TMI Blog2016 (6) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... td for the smooth conduct of business and prime face this fees is paid once in life time for amalgamation of the company with enduring benefits we are of the opinion the expenditure has to be apportioned and transferred to profit and loss account as per the provisions of Sec. 35DD and we direct the ld. AO to allow apportioned claim in the previous year being the first year and this ground of the assessee is partly allowed. Disallowance of expenditure as legal and professional charges paid to overseas parties - HELD THAT:- The expenditure is in the nature of legal and professional fee paid for services of translation, documentation, corporate matters and associated filing and such expenditure is wholly and exclusively for the business purpose and expenditure is genuine and relied on the decision of Apex Court. Assessee company acquired of Shares of M/s. Belair SA at Paris is for conducting business in Europe region and activity does relate to investment for enduring value and the expenses on acquisition of shares of foreign company directly or indirectly takes the character of capital in nature and shall be part of Business acquisition. Therefore, considering the apparent facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble High Court and Supreme Court and ld. CIT (Appeals) has only directed the ld. AO to examine the claim and allow as per law. CIT (Appeals) has only directed the ld. AO with a condition to verify and the power of Commissioner of Income Tax (Appeals) are co-terminus with AO and we considering the facts are of the opinion that the action of Commissioner of Income Tax (Appeals) is justified and we dismiss the ground of the Revenue. - I.T.A. No.2769/Mds/2014, I.T.A. No.2943/Mds/2014 - - - Dated:- 28-6-2016 - Shri Chandra Poojari, Accountant Member And Shri G. Pavan Kumar, Judicial Member Assessee by: Shri. N.V. Balaji, Advocate Department by: Shri. A.V. Sreekanth, IRS, JCIT. ORDER G. Pavan Kumar, These cross-appeals filed by the assessee and Revenue respectively, is directed against order of the Commissioner of Income- tax (Appeals)-I, Coimbatore in Appeal No.84/13-14, dt 04.09.2014 for the assessment year 2010-2011 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as 'the Act'). 2. First, we take up assessee appeal in ITA No.2769/Mds/2014 of assessment year 2010-2011 for adjudication :- The assessee has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company in foreign countries on assignments and also includes the expenditure on visits to the subsidiaries companies. The Board of Directors and top management professional travelling abroad for undertaking assignments for the benefit of the assessee company being holding company. Further, the assessee submitted paper book explaining the details of travels made by the employees and the expenses are wholly and exclusively for the purpose of business. The assessee company has subsidiary in China and the Managing Director travels for the business developments which are within the main objects of the assessee company. The expenditure incurred relating to the foreign subsidiary as under:- (i) ERP Finance Module Implementation for integration of accounts. (ii) Business Review Meeting. (iii)Vendor Development and Production Inspection. (iv) Market Study and Strategy (v)Implementation of Compressor Assembly process. The ld. Assessing Officer has disallowed the expenditure without appreciating the nature of expenses incurred on foreign travel to China which the ld. Commissioner of Income Tax (Appeals) discussed elaborately at page 8 to 10 of his order and concluded con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information filed in appellate hearing alongwith supporting judicial decisions were the ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of foreign travel expenses to the extent of ₹ 17,42,595/- without appreciating the business reviews and foreign travel is exclusively for the purpose of business, the investments in subsidiary company are on business module for global operations and such travel is solely for the benefit of business of the assessee and not to subsidiary and the ld. Commissioner of Income Tax (Appeals) has not adjudicated the difference amount of foreign travel expenses disallowance of ₹ 2,07,330/- and supported the arguments by submitting information on foreign travel expenses and judicial decisions. 3.3 Contra, the ld. Departmental Representative relied on the orders of the lower authorities and vehemently opposed to the grounds. 3.4 We heard the rival submissions, perused the material on record and judicial decisions cited. The ld. Authorised Representative argued that the ld. Commissioner of Income Tax (Appeals) has partially allowed the appeal considering the material submitted in the appellate proceedings. But on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business on acquisition amalgamation of another company. The ld. Assessing Officer not satisfied with explanations on the issue and treated ₹ 1,72,219/- as capital expenditure. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 4.2 In the appellate proceedings, the ld. Authorised Representative explained the nature of expenditure which includes professional charges paid to Company Secretaries and produced the bills. The ld. Commissioner of Income Tax (Appeals) considering the grounds and findings of the ld. Assessing Officer and judicial decisions relied by the ld. Assessing Officer found that the expenditure is incurred in connection with the amalgamation of the company intimating to the Bombay Stock Exchange. The above expenditure was incurred by the assessee company to merge M/s. Elgi Industrial Products Limited carrying on complementary business and the amalgamation was necessary for the smooth conduct of the business. The ld. Commissioner of Income Tax (Appeals) considering decision of the Apex Court and bills of legal and professional charges found that ₹ 55,150/- was paid to Bombay Stock Exchange and balance am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,77,984/- for other overseas consultants. The ld. Assessing Officer is of the opinion that the expenditure incurred towards acquisition of France Company is not related to assessee business earnings and income. Such expenditure was incurred in connection with a new unit feasibility and acquisition of a capital asset and not allowable u/s.37(1) of the Act. The ld. Assessing Officer relied on the judicial decisions and provisions of law and also Accounting standard of the Institute of Chartered Accountants of India (ICAI). The ld. Assessing Officer heard the explanations and was not convinced with the submissions and activities of the company and discussed elaborately at page 18 to 20 of his order and also distinguished the decision relied by the assessee and treated the expenditure as not related to the business and disallowed ₹ 21,33,539/. