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TMI Blog2018 (1) TMI 1399X X X X Extracts X X X X X X X X Extracts X X X X ..... n towards unexplained cash credits towards share capital and share premium, expenditure incurred on UAE branch, disallowance of interest on inter-corporate loans, addition towards cessation of liability u/s 41(1), towards unproved sundry creditors, disallowance of expenditure for failure to deduct TDS / short deduction of TDS u/s 194C, addition towards AIR mismatch and disallowance of amortization of subsidized cost. The AO also recomputed book profit u/s 115JB by making adjustments towards addition made on account of disallowance of amortization of subsidized cost. 3. Aggrieved by the assessment order, assessee filed appeal before the CIT(A). Before the CIT(A), the assessee has filed elaborate written submissions to contest each and every addition made by the AO. The CIT(A), for the detailed discussion in his order dated 11-01-2016 partly allowed appeal filed by the assessee, wherein he has deleted additions made by the AO towards unexplained cash credits u/s 68 towards share capital and share premium, disallowance of expenditure incurred for stting up UAE branch, disallowance of expenditure u/s 40(a)(ia) for failure to deduct TDS / short deduction of TDS and addition towards AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrence. Therefore, the treatment given for amortisation of subsidised cost is in accordance with accounting standards. Accordingly the AO was incorrect in making adjustment towards book profit. In this regard, he relied upon the decision of Hon'ble Supreme Court in the case of CIT vs Apollo Tyres Ltd (2002) 122 Taxman 562 (SC). The assessee also relied upon the decision of Hon'ble Supreme Court in the case of Taparia Tools Ltd vs JCIT (2015) 372 ITR 605 (SC). 5. The Ld.DR, on the other hand, supported the order of the CIT(A). 6. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The assessee has treated subsidised cost on sale of projectors and its accessories as deferred revenue expenditure and amortised over a period of agreement. During the year under consideration, the assessee has changed its accounting policy so as to charge total subsidised cost incurred to the P&L Account in the year in which such cost has been incurred and such changes has been disclosed in the notes to accounts. The AO made addition to the book profit computed u/s 115JB on the ground that the assessee has failed to make positive ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmally the ordinary rule is to be applied, viz. revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, then the department cannot deny the same. However, in that case, where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principles of matching concept is satisfied. In the present case, admittedly, the assessee has incurred subsidised cost on sale of projectors and accessories and such cost has been treated as revenue expenditure and also amortised over a period of agreement. However, due to changed circumstances, it has changed its accounting policies so as to charge total subsidised cost incurred in the year in which such expenditure has been incurred. The assessee also disclosed such changes in accounting policies in the notes to accounts for better disclosure of its financial statements. It is also an admitted fact that the assessee has prepared its accounts in accordance with Parts II and III of Schedule VI of the Companies'Act, 1956. The accounts of the assessee has been audited by the statutory auditors and also approved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any justification for offer of shares at a huge premium. According to the AO, the market value of the shares as on the date of issue of share at a premium is Rs. 88 and hence, the premium should have been charged at Rs. 78/-, whereas the assessee has charged excess premium of Rs. 955 per share. Therefore, he doubted the genuineness of transactions and accordingly made addition by following the decision of Hon'ble Bombay High Court in the case of Major Metals vs UOI 2016-LL-0517-33 It is the contention of the assessee that it is engaged in converting majority of the multiplexes and from time to time single screens in the country to digital cinema initiative platform and enjoys the privilege of being India's DCI compliant entity having Virtual Print fee contracts. The assessee is now listed on the Bombay Stock Exchange and the National Stock Exchnage has issued shares to UFO at a price of Rs. 1,043 per share having a face value of Rs. 10/-. Such shares has been issued to hold controlling interest considering the growth in number of screens. The assessee has filed various details before the AO to justify issue of shares at a premium. The assessee also filed details to prove identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... group and Apollo group. It is very