TMI Blog2016 (1) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... iling the present appeal under the I. T. Act, 1961 (for short the Act ), sought to set aside the impugned order dated 14.02.2011 passed by Ld. CIT(A) IX, New Delhi qua the Assessment Year 2005-06 on the grounds inter alia that: 1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) ( CIT (A) ) erred in confirming the order passed by the learned Assessing Officer ( AO ); and thereby confirming the total loss of the Appellant at ₹ 6,08,24,758 as assessed by the Learned AO in the order of assessment under section 143(3) of the Income tax Act, 1961 ( the Act ) dated 25.11.2008, as against the declared loss of ₹ 7,81,94,190/-. 2. The Learned CIT(A)/AO erred on the facts presented before them and have not given due cognizance to the fact that technical services received by the Appellant during the financial year 2004-05 were imperative for the purpose of establishing its business operations in India and thus cannot be treated as capital expenditure for the Assessee. 3. The Learned CIT(A) erred in concluding that these expenses incurred did not pertain to the existing business carried out by the Appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice to each other. The appellant prays for leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal. The appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case. 2. Briefly stated, the facts of this case are: during the processing of return of income filed by the assessee for the Assessment Year 2005-06, the case of the assessee was subjected to scrutiny and notice u/s 143(2) dated 01.05.2006 was issued to the assessee followed by detailed questionnaire along with notice u/s 142(1) dated 30.06.2004 and in response thereto, Shri Siddharth CA attended the proceedings as Authorized Representative, filed requisite details and the case was discussed with him. 3. Michelin-Apollo India is a joint venture between Michelin group of France and Apollo Tyres Ltd. in India incorporated on 17.11.2003 to carry out the business of manufacturing and trading of tyres and tubes for trucks and buses and passenger cars. During the year under consideration, the assessee was engaged in the import and resale (trading) of tyres for passenger cars, trucks and buses, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenging the impugned order contended inter alia that since there was no capital asset to be transferred nor there was any transfer of technical knowhow, Ld. CIT(A) has grossly erred in appreciating that the expenses incurred were in the nature of Revenue expenditure; that there was no trading activities and the matter referred to the TPO who has found no fault in the international transaction. 8. However, on the other hand, Ld. D.R. contended that since the appellant has failed to conclusively prove that the expenditure was in the nature of revenue expenditure, Ld. CIT(A) has passed valid and legal order and relied upon the impugned order. 9. Now, the first question arises for determination in this case is, as to whether Ld. CIT(A) has erred in confirming the total loss of appellant at ₹ 6,08,24,758/- as assessed by the A.O. as against the declared loss of ₹ 7,81,94,190/-. 10. The appellant claimed to have paid an amount of ₹ 1,42,04,926/- during the period of assessment towards technical fee under the head professional and legal expenses . The A.O. relied upon the operative part of agreement entered into between the assessee and its partner M/s. Apoll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profitably while leaving the fixed capital untouched. If only the project reports had been successfully accepted and put into implementation, the assessee would have gone into manufacturing of a new product which would have certainly required investment of fresh capital and coming into existence of additional fixed assets. 14. Now. Coming to the case at hand, the assessee claimed to have spent an amount of ₹ 1,42,04,926/- towards legal fee under the head professional New Delhi legal expenses , which have been treated as capital expenditure and added to the income of the assessee by the A.O. as well as Ld. CIT(A). 15. Ld. CIT(A) by relying upon the decision of Hon'ble High Court in the case of Triveni Engineering Works Pvt. Ltd. (supra) confirmed the order passed y A.O. making addition of ₹ 1,42,04,926/- being in the nature of capital expenditure on the sole ground that when the said amount was expended by the appellant for availing the technical services to assess the feasibility of the project was eventually hived off / discounted such expenditure are to be treated as infructuous expenditure and as such are in the nature of capital expenditure. 16. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration on different locations. 19. For the sake of repetition, it is reiterated that when the amount is being spent by the assessee for increase in the authorized capital and for payment of sales tax and excise registration on different locations in respect of the same business or for the expansion of business under the joint venture then such an expenditure is to be treated as business expenditure despite the fact that the business of the assesses tans discontinued. So, in view of the law laid down by Hon'ble High Court in the judgement cited as Indo Rama Synthetics (I) Ltd. (supra), addition of ₹ 28,02,000/- made by the A.O. and confirmed by Ld. CIT(A) is not sustainable and hence, ordered to be deleted. 20. The assessee claimed an amount of ₹ 1,15,368/- as provision for payment of gratuity based on actual valuation. Undisputedly, the amount of ₹ 1,15,368/- claimed on account of making provision for payment of gratuity has never been paid. Provisions contained u/s 40A(7) of the Act explicitly says that no deduction shall be allowed in respect of any provision made in business hence, Ld. CIT(A) has rightly confirmed the addition of ₹ 1,15,368/- ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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