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TMI Blog2015 (12) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... d in not appreciating that the assessee company has been formed by reconstruction of the business already in existence and the assessee has made use of used plant and machinery which is not in conformity with the provisions of section 10B, the company is not eligible for deduction u/s 10B. 4. The learned CIT(A) erred in not appreciating that it was the totality of the reconstruction that has to be looked for allowing the deduction and not the extent of usage of the used plant and machinery during the relevant assessment year in question or the initial assessment year. 5. The CIT(A) erred in deleting the addition of Rs. 23,08,94,447/- u/s 2(22)(e) holding that there was no accumulated profits and the advances/loans made to sister concern were out of Securities Premium Account of Rs. 63.75 crore which is a capital reserve and placing reliance on ITAT, Chandigarh decision in the case of Radhe Sham Jain reported in 140 ITD 244 (CHD) without appreciating that the relied on decision has not become final and appeal has been preferred before Punjab & Haryana High Court. 6. The learned CIT(A) erred in directing the AO to allow deduction u/s 10B on enhanced profit on account of disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and customers of the assessee respectively. Thus holding, the CIT(A) set aside the finding of the AO and allowed the deduction u/s 10B of the Act. We find that the CIT(A) has given elaborate reasons for coming to the conclusion and that the learned Departmental Representative has not been able to rebut any of the findings of the CIT(A) with any evidence to the contrary. Since the findings of the CIT(A) are based upon the evidence produced by the assessee which has not been rebutted by the revenue, we do not see any reason to interfere with the order of the CIT(A). Thus, the revenue's appeal is dismissed." Following the earlier order of this Tribunal in assessee's own case, we do not find any error or illegality in the order of the CIT(A) qua this issue. These grounds of the revenue are dismissed. Ground No.5 regarding addition u/s 2(22)(e) on account of deemed dividend: 5. We have heard the learned departmental representative as well as the learned AR of the assessee and considered the relevant material on record. The learned departmental representative has submitted that the AO has recorded the fact that the assessee has advanced an amount of Rs. 23,08,94,447/- to concern in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount after reducing the loss incurred by the assessee for the earlier year as well as during the year under consideration. Therefore, there is no dispute about the fact that the reserve and surplus amount does not show any accumulated profit but the amount shown is only loss as well as premium on securities. The term 'accumulated profit' has been defined and explained in Explanation 1 and 2 to sec.2(22)(e) as under: "Explanation 1 - The expression 'accumulated profits', wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956. Explanation 2 - The expression 'accumulated profits' in sub-clauses (a), (b), (d) and (e) shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in subclause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in its appeal has raised the following grounds: "Ground I 1.1 The order of the learned CIT(A) is erroneous and bad in law to the extent it does not allow the grounds on deductibility of the expenses relating to rent, legal and professional charges, wash trial expenditure and Payment of sales commission, on the ground that the disallowance would only increase the claim of deduction under Section 10B of the Act. Ground 2: Payment of rent to overseas entity 2.1 The learned CIT(A) has erred in not upholding the Appellants claim of deductibility of rental expenditure of Rs. 20,865,900 on merits. 2.2 The learned CIT(A) has erred in not upholding the deductibility of expenses in light of the submissions filed by the Appellant during the appellate proceedings. Ground 3: Payment of legal fees to Dutch law firms 3.1 The learned CIT(A) has erred in not upholding the Appellants claim for deduction of legal fees of Rs. 5,600,000 on merits. 3.2 The learned CIT(A) erred in not deciding that, these payments were not disallowable under Section 40(a)(i) of the Act as the payments made are not taxable in India and therefore the withholding tax provisions would not apply. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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