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2021 (8) TMI 690 - AT - Income TaxDisallowance of product development expenditure being treated as capital expenditure - HELD THAT:- It is a fact that the appellant has not claimed double deduction in respect of the said expenditure. Although the amount amortized in the books is different from the amount claimed as deduction it has neither written off the product development expenses in A.Y. 2016-17 nor claimed the same as deduction in furnishing the return of income for A.Y. 2016-16. Though the appellant has treated the capitalized R & D expenses as revenue expenses and at the same time it has added back the amortized amount debited to P & L Account resulting into income of ₹ 99,98,324/- as it appears from the record. Further that in the earlier Assessment Years the identical claim of product development expenses was allowed as revenue expenses. Therefore, taking into consideration the entire aspect of the matter the deletion of such addition of ₹ 5,31,82,295/- on account of capital expenditure as made by the Ld. AO has been rightly done by the Ld. CIT(A) without any ambiguity so as to warrant interference. Hence, the ground of appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed. Addition u/s 36(1)(iii) - assessee made long-term capital advances for placing order for constructing building as per the terms to M/s. Riddhi Construction and No interest attributable to the funds utilized for purchasing of the capital asset has been capitalized during the year under consideration - HELD THAT:- Before us assessee which was brought to our notice depicting the opening balance of ₹ 346,621,488/- as on 31.03.2012 as the fund towards share capital and reserves and surplus of the assessee. Therefore, the assessee is not required to proof that no interest bearing fund is utilized for assessment made for purchases of capital when assessee’s own fund is much more higher than the advances for such purchase of capital asset provided to the Riddhi Siddhi Construction. In that view of the matter addition of proportionate interest attributable to such funds on the basis of total interest paid is not permissible and hence the same is not sustainable in the eye of law and allowable to be deleted. With the above observation we allow the ground of appeal by deleting the above addition. Addition u/s 36(1)(va) of the Act on account of delayed payment of PF/ESIC - amount received by the assessee by way of employees’ contribution of EFP has not been deposited by the assessee in the employees’ account in the relevant fund on or before the due date - assessee’s case is this that certain payments being employees’ contribution towards PF was made late but the entire contribution was paid during the Financial Year itself - HELD THAT:- Relying upon the judgment passed by the Hon’ble Jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation, [2014 (1) TMI 502 - GUJARAT HIGH COURT] both the authorities below has declined to allow such claim made by the assessee since the contribution of employees’ in PF has been failed to be deposited in the concerned account before the due date in terms of the provision laid down in Section 36(1)(va) r.w.s. 2(24)(x) of the Act. It is allowable, if only such employees contribution towards Provident Fund is credited by the assessee to the relevant account on or before due date as the crux of the order passed by the authorities below which according to us is without any ambiguity so as to warrant interference. Hence, we confirm the order passed by the authorities below. Assessee’s this ground of appeal is, thus, found to be devoid of any merit and hence dismissed. Addition made u/s 56(2)(viib) - shares issued at premium - HELD THAT:- When shares are allotted on premium by a company in which public is not substantially interested, it is categorically stated that, any consideration received by such company for issue of shares that exceeds the face value of such shares, the aggregate consideration received by such company for such shares as exceeds the fair market value of the share. For calculation of the fair market value the method has been prescribed under Rule 11UA. Thus, it reveals from the records that the appellant itself has admitted that it has allotted shares at ₹ 250 whereas the fair market value of the share is ₹ 246/-. In that view of the matter the excess amount of ₹ 4 on number of shares allotted i.e. ₹ 4,83,200/- has rightly been added to the total income of the appellant under Section 56(2)(viib) of the Act. Addition as made by the authorities below is hereby confirmed. - Decided against assessee. Addition u/s 14A r.w.r. 8D - CIT-A deleted the addition - HELD THAT:- After perusal of the record it appears that the assessee has not earned any exempt income neither claimed any exempt income - As relying on CORRTECH ENERGY PVT. LTD. [2014 (3) TMI 856 - GUJARAT HIGH COURT] when there is no exempt income earned by the assessee no addition could be made under Section 14A of the Act, deletion of such addition made by the Ld. CIT(A) in our considered opinion, is without any ambiguity so as to warrant interference. Thus, Revenue’s this ground of appeal is found to be devoid of any merit. Disallowance u/s 36(1)(iii) - Investment made by the assessee is not for the business purposes as of the opinion formed by the Ld. AO - HELD THAT:- Fact reveals from the balance sheet of the appellant that it had share capital of ₹ 8.80 crores and reserve and surplus amounting to ₹ 46.12. crores which proves that the assessee is having sufficient interest free funds available in his hand and therefore, disallowance made under Section 36(1)(iii) of the Act has been rightly deleted by the Ld. CIT(A).- Decided against revenue. Addition on account of interest received on short term loans and advances - Assessee has given short term loans and advances for supply of goods and for rendering services to various persons - HELD THAT:- Before the First Appellate Authority the assessee submitted that the said M/s. Parekh Polymers is an associated concern and it provided this fund to the said concern for business purposes towards supply of goods/services. Practically the Ld. AO has not invoked the provisions of Section 36(1)(iii) for non-related persons as the same were given for the business purposes. In that view of the matter the Ld. CIT(A) has not found it justified in invoking the provisions of Section 40A(2)(a) of the Act for disallowing proportionate interest expenses under Section 36(1)(iii) of the Act which in our considered opinion is just and proper so as to warrant interference. Thus, the same is hereby confirmed, thus, Revenue’s this ground of appeal fails.
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