TMI Blog2017 (11) TMI 1715X X X X Extracts X X X X X X X X Extracts X X X X ..... bership fees paid to STPI, a government of India undertaking are in the nature of recurring expenditure which does not give any enduring benefit to the assessee. Stamp duty incurred for registration of lease agreement is also revenue expenditure irrespective of period of lease. This legal proposition is supported by the decision in the case of CIT vs Cinecita (P) Ltd [1982 (2) TMI 58 - BOMBAY HIGH COURT] wherein it was held that expenditure on registration fee, stamp duty and solicitor’s fee incurred in connection with registration of lease deed is revenue expenditure irrespective of period of lease. Therefore, we are of the view that the AO was erred in treating the expenditure as capital in nature. Also AO has made addition towards total expenditure incurred for setting up of STPI unit at Chennai u/s 14A and also made separate addition towards capital expenditure. Though relief is granted in the rectification order dated 10- 03-2011, there is no clarity on the issue as to whether the relief was allowed towards addition made u/s 14A or addition made under the head ‘legal and professional charges’. Therefore, we are of the view that the issue needs to be re-examined by the AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue, on perusal of the assessment order of AO as well as directions of the DRP u/s 144(5), the AO has not made any adjustments to book profit computed u/s 115JB of the Act. The AO has accepted book profit computed by the assessee without any modification except addition made u/s 14A in respect of expenditure incurred for STPI unit at Chennai. Therefore, we are of the view that the issue is not emanating from the orders of lower authorities; hence, there is no merit in the ground raised by the assessee. - I.T.A No.9145 /Mum/2010 - - - Dated:- 21-11-2017 - Shri Saktijit Dey (JUDICIAL MEMBER) AND Shri G Manjunatha (ACCOUNTANT MEMBER) For the Appellant : Shri Charul Toprani For the Respondent : Shri H.N. Singh ORDER Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of the AO u/s 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 pursuant to directions of Dispute Resolution Panel and it pertains to assessment year 2006-07. The assessee has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law the Learned DClT erred in disallowing an amount of ₹ 2,24,57,168 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal, and in the alternative, the DCIT be directed to grant deduction in the year in which the tax is deducted and paid. 8. On the facts and in the circumstances of the case and in law, the learned DCIT erred in disallowing an amount of ₹ 5,68,529 in respect of legal and professional fees u/s 40(a)(ia) although tax had been deducted at source thereon, thereby not following the directions of the Honorable Dispute Resolution Panel 9. On the facts and in the circumstances of the case and in law, the learned DCIT erred in disallowing u/s 40(a)(ia) an expense aggregating to ₹ 68,875 on hire of hall a though provisions of section 1941 were not applicable. 10. On the facts and in the circumstances of the case and in law, the learned DCIT erred in restricting the claim of set off of business loss to ₹ 4,27,10,713 as per the directions of the Dispute Resolution Panel as against ₹ 10,51,00,000 claimed by the appellant in the return of income. 11. On the facts and in the circumstances of the case and in law, the Learned DCIT erred in treating the expenditure incurred on miscellaneous hardware expenses amounting to ₹ 8,61,215 as capital in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s towards book profit u/s 115JB towards disallowance u/s 14A. Aggrieved by the assessment order, the assessee is in appeal before us. 3. The first issue that came up for our consideration from grounds 1 to 4 is disallowance u/s 14A in respect of expenditure amounting to ₹ 2,24,57,168 incurred for setting up STPI unit at Chennai holding it as inadmissible in terms of section 14A of the Act. The AO observed that since the auditor has quantified the disallowance to be made u/s 14A and the assessee has not offered any explanation, disallowed the same u/s 14A of the Act and also made adjustments of similar amount to the book profit computed u/s 115JB of the Income-tax Act, 1961. The Ld.AR for the assessee submitted that in the absence of any exempt income, there is no question of disallowance u/s 14A of the Act. The Ld.AR further submitted that during the year under consideration, the STPI unit at Chennai has not commenced its business operations and the assessee has not claimed any deduction u/s 10A of the Act. Therefore, the question of disallowance u/s 14A does not arise. In this regard he relied upon the decision of Hon ble Delhi High Court in the case of Cheminvest Ltd vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no exempt income, disallowance of expenditure u/s 14A cannot be made. Therefore, we direct the AO to delete addition made towards expenditure incurred for setting up of STPI unit u/s 14A of the Act. We further direct the AO to delete adjustment made towards book profit computed u/s 115JB of the Income-tax Act, 1961. As a result, grounds raised by the assessee are allowed. 