TMI Blog2018 (5) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- In the plethora of cases, the courts have held that CIT(A) and ITAT have power to allow deduction for expenditure to assessee to which it was otherwise entitled even though no claim was made in the return of income. The assessee is entitled to a particular claim, which it missed in the return of income, may claim during appellate proceedings. The assessee should ensure that all necessary evidences are submitted during appellate proceedings and available on record. The case to refer in particular is CIT vs. Pruthvi Brokers & Shareholders P. Ltd. (2012 (7) TMI 158 - BOMBAY HIGH COURT). In the case under consideration, the assessee has submitted all relevant information on record relevant to claim the non-compete payment and it is not in dispute. The only issue is, it is not claimed in the return of income. Since, CIT(A) has power to allow the claim as per the above decisions of higher courts, it is within the powers of CIT(A) to allow the claim of the assessee. TDS u/s 194H - Payment of commission to Shri P. Ramaraju without deducting TDS - Held that:- This is a genuine expenditure and it should be allowed. This is relating to market development and it cannot be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f record, we find that there was a delay of 32 days in filing the CO before us. To this effect, the assessee filed an affidavit wherein it was affirmed that due to change in management at the relevant point of time, the delay of 32 days were occurred, hence, the delay has occurred due to unavoidable circumstances and there was no intention to default. As the assessee was prevented by reasonable cause in not filing the CO within the stipulated time, we condone the delay and admitted the CO for adjudication. 4. As regards ground No. 2 pertaining to disallowance u/s 14A, during the year under consideration, the assessee had purchased shares of M/s Hitech Print Systems Pvt. Ltd (HPSL) for a consideration of ₹ 14 crores. The AO noted that the investment is towards share capital and the dividend is not taxable. He, therefore, proposed to make disallowance by applying section 14A of the Act, In response, assessee submitted that the company s total net worth as on 01/04/2007 was ₹ 29.278 crores and loan funds stood at ₹ 36.54 crores. The amount invested for allocation of shares in HPSL was much less than the net worth and the loan funds available at the commencement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income for the concerned assessment years, we are of the view, Section 14A of the Act cannot be invoked. In this appeal, the revenue has not dispelled the contention of the assessee before AO that it was not in receipt of any exempt income. Learned CIT(A), has misconstrued the decision of Delhi Bench of this Tribunal in the case of M/s Technopak Advisors (P) Ltd., as that of the Hon' Delhi High Court, without recognizing that after the said decision, there has been a catena of judgments from various High Courts, going in favour of the assessee. Hence according to us, the Assessing Officer has erred in invoking Section 14A of the Act. 7.2 In the case of ACIT Vs. M/s Mishra Dhatu Nigam Ltd., (supra), the coordinate bench of ITAT, Hyderabad has held as under: 8. We have considered the submissions of the parties and perused the materials on record. Though, ld. DR relying upon the decision of ITAT Delhi Special Bench in case of Cheminvest Ltd. Vs. ITO (supra), attempted to justify the disallowance made u/s 14A, however, on careful analysis of the decisions cited by assessee including the decision of the Hon ble P H High Court in case of CIT Vs. M/s Lakhani Marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as no exempt income was earned from the investment so made, the provisions of Section 14A will not be applicable in the case of assessee. Therefore, following the said decisions of the coordinate bench as section 14A cannot be invoked without any exempt income, accordingly, we dismiss the grounds raised by the revenue and allow the grounds raised by the assessee in C.O. 8. As regards ground Nos. 2 3 pertaining to non-compete fee, brief facts relating to these grounds are, during the AY assessee has not claimed non-compete fee paid in the return of income. However, it has treated the same as advance payment and kept it as balance sheet item. In AY 2009-10, assessee has claimed non-compete fee of ₹ 4 crores as revenue expenditure and AO has disallowed the same by observing that the activity of the assessee is manufacture of cement whereas the receivers of non-compete fee are Shri Madhusudhana Rao and Smt. Jayasree who were not anywhere related to cement industry. The agreement of non-compete fee is with reference to paper and print sector which is the business of Hitech, which is subsidiary of the assessee. Therefore, the assessee cannot claim deduction for payment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the claim of this payment of ₹ 4 crores as expenditure in AY 2009-10 on the ground that non-compete fee agreement would benefit to subsidiary company and not assessee company. 