TMI Blog2023 (3) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed discussion in the order, has deleted the adjustment made by the TPO on this issue. Depreciation on expenses incurred for increase in share capital - assessee admitted that such expenditure was treated as part of fixed assets and depreciation has been claimed of such expenditure, since expenditure is not allowed as revenue expenditure on increase in authorized capital, the assessee cannot claim such expenditure by capitalising the same and claiming depreciation thereon - HELD THAT:- The assessee is in appeal before us against the aforesaid addition confirmed by Ld. CIT(Appeals). In the case of International Computers Indian Manufacture Ltd. [ 2015 (3) TMI 502 - BOMBAY HIGH COURT ] the Bombay High Court held that Depreciation is not allowable on capitalised expenditure on issue of shares; such expenditure would fall within provision of section 35D. Similar view was held in the cases of Autolite India Ltd Vs CIT [ 2003 (7) TMI 53 - RAJASTHAN HIGH COURT ] and CIT Vs Mahindra Ugine and Steel Co Ltd [ 2000 (2) TMI 26 - BOMBAY HIGH COURT ] where the Courts have denied depreciation on such expenses which were capitalised. Accordingly, we find no infirmity in the order of Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case and in law, the Ld. CIT(A) has erred in holding that no discrepancies or other material evidences were brought on record which can prove that contentions of the appellant regarding quality difference were incorrect without appreciating the fact that the TPO has clearly stated that no evidence to substantiate that the sales to Non-AE of up to 12% of production in January-2014 was sale of scrap alone was furnished by the assessee company during transfer pricing proceeding. 5 It is, therefore, prayed that the order the Ld. CIT(A)- 13.Ahmedabad may be set aside and that of the AO may be restored to the above extent. 6. The appellant craves leave to add, alter, amend and/or withdraw any round(s) of appeal either before or during the course of hearing of the appeal. 3. The assessee has taken the following grounds of appeal: 1 In law and in the facts and circumstances of the case, the learned CIT (Appeals) has erred in directing the AO to disallow depreciation on the amount of expenses for increase in authorised capital 1.1 Assessing Officer ought to have appreciated that such expenses are incurred prior to commencement of business and hence the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tially accepted by the AO for the purchases made by the assessee in the months of December 2013, February 2014 and March 2014. The AO disputed purchases made only for the month of January 2014 on the ground that the sales made by AE s to non-related parties was 12.31% and such percentage was significantly higher in comparison with other months. Accordingly, the AO made a downward adjustment of purchases made from the AE by ₹ 2,05,23,752/-. 7. The assessee filed appeal before Ld. CIT(Appeals) who allowed the appeal of the assessee on the ground that the assessee submitted confirmation from third parties, who purchased MS ingots from the AE of the assessee and they stated that the reason behind variation in prices are on account of high content of carbon and random size of MS ingots. The Ld. CIT(Appeals) observed that the details submitted by the assessee clearly proves that non-related parties who made purchases from the AO are not in the business of manufacture of TMT bars whereas assessee is in the business of manufacture of TMT bars. Therefore, there was a qualitative difference between the sales made by the AE to non-related parties as compared to the assessee. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence were incorrect. When the AE is selling goods to non-related parties, such parties are confirming quality of the material., the appellant establishing the fact that non-related parties are purchasing scrap quality product from KSL, the TPO was not justified in not accepting purchase price only in one month only by comparing sales made by KSL to the appellant and KSL to nonrelated parties. The copies of relevant bills and other evidences, as discussed herein, above for the month of January 2014 are similar with details of other months and there being no other material on record which can prove evidences submitted by appellant are not reliable, downward adjustment made by the TPO cannot be sustained. 3.3.2 It is observed that during the course of assessment proceedings, the appellant has also submitted certificate from M/s. Steel Tech Engineers Consultants along with statement of party wise chemical proportion with physical properties and remarks describing the chemical proportion as mentioned in the chemical analysis report. As per such report sub-standard ingots are sold at discounted value. These material evidences were also on record of the AO and not found to be inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case under consideration, the downward adjustments made by the TPO for Rs. 2,05,23,753/- is found not sustainable and is directed to be deleted. The related ground of appeal is allowed. 8. The Department is in appeal before us against the order passed by Ld. CIT(Appeals) deleting the additions made on account of downward adjustment of purchase price of MS ingots purchased by the assessee from its AE for the month of January 2014. Before us, the DR primarily relied on the observations made by the TPO/AO in the assessment order. In response, the assessee primarily reiterated the submissions made before Ld. CIT(Appeals) and also filed copy of written submissions for our perusal. We observe that Ld. CIT(Appeals) gave relief to the assessee primarily on the ground that assessee had submitted confirmation by third parties which attributed the price difference to variation in carbon content and random size of MS ingots purchased by the third parties from its AE as compared to products purchased by the assessee from its AE of the assessee company. The end use of the assessee was different from the products sold to other third parties since the assessee was manufacturer of TMT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that such expenditure was incurred prior to commencement of commercial production and same was transferred to asset account along with the financial charges. The claim was not accepted by the AO on the ground that once expenditure is capitalised, the depreciation would be indefinitely claimed by the assessee which would result into charge on taxable profit every year. According to the AO, the methodology adopted by the assessee was not in consonance with the provisions of the Act as the assessee was required to charge such expenditure as revenue expenditure and the A.O. disallowed such expenditure while computing taxable income. Accordingly, the AO made addition of ₹ 5,24,023/-. 12. In appeal, the Ld. CIT(Appeals) partly allowed the assessee s appeal by holding that the AO cannot compel the assessee to complete such expenditure as revenue expenditure and thereby make disallowance, when the assessee had capitalised expenditure in its books of accounts. However, since the assessee admitted that such expenditure was treated as part of fixed assets and depreciation has been claimed of such expenditure, since expenditure is not allowed as revenue expenditure on increase in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of assessment proceedings, the assessee agreed for such additions and additions were made by the AO. In appeal before Ld. CIT(Appeals), the assessee took the alternative contention that since interest income has been offered to tax in the subsequent year i.e. assessment year 2015-16, it would amount to double taxation in case this interest income is taxed in assessment year 2014-15 as well. Ld. CIT(Appeals) dismissed the appeal of the assessee with respect to this ground on the basis that since the assessee is following mercantile system of accounting, interest income is required to be taxed on accrual and hence it cannot be accepted that it should not be subject to tax in assessment it 2014- 15 simply on the basis that assessee has offered the same to tax in the subsequent year. The Ld. CIT(Appeals) while dismissing the assessee s appeal observed as below: DECISION: 6.2 The submission is considered. On careful consideration of the findings given by the AO in the assessment order and the submissions filed by the appellant, it is observed that the AO has made addition of interest income on the ground that the appellant has not offered such amount for taxation even th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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