6. The next issue from ground 5 6 that came up for our consideration is disallowance of expenditure amounting to ₹ 10,12,848 incurred in respect of legal and professional fees and ₹ 12,74,100 in respect of stamp duty. The AO disallowed expenditure incurred towards legal and professional charges in respect of STPI unit on the ground that expenditure incurred is in the nature of capital expenditure. The AO disallowed the impugned expenditure on the ground that expenditure incurred for setting up of STPI unit which was going to provide working apparatus giving enduring benefit to the assessee. It is the contention of the assessee that professional expenditure were incurred for Oracle migration accounting and project control software for STPI division which is in the nature of revenue expenditure wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up of STPI unit at Chennai u/s 14A and also made separate addition towards capital expenditure. Though relief is granted in the rectification order dated 10- 03-2011, there is no clarity on the issue as to whether the relief was allowed towards addition made u/s 14A or addition made under the head legal and professional charges . Therefore, we are of the view that the issue needs to be re-examined by the AO and hence, we set aside the issue to the file of the AO and direct him to give a finding as to whether relief is given towards addition made under the head legal and professional charges or disallowance u/s 14A of the Act. 8. The next issue that came up for our consideration from ground 7 to 8 is disallowance of expenditure u/s 40(a)(ia) mounting to ₹ 16,13,260 on account of non deduction of tax at source. The AO has disallowed various expenditure incurred by the assessee like professional fees, purchase of samples, hall hire charges and food charges for failure to deduct tax at source under respective provisions of the Act. 9. The Ld.AR for the assessee contended that though the AO has made addition towards various expenditure, rectified the mistakes vide rect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came up for our consideration is restricting the claim of set off of business loss to ₹ 4,27,10,713 as against ₹ 10.51 crores as claimed by the assessee. The Ld. AR for the assessee submitted that the issue is squarely covered by the decision of ITAT, Mumbai Bench in assessee s own case for the assessment years 1997-98 to 1999-2000 in ITA No.3367/Mum/2009 dated 08-07-2016. We find that the co-ordinate bench considered similar issue in the light of provisions of section 71, 72 and after considering the relevant provisions observed that the pre condition of continuation of business has been dispensed by the Finance Bill, 1999 and, therefore, the provisions of section 72 would be applicable but not provisions of section 71 as held by the AO and the first appellate authority. The relevant portion of the order is extracted below:- 7.1.Before the FAA the assessee argued that the provisions for carry forward, set off of business losses were governed by section 72 and not by section 71(l)(i), that the proviso in connection with the continuance of business had been omitted by the Finance Act, 1999 w.e.f. 1.4.2000.After considering the submission of the assessee the FAA held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt issue that came up for our consideration from ground 13 is adjustments towards provision for fringe benefit tax amounting to ₹ 7,50,000 for book profits computed u/s 115JB of the Income-tax Act, 1961. The Ld.AR for the assessee submitted that the AO was erred in not reducing provision for Fringe Benefit Tax while computing book profit u/s 115JB even though the circular issued by the CBDT vide circular No.8 of 2005 clarifies that Fringe Benefit Tax is an allowable deduction in computing book profit u/s 115JB of the Act. We find that though the assessee has taken a ground on the issue, on perusal of the assessment order of AO as well as directions of the DRP u/s 144(5), the AO has not made any adjustments to book profit computed u/s 115JB of the Act. The AO has accepted book profit computed by the assessee without any modification except addition made u/s 14A in respect of expenditure incurred for STPI unit at Chennai. Therefore, we are of the view that the issue is not emanating from the orders of lower authorities; hence, there is no merit in the ground raised by the assessee. 14. The next issue that came up for our consideration from grounds 14 15 is against non gran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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