TMI Blog2017 (2) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is allowable u/s. 35D of the Act, yet he could not convincingly explain as to how this expenditure would fall in the list of expenses specified u/s. 35D of the Act. Further in the case of Brooke Bond India Ltd. (1997 (2) TMI 11 - SUPREME Court) has held that expenditure incurred in augmenting the share capital is capital in nature. Hence, we do not find any reason to interfere with the order passed by the learned CIT(A) on this issue. - Decided against assessee. Double addition of interest income - Held that:- The assessing officer has already assessed the interest income (credit entry), whose corresponding debit entry is the increase in the amount of “Capital work in progress”. In any case, since Capital workin- progress i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer noticed that the assessee has incurred share issue expenses aggregating to ₹ 4.76 crores. After disallowing the preliminary expenses of ₹ 34,100/-, assessee claimed 1/5th of share issue expenses amounting to ₹ 95,45,587/- u/s. 35D of the Act. The Assessing Officer, by placing reliance on the decision rendered by Hon'ble madras High Court in the case of Sakthi Finance Ltd. (256 ITR 488), held that the amount spent for increasing the share capital does not qualify for deduction u/s. 35D of the Act. Accordingly, he disallowed claim of ₹ 95,45,587/- made by the assessee. The learned CIT(A) also confirmed the same. 5. We have heard the parties on this issue and perused the record. The learned CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Village, in Raigad District. The company is also in process of acquisition of land at various places including Umbergaon and Pipavav in Gujarat, Chennai and National capital region to set up CRS/ICD/Multimodal project is classified. The assessee capitalized expenditure incurred in construction of this project under the head Pre-operative expenditure pending capitalization (may also be referred as Capital work in progress ). The Assessing Officer noticed that the assessee has earned interest income of ₹ 3,28,17,073/- from banks out of fixed deposits. The assessee deducted this interest income from pre-operative expenses and accordingly did not offer the same as its income while computing total income. The Assessing Officer, by paci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the tax authorities have made double addition of same item. 8. We have heard the parties on this issue. We have also noticed that the assessee has reduced capital work-in-progress by interest income of ₹ 3.28 crores and accordingly disclosed net amount as capital work-in-progress in the books of account. It is pertinent to note that the Capital work in progress was not shown in Profit and Loss account, but was rightly shown as a Balance Sheet item. The Assessing Officer has assessed the interest income as income of the assessee under the head income from other sources . After assessing the said amount, the Assessing Officer has again taken the view that increase in capital work-in-progress would increase business profit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entry is the increase in the amount of Capital work in progress . In any case, since Capital workin- progress is a Balance sheet item, its increase will not increase the business profit of the assessee, as presumed by the Assessing Officer. Hence, we are unable to agree with the view taken by the tax authorities as the same is against the accounting principles. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete the addition of ₹ 3.28 crores made towards under valuation of work-inprogress, as the same results in double addition of same item. 9. In the result, appeal filed by the assessee is partly allowed. Order has been pronounced in the Court on 21.12.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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