TMI Blog2016 (2) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... ather contemporary knowledge about management of certain illness/disease and learn about newer therapies. We found that the disallowance was made by the AO by relying on the CBDT Circular dated 01.08.2012 onwards. However, the Circular was not applicable because it was introduced w.e.f.01.08.2012. i.e. assessment year 2013-2014, whereas the relevant assessment year under consideration is 2010-2011 and 2011-2012. Accordingly, we do not find any merit in the disallowance - Decided in favour of assessee Addition on account of forfeiture of warrant application money - Held that:- As found that warrants were converted into shares, however, money contributions did not contribute these warrants into shares, therefore, their contributions were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd and record perused. Facts in brief are that the assessee is engaged in manufacturing of various pharmaceuticals products and having sales within and outside India. During the year under consideration, the assessee had debited an amount of ₹ 4,32,11,406/- under the head sales promotion expenses‟. Accordingly the details were called for and noticed that an amount of ₹ 22,45,000/- was relating to freebies given to medical practitioners. The AO disallowed ₹ 22,45,000/- by invoking Explanation to Section 37(1) and CBDT Circular dated 1-8-2012. 4. By the impugned order the CIT(A) confirmed the disallowance. 5. We have considered rival contentions and found that receiving of gifts by doctors was prohibited by MCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.60 per warrant aggregating to ₹ 14,95,000/-. Balance amount was to be received within 18 months as per SEBI guidelines. However, due to fall in share price of company, warrant holders did not avail the option for conversion of the warrants into equity shares within the stipulated time as per SEBI(DIP) guidelines and as per the terms of the issue within a period of 18 months from the date of allotment i.e. 28th Sept., 2009 resulting in violation of terms of the issue and accordingly the upfront amount of ₹ 4.60 per warrant paid by the warrant holder was forfeited by the company. The forfeited amount was credited to capital reserve in its audited accounts for the year under appeal. The AO added this amount as income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., it was a case of write back of loan taken for business purposes. Thus, both the cases deal with the amounts credited to profits and loss account which amounts were initially received in the course of trading and business activities, therefore, not relevant to the facts of the present case. In the present case, the amount was received for increase in share capital i.e. capital account and that the forfeited amount was disclosed as capital reserve and not credited to the profit loss account. The AR has also relied on a number of decisions cited above and also the decision of hon'ble Supreme Court in case of Travancore Rubber Tea Company Ltd. Vs. CIT 243 ITR 158. Thus, it was argued that since it was a capital receipt, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forfeited amounts must also be treated as capital receipts. Since the facts of the present case are squarely covered by the decision of hon'ble Supreme Court, therefore, the addition made by the AO. is not sustainable, hence deleted. Ground of appeal is allowed. Against the above order of CIT(A), the revenue is in further appeal before us. 9. We found that warrants were converted into shares, however, money contributions did not contribute these warrants into shares, therefore, their contributions were forfeited which was treated by assessee as capital receipts. The issue is squarely covered by the decision of Hon‟ble Supreme Court in the case of Travencore Rubber Tea Company Ltd. (supra). The case laws relied on by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by holding that the expression does not form part of the total income in Section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Respectfully following the decision of the Hon‟ble Delhi High Court and other High Courts, as discussed above, we do not find any merit for the disallowance so made u/s.14A, when there is no exempt income during the year under consideration. 12. In the result, appeals of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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