TMI Blog2015 (12) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... s no accumulated profits in the books of the assessee, then merely because the reserve and surplus having the balance on account of premium on security would not lead to the conclusion that the assessee was having sufficient accumulated profits to invoke the provisions of sec.2(22)(e). - Decided in favour of assessee. - ITA No. 1105/Bang/2013, ITA No.1244/Bang/2013 - - - Dated:- 27-11-2015 - Shri Abraham P. George, Accountant Member And Shri Vijay Pal Rao, Judicial Member For the Petitioner : Shri Nageswar Rao, Advocate For the Respondent : Shri Sanjay Kumar, CIT (DR) ORDER Per Vijay Pal Rao, JM: These cross appeals are directed against the order dated 13/05/2013 of the CIT(A) for the assessment year 2008-09. 2. First we take up the revenue s appeal ITA No.1244/Bang/2014 wherein the following grounds are raised: 1. The order of the Learned CIT(Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The CIT(A) erred in allowing the deduction u/s 10B by placing reliance on the decision in ITA No.193/AC-11(5)/A-I/10-11 dated 24.08.2012 for assessment year 2007-08 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Having heard the rival contentions and having considered the material on record, we find that the CIT(A) has considered the issue at length and has come to the conclusion that there was no transfer of old plant and machinery during the financial year 2004-05, 2005- 06 and 2006-07 and further that the plant and machinery purchased by the assessee from FFIPL in the financial year 2007-08 also did not exceed 20% of the total plant and machinery of the assessee during the said financial year. He further observed that since there was no purchase of old plant and machinery from FFIPL in the earlier assessment year even as per contemporaneous records of the EOU/Customs authorities. The relevant date of the plant and machinery purchased by the assessee over the years is reproduced at para 1.2.3, page 30 of the order of the CIT(A). Thus, CIT(A) held that the manufacturing activity carried on by the assessee in the assessment years earlier to assessment year 2008-09 was by use of new plant and machinery. As regards the transfer of business premises, employees and the customers of FFIPL to the assessee, the CIT(A) observed that there was no prohibition in the use of the business premises of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the amount shown in the reserve and surplus pertains to premium on securities. Thus, the Senior Counsel has submitted that the provisions of sec.2(22)(e) cannot be invoked when the conditions provided under the said provision, particularly, the existence of the accumulated profit is not satisfied. He has relied upon the decision of the Hon ble Punjab Haryana High Court dated 29/10/2013 in ITA No.225/2013 in case of CIT vs. Radhe Sham Jain and submitted that while considering an identical issue, the Hon ble High Court has held that in the absence of accumulated profit, share premium amount lying as reserve and surplus of the company is not income of the company and therefore, the provisions of sec.2(22)(e) cannot be invoked. 7. Having considered the rival submissions as well as the relevant material on record, we note that the CIT(A) has recorded the fact and details of the reserve and surplus at page 55 of the impugned order as under: Reserves and Surplus March 31, 2008 March 31,2007 Securities Premium Account 63,75,62,600 63,75,62,600 Opening balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding the above question, the Hon ble High Court has held as under: A perusal of the order passed by the Income Tax Appellate Tribunal reveals that after considering that a cheque was issued in favour of the assessee, from the account of the proprietorship concern, the assessee deposited the cheque in the account of the newly formed company, which returned this amount to the assessee, held that the amount belonged to the assessee on account of his capital in the proprietorship concern. The Income Tax Appellate Tribunal also held that the Commissioner of Income Tax (Appeals) rightly restricted addition of ₹ 34,858/- i.e. to the extent of accumulated profits. We have considered the arguments advanced by counsel for the revenue and are not inclined to take a view different from the opinion recorded by the Tribunal. The arguments raise disputed questions of fact, which have been answered in favour of the assessee. In the absence of any error, while considering the facts or in applying any provision of the Act, we find no reason to hold that findings of facts recorded by the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) give rise to a quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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 5: Payment of Sales Commission 5.1 The learned CIT(A) has erred in not upholding the Appellant's claim for deduction of ₹ 3,527,095 towards sales commission on merits. 5.2 The learned CIT(A) has 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. 5.3 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. The Appellant submits that each of the above grounds is independent and without prejudice to one another. Further, the Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before, or at the time of, hearing of the appeal. 10. The issues raised in the assessee s appeal are regarding disallowance of certain expenses. 11. We have heard the Senior Counsel as we ..... 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