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2020 (8) TMI 143 - AT - Income TaxAddition u/s 56(1) - also alternatively u/s 68 - share premium receipts - whether CIT(A) erred in considering the share premium as a genuine transaction by treating the Discounted Cash Flow Method valuation at ₹ 230.40 and ₹ 2,457.12 for Equity Shares and Compulsory Convertible Preference Shares of ₹ 10/- respectively as correct? - HELD THAT:- AO assessed the share premium received as income from other sources by holding that this is nothing but profits received by the assessee. Alternatively, the Ld. AO has also recorded findings in the reassessment order that said receipt can also taxed as unexplained cash credit in the books of the assessee company. The Ld.CIT(A) has passed a very reasoned and speaking order justifying the deletion of additions by dealing with all the issues as raised by the revenue including the provisions of section 78 of the Companies Act . Therefore we do not find any infirmity or defect legal or otherwise in the order of the Ld.CIT(A) and hence the conclusion drawn by the Ld.CIT(A) is affirmed by dismissing the ground No.1 raised by the revenue. Addition on account of consultancy fees - A.O. without appreciating the accounting system came to a conclusion that since the invoice has been raised irrespective of time period and usage of software, the full amount needs to be accounted as income for appellant company and thereby made an addition shown as Current Liability in the appellant’s books - HELD THAT:- The assessee has accounted for one time Activation Fees and Customization Fees as current year’s Income and 15 days Contract Income for use of software as the fees of the appellant company based on the accrual system of accounting. On the other hand the Assessing Officer went on the basis of Invoices raised during the year and as such treated the same as Income of the Appellant Company for current Assessment Year without understanding the concept of accrual basis and he simply made an addition based on the Invoices raised. The ld. CIT(A) also confirmed the addition citing the reasons that agreements were not before the authorities below by ignoring the facts of the case. Hence the issue is restored to the AO for limited purpose of examining whether accounted for in the next year or not and if offered to tax the addition is to be deleted . The AO is directed accordingly. The ground is allowed for statistical purpose. Nature of expenditure - addition towards Professional Fees and treating the same as Capital Expenditure - HELD THAT:- Legal and Professional charges paid by the appellant company does not directly or indirectly pertain to the Product development cost nor does it give the benefit of enduring nature but it’s a normal routine business expenditure incurred by the appellant company. CIT(A) has given a finding that the said expenses included legal consultancy, vetting charges for documents , architect fee and compliance related fee. In our opinion the conclusion of ld. CIT(A) upholding the order of AO that these were capital in nature appears to be wrong and contrary to the findings recorded in the appellate order and hence cannot be sustained. Assessee has filed the break-up of Legal Fees paid to various Professionals have been provided. After perusing all these details and nature of these expenses , we are of the opinion that these are revenue in nature and have to be allowed as deduction. - Decided in favour of assessee.
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