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 5.2In the appellate proceedings, the ld. Authorised Representative explained that the assessee company paid fees to overseas consultancy firm towards the services and market survey in Asia and South Africa incurred by the parent com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is wholly and exclusively for the business purpose and expenditure is genuine and relied on the decision of Apex Court. We found that the assessee company acquired of Shares of M/s. Belair SA at Paris is for conducting business in Europe region and activity does relate to investment for enduring value and the expenses on acquisition of shares of foreign company directly or indirectly takes the character of capital in nature and shall be part of Business acquisition. Therefore, considering the apparent facts, necessity of expenditure and overseas payment, we are of the opinion that the professional charges paid to M/s. Stehlin Associates, Paris in connection with acquisition is capital expenditure and we upheld the order of CIT() on this ground and the ground of the assessee is dismissed.. 6 In the result, the appeal of the assessee in ITA No.2769/Mds/2014 of assessment year 2010-2011 is partly allowed for statistical purpose. . 7 Now, we take up Department appeal in ITA No. 2943/Mds/2014 of assessment year 2010-11 for adjudication. 7.1 The first ground raised by the Department is that Commissioner of Income Tax (Appeals) ought to have called for a remand report as laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. Assessing Officer for limited purpose to verify the genuineness of statements filed in the appellate proceedings and the ld. Assessing Officer shall provide adequate opportunity of being heard to the assessee before passing the orders and the ground of the Revenue is allowed for statistical purpose. 8 The second ground raised by the Revenue is that Commissioner of Income Tax (Appeals) erred in concluding that Holyroyd Machinery replaced comes under ''Repairs and Maintenance'' and hence allowable u/s.37 of the Act, which is factually incorrect, since the facts and circumstances of the case indicate that it is clearly a new machinery installed. 8.1 The assessee company has incurred expenditure under the head repairs and maintenance. Out of the above amount, the company has incurred expenditure under the Head Holyroyd Precision Limited having purchased a new dual type PC technology based controlling system with CAN (Control Areas Network) fitted by replacing the existing CNC (Computer Numerical Control) drive system. The ld. Assessing Officer observed and considered the submissions of the ld. Authorised Representative and is of the opinion that expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposal and prayed the expenditure is in the nature of repairs and maintenance as the company is in engineering industry and the value of replacement does increase its capacity and consists of electrical panel and shall cannot function independently and the components forming part of larger machines and prayed for dismissing the appeal. 8.5 We heard the rival submissions, perused the material on record and judicial decisions. The contention of the ld. Departmental Representative that the assessee has installed new machinery and could not substantiate with material evidence being Revenue expenditure except relying on the finding of the Commissioner of Income Tax (Appeals) were it was dealt based on the operation and technical feasibility of the machine and on upgradation of Holyroid Machinery. The ld. Departmental Representative further explained that the replacement of parts play a important role in machinery and can work independently and shall provide perpetual enduring benefit and increase the life of existing machine. The ld. Authorised Representative substantiated his arguments with evidence of photographs of units and also upgrade proposal of the company and relied on judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved at para 23 of his order and allowed the ground of the assessee by directing the Assessing Officer to examine the claim of additional brought forward depreciation of the amalgamating company and allow in accordance with law. Aggrieved by the order, the Revenue assailed an appeal before Tribunal. 9.3 Before us, the ld. Departmental Representative argued that the ld. Commissioner of Income Tax (Appeals) does not have power to remit the issue to the ld. Assessing Officer as per provisions of Sec. 251(1)(a) of the Act and prayed for allowing the appeal. 9.4 On the other hand, the ld. Authorised Representative relied on the order of CIT(A) in directing ld. Assessing Officer to examine the claim of the assessee based on the Apex Court decision and vehemently opposed to the grounds of Revenue. 9.5 We heard the rival submissions, perused the material on record. The contention of the ld. Departmental Representative that the ld. Commissioner of Income Tax (Appeals) remitting the issue to the file of ld. Assessing Officer is in violation of provisions of Sec. 251 (1)(a) of the Act. We considered the findings of the ld.CIT(A) on the judicial decisions of Hon'ble High Court and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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