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2016 (10) TMI 195 - ITAT AHMEDABAD

2016 (10) TMI 195 - ITAT AHMEDABAD - TM - Addition u/s 35D - expenditure incurred for increase in Authorised Capital of the Company - Held that:- The assessee has debited an amount of ₹ 104,000/- as preliminary expenses on account of expenditure incurred in the case of fees and stamp duty payable to increase the authorized capital u/s. 35D of the I.T. Act We find that according to provisions of section 35D(ii) of the Act the kinds of expenses claimed by the assessee are not specifically co .....

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D unless it is coupled with the extension of an industrial undertaking or in connection with setting up of a new industrial undertaking.We find that this disallowance was confirmed by the Ld. Commissioner of Income Tax(A) by giving a specific finding that the assessee is not fulfilling the conditions imposed under sub-sections (1) and (2) of section 35D, we, therefore, uphold the order of the Ld. Commissioner of Income Tax(A) - Decided against assessee - Disallowance u/s. 14A - Held that:- W .....

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decision of the co-ordinate bench in the case of Shr Nandlal J. Agarwal vs. DCIT, Circle-1 Ahmedabad [2015 (7) TMI 1139 - ITAT AHMEDABAD] where it was held that the disallowance under section 14A cannot be made when no income is claimed to be exempt in that particular year after relying on the decision of Hon’ble jurisdictional high court in the case of Commissioner of Income Tax vs. Corrtech Energy (P) Ltd. (2014 (3) TMI 856 - GUJARAT HIGH COURT). In view of the above mentioned facts and circum .....

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ssessee s appeal for A.Y. 2009-10, arises from order of the CIT(A)-XI, Ahmedabad dated 12-08-2013 in appeal no. CIT(A)- XI/217/Addl. CIT.R-5/11-12, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . ITA No. 2488/Ahd/2013 Assessment Year 2009-10 2. The assessee has filed the appeal raising following substantive grounds:- 1. The Ld. CIT(A) XI has erred in law and on facts in confirming the addition of ₹ 1,04,000 made by the Ld. Assessing Officer while making .....

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the order being bad on facts may kindly be quashed and the addition may kindly be deleted. Ground No. 1 3. The fact of the case is that the Assessing Officer on perusal of the P &L A/c of the Company, noticed that the assessee has debited a sum of ₹ 1,04,000/- as preliminary expenses written off. On query, the assessee submitted before the Assessing Officer that preliminary expenses incurred in the year 2005-06 is in the nature of increase in the capital of the company hence qualify t .....

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f the Companies Act 1956, to increase the authorized capital. The expenses so incurred are not revenue expenses as they likely to give benefit of enduring nature,so it treated the same as deferred revenue expenses. Accordingly, it has been claiming 1/5 of the total expenditure incurred then every year, for five years. The Assessing Officer stated that the jurisdictional High Court decision in M/s Vareli Textiles Ltd 284 ITR 238(Guj), which has followed the decision of Supreme Court reported in 2 .....

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ssee. Against the order of Assessing Officer, the assessee has filed appeal before the Ld. Commissioner of Income Tax(A). The Commissioner of Income Tax(A) held as under:- 2.1 I have carefully considered the facts of the case. Hon'ble Supreme Court in the case of Brook Bond India Ltd. 225 ITR 798 has held that the fees paid to registrar for increase In authorised share capital is a capital expenditure. On going through the provisions of sec. 35D, I find that the fees for registering the comp .....

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on of a company depending on the nominal share capita!, in respect of a company having a share capital. Item 3, on the other hand, deals with fees payable for filing a notice for increase in the nominal share capital of the company. The first two items and the third item operate in conceptually and contextually different fields. This is also clear from a reading of item 4 which provides that for registration of any existing commpany, except such companies as are by the Companies Act exempted fro .....

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ew has been taken in the case of Shakti Finance Ltd. 250 JTR 488 Madras. 2.3 From the above discussion what emerges is the fact that the fees paid to registrar for increase in the authorised share capital is a capital expenditure and is therefore not allowed under the general provisions of sec. 37 of the I.T. Act. The same is not allowed under the specific provisions of sec.35D of the I.T. Act also. Accordingly, the disallowance made by the A.O. of ₹ 1 ,04,000/- u/s. 35D of the I.T. Act is .....

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sessee has debited an amount of ₹ 104,000/- as preliminary expenses on account of expenditure incurred in the case of fees and stamp duty payable to increase the authorized capital u/s. 35D of the I.T. Act We find that according to provisions of section 35D(ii) of the Act the kinds of expenses claimed by the assessee are not specifically covered in the section 35D(ii). Hon ble supreme court in the case of Brook Bond India Ltd. 225 ITR 798 has held that the fees paid to registrar for increa .....

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Industrial Development Corp Ltd. vs. Commissioner of Income Tax (1997) 225 ITR 792/93 also held that fee paid to Registrar of Companies for expansion of capital base of the company is capital expenditure. The co-ordinate bench of this tribunal in the case of Gujarat Power Corporation Ltd. vs. ACIT (2013) 33 taxmann.com 318 Ahmedabad Tribunal has disallowed the claim of assessee u/s. 35D as the asssessee was not fulfilling the conditions laid down under sub-section (1) and (2) of section 35D. We .....

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; 80,12,500/- both at the beginning of the year and at the end of the year, the dividend income from which are exempt from tax. In the computation of income, the assessee has not disallowed any amount towards disallowance u/s 14A. On being queried as to why the provisions of Section 14A r.w. Rule 8D be not applied to the facts of the present case, the assessee contended that since the company has not received any income exempt from tax, the provisions of sec. 14A are not applicable. The assessee .....

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relation to income which does not form part of total income" and in order to disallow the expenditure actual income need not be earned. He relied on the judgment in the case of Cheminvest Ltd. vs. ITO (ITAT, Delhi (SB)) in ITA No. 87/Del/2008. The Assessing Officer pointed out that the assessee has not been able to show that no interest expenses incurred in relation to exempt income. The Assessing Officer held that the provisions of sec. 14A is applicable in the case of the assessee and wo .....

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e capable of producing or generating exempt income. This issue is amply covered by the decision of Hon'ble Delhi Special Bench in the case of Ken Investment Ltd 121 ITD 318 (2009) (S.B). With regard to the claim that the investments made by the appellant were in the nature of trade investment made with an objective of furthering the business interest of the company, this aspect has been considered by various judicial authorities. In the case of Maxopp Investments Ltd. [203 taxman 185 (Del)] .....

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of mixed fund as highlighted by the A.O. being used for the purpose of earning taxable as well as exempt income. Appellant has not been able to show before the A.O. that no interest expenses have been incurred by it in relation to the assets capable of generating exempt income. In view of the above facts and decisions the disallowance made by the A.O. of ₹ 3,26,457/- is hereby confirmed and this grounds of appeal is dismissed. 6. The ld. counsel contended that the assessee company has not .....

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he parties and perused the material on record. The provisions of section 14-A are being reproduced as under: "(1) For the purpose of computing the total income under this chapter no deduction shall be allowed in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The assessing officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income .....

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