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TMI Blog2022 (6) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.2015 was issued. The assessee stated its business as of providing infrastructure services. During the assessment proceedings, it was observed that the assessee had received Rs.590/- as share capital on conversion of fully convertible debentures (FCDs) into equity shares and had also received share premium amounting to Rs.6,72,03,810/-, the ledger account of which was furnished. 3. The ld AO had called for explanation in regard to addition in share capital and share premium, identity and creditworthiness of the share holders, valuation report. However, being unsatisfied the ld AO observed that the Assessee has failed to discharge its onus of proving the identity and creditworthiness of the investors and genuineness of the transaction. Hence, the amount of share capital and share premium totaling to Rs. 6,72,04,400/- was added to the income of the Assessee as unexplained credit u/s 68 of the Act. Further, the ld AO observed from the copy of Memorandum of Association it was observed that he main object for which he company had been incorporated was to carry on the business of builders and colonizers. However, from the details of revenue as appearing in the financial Statement, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of these facts, provision of section 68 are not applicable for the simple reason that the said provision, inter alia, stipulates that amount credited during the previous year has to be brought to tax fee the conditions are not satisfied. 6.1.4 In view of the above whereby it is an admitted fact that the amount on account of which the equity shares were issued is not found to have been credited during the previous year, the AO is not justified in making the addition. The AO, in the remand report, has indirectly referred to the fact that conversion of Fully Convertible Debentures into equity has taken place. It is also to be noted that in the audited financial statements for the year ended 31.03.2013, under long term borrowings, debentures are shown to be Nil whereas the said amount for the year ended 31.03.2pi4 was Rs. 6,72,04,400/-. 6.1.5 In view of the discussion above and in view of the facts of the case, the addition made is "deleted. Grounds of appeal nos. 1 and 2 are allowed. The AO may, however, take necessary action, to invoke the provision of section 68 in the relevant previous year(s) in which the amounts have actually been received as per provision of Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) in regard to sustaining the disallowances of expenditure on the ground that Assessee was not having any business activity in the relevant year. 10. On the other hand on behalf of the Assessee it was submitted that the ld CIT(A) has rightly relied upon the provision of law with regard fact that if no cash is credited in the relevant Assessment Year provision of section 68 cannot be invoked. However, supporting the grounds raised in its appeal it was submitted that leaving opportunity with the ld AO to invoke provision of section 68 in relevant previous years is not justified when otherwise it is established that in the previous year also the money was received in the form of fully convertible debentures as per relevant provision of FEMA and Companies Act. He relied upon the judgments of Hon'ble Madras High Court in case of VR Global Pvt. Ltd Vs. ITO in IT Appeal No. 246/2017 dated 06.08.2018 to contend that Hon'ble High Court has held that cash credit towards share capital was of book adjustment, so additions u/s 68 of the Act cannot be made. It was further submitted in regard to grounds challenging the sustenance of disallowance of expenditure by the ld CIT(A), the ld AR submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts for the period under consideration and placed on record at page No. 38 of the paper book. "NCR Business Park Private Limited (formerly known as Kay Kay Buildtech Private Limited) Noted to financial statements for the year ended 31 March 2014 (All amounts in Indian Rupees) 16. Other Income For the year ended 31 March 2014 For the year ended 31 March 2013 interest on income tax refund interest on income tax refund 6440 Profit on redemption of mutual fund units 22,236 252958 interest on fixed deposits 672351 672651 Liabilities no longer required written back 66085 694887 997884 17 Other Expenses Loss on permanent diminution of investments 330,000 Market research 520226 495507 Electricity charges 1633324 5620 Prevailing and conveyance charges 47134 6674 Rates and taxes 59479 11500 Legal and professional 1510531 778386 Auditors' remuneration (as auditors (excluding service tax) 500000 150000 Advance written off 220600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business once it got revived and that amounted to passive use of the assets, which would meet the requirements of Section 32 of the I.T. Act, 1961. Further referring to the decision of Mumbai Bench of the Tribunal in the case of Sai Fragrance & Flavours (P.) Ltd., 169 ITD 235 (Mumbai.Tribu.), he had submitted that under identical circumstances the Tribunal has allowed the claim of various expenses incurred by the assessee to keep the corporate status and the expenses were allowed as deduction under section 37(1) of the I.T. Act, 1961. The Coordinate Bench sustaining the contentions had held; "8. I have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the A.O. in the instant case disallowed expenses of 12 ITA.No.404/Del./2020 Dhanyata Enterprises Private Limited, Delhi. Rs.9,94,872/- on the ground that assessee has not carried out any business activity and no business income has been declared and the assessee failed to produce the complete books of account, bills and vouchers etc. I find the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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