGH COURT] in preference to the judgment of the Hon’ble Kerala High Court cited by DR of the Revenue rendered in the case of Sunrise Academy of Medical Specialities (India) (P.) Ltd. Vs. ITO [2018 (8) TMI 203 - KERALA HIGH COURT] because this is settled position of law by now that if two views are possible then the view favourable to the assessee should be adopted and with regard to various Tribunal orders cited by learned DR of the Revenue which are against the assessee we hold that because we are following a judgment of Hon’ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd., Vs. Pr. CIT (supra), these tribunal orders are not relevant. In the case of Innoviti Payment Solutions Pvt. Ltd., Vs. ITO [2019 (1) TMI 688 - ITAT BANGALORE] this judgment of Hon’ble Bombay High Court was followed and the matter was restored back to the file of AO for a fresh decision with a direction that AO should follow DCF method only and he cannot change the method opted by the assessee as has been held by the Hon’ble Bombay High Court. Disallowance u/s 14A - as per assessee there is no exempt income earned by the assessee - HELD THAT:- Computation of Income is not filed before us and the assessee has earned in the present year ₹ 58,88,121/- as profit on sale of investments (Net) and a part of it might have been claimed by the assessee as exempt income, we feel it proper to restore this matter back to CIT(A) for a fresh decision after finding out this as to whether the assessee has earned any exempt income in the present year and by restricting the disallowance u/s 14A to the extent of such exempt income earned by the assessee in the present year in line with the judgment of Hon’ble Delhi High Court rendered in the case of Cheminvest Ltd., Vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] - Ground No.4 of the assessee’s appeal is allowed for statistical purposes. Disallowance of share issue expenses - revenue or capital expenditure - HELD THAT:- Even if the fresh share capital is to meet working capital needs, then also, the nature of expenses remains same and hence the entire amount of such expenses is to be considered as capital expenditure as has been held by Hon’ble Apex Court in these two judgments having been rendered in the case of Brooke Bond India Limited Vs. CIT 1997 (2) TMI 11 - SUPREME COURT] and PSIDC Ltd. [1996 (12) TMI 6 - SUPREME COURT].