9.1 It was further submitted that assessee as a holding company made payment for business purpose and whether is the purpose of holding or subsidiary company would not be relevant as held in the case of SA Builders Vs. CIT, 288 ITR 1 and further relied on other case law. It was also subumitted that in support of filing of additional grounds, which arise directly out of the facts and evidence on record does not require any investigation into the facts and therefore qualify for adjudication. 9.2 Alternatively, it was also submitted that the above payment should be treated as capital expenditure and depreciation thereon should be allowed. In support of this submission, the assessee relied on the following cases: 1. ACIT Vs. Real Image Tech (P) Ltd., 120 TTJ 983 2. ITO Vs. Medicorp Technologies India Ltd., 30 SOT 506 3. Bunge Agribusiness (India) (P) Ltd., Vs. DCIT, 132 ITD 549 (Mum.) 4. M/s Scott Glass India Pvt. Ltd. Vs. DCIT, 1698/Mum/2003. 5. Serum Institute India Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the acquisition of Non-compete Right is not revenue expenditure since the same has been incurred for the acquisition of a capital asset. It is pertinent to point out in this regard that the appellant has acquired the Right of no competition in printing business. It has resulted in the acquisition of an unrivaled and no competed business domain / territory for the appellant for a specific period. The acquisition of such a business domain / territory with no competition has brought advantages in the capital field. The transaction resulting in the acquisition of the Right to do printing business without any competition is final and irreversible. This Right has become the ownership right of the appellant. It is this expenditure which has bought this ownership right to the appellant. Under the circumstances, it is held to be an expenditure on capital account incurred for the acquisition of the Non-compete Right, a capital asset. The Non-compete Right is an intangible capital asset for the purposes of section 32(1)(ii) of the Act and is eligible for depreciation at the admissible rates. The alternate plea of the appellant that the same be allowed as revenue expenditure has already be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholders P. Ltd., 349 ITR 336 (Bom.). In the case under consideration, the assessee has submitted all relevant information on record relevant to claim the non-compete payment and it is not in dispute. The only issue is, it is not claimed in the return of income. Since, CIT(A) has power to allow the claim as per the above decisions of higher courts, it is within the powers of CIT(A) to allow the claim of the assessee. Therefore, ground raised by the department is dismissed. C.O. No. 13/Hyd/2016 by assessee 13. The assessee has filed the following cross objections in its C.O: 1. The Learned CIT(A) failed to note that the entire income was deductible U/s. 36(1)(iii) of the I.T Act, 1961 as no borrowed funds have been utilised for investments in exempted income yielding assets. 2. The learned CIT (A) failed to note that no disallowance U/s. 14A of I.T Act, 1961 can be made in a year in which no exempt income has been earned or received by the Appellant Company. 3. Without prejudice to Cross objection No: 2 the learned CIT (A) erred in confirming the disallowance in part by holding that the provisions of Section 14A are to be applied to interest to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, following the conclusions drawn therein, we allow the ground raised by the assessee. (Refer Para No. 12). 18. As regards ground Nos. 2 3 regarding payment of commission to Shri P. Ramaraju without deducting TDS, it is observed that the assessee has shown ₹ 10,00,000/- as special discount in case of Shri P. Ramaraju. The assessee had appointed consignment agent for developing market outside AP. Shri P. Ramaraju was instrumental in developing good market in Karnataka and the amount paid to him relating to market development was debited as special discount to profit and loss a/c. The AO held that the expenditure incurred is genuine, the deduction was not allowed as no TDS was deducted u/s 40(a)(ia) of the Act on the ground that the discount given to Shri Ramaraju was in the nature of commission which is liable to TDS u/s 194H. 19. On appeal, the CIT(A) confirmed the action of the AO by holding that it is a common practice to call the commission paid as discount to avoid TDS provisions, therefore, the AO is correct in applying the provisions of section 40(a)(ia) and accordingly upheld the disallowance of ₹ 10,00,000/- u/s 40(a(ia). 20. Aggrieved, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
