TMI Blog2021 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... sources of the funds, expenditure of J V may be financed out of that , but that does not make it the liabilities of J V partners, Instead of J V Itself. Therefore, in view of this we hold that the expenditure is incurred by the assessee for registration of lease deed. Therefore, such expenditure is allowable in the hands of the assessee under Section 37(1) of the Act. Hence the orders of the lower authorities are reversed and the Assessing Officer is directed to allow and delete the disallowance - Decided in favour of assessee. - ITA. No.4750/Del/2017 - - - Dated:- 24-12-2020 - Shri H.S. Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : None For the Revenue : Ms. Aman Preet, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee company against the order of the ld. CIT (Appeals)-38, New Delhi, dated 06th March, 2017, for the Assessment Year 2013-14, raising a solitary ground of appeal against the confirmation of the disallowance of ₹ 12,08,891/- incurred towards Lease Deed Registration Charges. 2. Brief facts of the case shows that assessee is a company engaged in the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s summarized as under:- That as per share holders agreement made in financial year 2007-08 between National Textile Corp. and Alok Industries Ltd. the share capital was subscribed 50% 49% respectively and NTC offered its factory premises at a yearly rent of ₹ 100/- only and Alok Industries was to bring additional amount into the company for making such payments as that the registration of Lease Agreement and the amount so brought by Alok Industries as additional capital shall be considered as share premium. The relevant page to the Agreement is enclosed. Since these expenses were unascertained at the time of Agreement such, clause was necessary. Since the stamp duty of ₹ 3.62 Cr. paid by the assessee company was recoverable from the Alok Industries Ltd a note on the accounts to this effect was necessitated in the Balance Sheet of Financial year 2010-11 and since the amount of additional capital was received during the financial year 2011- 12 and credited to capital Reserve note to this effect was accordingly given. Note no 9 in Balance Sheet of 2010-11 by the Previous Auditors and Note No. 4 in Balance Sheet by the Present Auditors stating the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant are as under:- During the assessment proceedings for the AY 201 l-12the expenditure of ₹ 12.08861/- towards Lease Deed Registration charges claimed in Schedule 19 of P L A/c were disallowed on the basis of Note No. 8 9 of Schedule 21 of Auditor s Report where it has been mentioned by the Auditors that the amount of stamp duty will be brought in and recoverable form the strategic partner i.e. M/s Alok Industries Ltd. The auditors have clearly mentioned in the Report that the amount of stamp Duty to be bought in will be Additional Share Premium will be credited to capital reserve in 8 9 of Schedule 21. Under any circumstances the Expenditure on Stamp Duty cannot be the Expenditure of Alok Industries or anybody else. Since in our view the word recoverable* in note no. 9 of Schedule 21 and the word 'borne by strategic partner in Shareholders Agreement have been misinterpreted the appellant company has filed an appeal before ITAT new Delhi which is still pending for Disposal. AR of appellant submitted copy of order CIT (A)-XVI, New Delhi in its own case passed on 29.08.2014 in appeal no. 273/13-14 for AY 2011-12. In this order Ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrue in the hands of the appellant company but the same shall accrue in the hands of the strategic partner M/s Alok Industries Ltd., because the terms of agreement clearly says that all such Government and statuary duties payable by the appellant company shall be solely borne by the strategic partner. Therefore no liability arises in the hands of the appellant company on account of the stamp duty paid/payable. In view of the above, the amortized amount of ₹ 12,08,861/- debited in the P L account of the assessee, is not allowable as revenue expenditure in the hands of the assessee. As such, the disallowance made by the AO is sustained. The appeal fails in this ground. 3.4 I have carefully perused the assessment order, submissions of appellant on grounds of appeal 1 and 2 and order of Ld. CIT(A)-XVI, New Delhi in appellant s own case passed on 29.08.2014 in appeal no. 273/13-14 for AY 2011-12. On perusal of the tripartite Shares Subscription and shareholders Agreement between National Textile Corporation Ltd., Alok Industries Ltd. (Strategic Partner) and the appellant company executed on 20.11.2007 at clause 4.6(ii) in page 13, it is seen that clause 4.6(ii) clearly state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Alok Industries Ltd. However, the liability to pay the above sum remains with the assessee. Therefore, the above expenditure has to be incurred by the assessee and not by Alok Industries. Only the source of the funds in the joint venture company is to be provided by Alok Industries. When the leased premises are to be used for the purposes of business of the assessee, necessary lease registration charges are also liability of the assessee. Merely because Joint venture partners decides about who puts in money in J V for what purposes, it is merely that they are deciding about the sources of the funds, expenditure of J V may be financed out of that , but that does not make it the liabilities of J V partners, Instead of J V Itself. Therefore, in view of this we hold that the expenditure is incurred by the assessee for registration of lease deed. Therefore, such expenditure is allowable in the hands of the assessee under Section 37(1) of the Act. Hence the orders of the lower authorities are reversed and the Assessing Officer is directed to allow and delete the disallowance of ₹ 12,08,861/-. Accordingly, Ground Nos. 1, 2 and 3 of the appeal are allowed. 6. In the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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