obvious from the evidences on record that UFO had acquired minority stake in the appellant at the price of Rs. 1,043.11 per share including share premium as strategic investment with the appellant. UFO and the appellant, as claimed by the appellant, are unrelated and independent parties. Over the year. UFO has acquired majority stake in the appellant having 26.41% in FY 2011-12 and was having 51.85%Jn FY 2012-13 it was having 76.42% And in FY 2013-14 the holding was of 91.33%. During the course of assessment proceedings Ld. AR of the appellant has submitted various documents like share subscription and share holders agreement, copy of bank statement showing receipt of share application money, copy of form No.2 filed with Registrar of Companies, certified copy of Board resolutions and annual accounts of UFO. All these evidences are very relevant to the issue under consideration. Further, the AO has not appreciated it properly and has wrongly presumed that the appellant has not produced any concrete evidence. 7. As regards the fair market value of companies share, the working given by AO is untenable because it is mechanical calculation having n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business scenario and business prospects for which share premium charged. When creditors or investors are existing one and their accounts are ifiable. no such addition can be made u/s.68 of Income Tax Act. Vide:- CIT Vs Ania Investment Pvt. Ltd. (2010) 322 ITR 394 (Bom). CIT Vs Steller Investment ((2001) 251 ITR 263 (SC). Further, share capital and share premium is capital receipt which cannot be taxed when source of receipt is explained and documentary evidence are on record, Therefore I find no justification to approve such baseless addition made by the AO u/s.68 of the Act. The AO is therefore directed to delete Rs. 1,83,12,324/-." 11. Facts remain unchanged. The revenue fails to bring on record any evidences to controvert the findings of facts recorded by the Ld.CIT(A). Hence, we are inclined to uphold the findings of CIT(A) and reject ground raised by the revenue. 12. The next issue that came up for our consideration is addition made by the AO towards disallowance of expenditure for setting up of UAE branch. The AO disallowed expenditure incurred for setting up of UAE branch on the ground that the assessee has not carried out any commercial activity; hence, expenditure is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies. The assessee is holding more than 33% equity stake in the company for which loans have been given and also derived commercial benefit. Therefore, the AO was incorrect in holding that the assessee has diverted interest bearing funds to give loans to group companies. The CIT(A), after considering relevant submissions has rightly deleted addition made by the AO. We do not find any error in the order of CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and dismiss ground raised by the revenue. 16. The next issue that came up for our consideration is addition of outstanding sundry creditors of Rs. 80,52,899 u/s 41(1). The AO made addition towards unproved sundry creditors on the ground that the assessee has failed to file any evidence to prove the sundry creditors appearing in the books of account. It is the contention of the assessee that the AO was incorrect in making addition towards sundry creditors u/s 41(1) without appreciating the fact that the assessee has not derived any cash or kind benefit by cessation of liability and such liability has been paid in the subsequent financial year. Therefore, the AO was incorrect in disallowing sundry creditors u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no scope for the AO to disallow expenditure u/s 40(a)(ia) of the Act as the provisions u/s 40(a)(ia) is applicable only when there is no TDS deduction. This legal proposition is supported by the decision of Hon'ble Calcutta High Court in the case of CIT vs SK Tekriwal (supra) wherein it was held that if there is lesser deduction of TDS due to any difference of opinion, no disallowance can be made u/s 40(a)(ia) of the Act. If there is short deduction, the revenue is free to proceed to pass an order u/s 201 of the Act, but no disallowance can be made u/s 40(a)(ia) of the Act. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. Therefore, we uphold the findings of CIT(A) and reject ground raised by the revenue. 20. The next issue that came up for our consideration is addition made by the AO towards AIR mismatch for Rs. 62,900. The AO has made addition of Rs. 62,900 on the ground that the assessee has made TDS claim of Rs. 1,258 without considering corresponding receipts in the books of account. It is the contention of the assessee that it has furnished reconciliation of TDS difference and explained that certain parties have deducted excess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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