TMI Blog2023 (12) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed in the finding of the ld. CIT(A). CIT(A) has elaborated in his finding the relevant supporting document furnished by the assessee which categorically established the identity, genuineness and creditworthiness of the transactions. CIT(A) has also referred the CBDT instruction 2/2015 dated 29.01.2015 that premium on share issue was on account of capital account transaction and does not give rise to income and, hence not liable to transfer pricing adjustment as held in the case of M/s Vodaphone Services Pvt. Ltd. Vs. Union of India Others [ 2014 (10) TMI 278 - BOMBAY HIGH COURT ] During the course of appellate proceedings the ld. Counsel has also referred the decision of ITAT in the case of ITO 6(2)(4) Vs. Chiripal Poly Films Ltd. [ 2019 (4) TMI 1422 - ITAT MUMBAI ] wherein held that the assessee complied with the requirements of RBI guidelines by filing FIRC with RBI and also filed Unique Identification number received from RBI. Further it had also filed FCGPR with RBI that the assessee was having sufficient authorised share capital to issue shares to investor then no addition could be made u/s 68 of the Act. In view of the above facts and finding we don t find any err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the additional evidence submitted by the assessee, considering that the case of the assessee did not fulfill any of the conditions mentioned in sub-rule (1) of Rule 46A of the Income-tax Rules, 1962. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in admitting the additional evidence submitted by the assessee without recording his reasons for doing so as provided in sub-rule (2) of Rule 46A of the Income-tax Rules, 1962. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the AO on the issue of share premium treated as unexplained cash credits, considering that the assessee was unable to establish identity, creditworthiness and genuineness in respect of said transaction, during the assessment proceedings. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of 20% of Advertisement and Sales Promotion expenses made by the AO, considering that the assessee company has a global brand and therefore, advertisement cost incurred by the assessee company attributable to its global image should not be clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A). The ld. CIT(A) had deleted the impugned addition. The relevant extract of the decision of the ld. CIT(A) is reproduced as under: 6. Decision on Ground No. 1: In the ground of appeal no. 1, the appellant argued that the AO has erred in considering the share capital and premium of Rs. 2,23,92,400/- received by the appellant as unexplained cash credits taxable in the hands of the appellant u/s. 68 of the Act. It is further argued that the provisions of Section 68 are applicable only in case of amounts received from resident and the same should not apply to the share premium received by the appellant from issue of its equity to non-resident investors. 6.1 I have carefully considered the submissions filed by the Appellant, facts mentioned by the AO in the assessment order and the other materials on record on this issue. I have found from the records that appellant during the year under consideration has issued 223924 shares to Netherland entity M/s Carlisle Europe BV (CUBV) at a face value of Rs. 10/- and premium of Rs. 90/- per share The appellant company has received share capital/premium to the tune of Rs. 2,23,92,400/. In this regard, the AO has called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of the resolution passed at the meeting of the Board of Directors of Carlisle Trading and Manufacturing (1) Pvt. Ltd. ii. Copy of Certificate of Foreign Inward Remittance of Rs. 2,23,92,400/ (S.No. 034883) by Bank of America, Chennai. iii. Copy of Certificate from M/s. Jain K. Gupta Co., C.A. regarding examination of the books of accounts and other related records of appellant company. iv. Copy of Certificate to be filed by the Company Secretary of the Indian Company accepting the investment Neelam Rangwala. v. Copy of reporting of remittance received towards shares application by appellant to Bank of America. vi. Copy of Bank statement of appellant showing amount of share premium received. vii. Copy of Annual accounts i.e Balance Sheet and Profit Loss A/c. of Carlisle International BV for the year 2013. viii. Copy of letter dated 08.08.2016 issued by RBI to appellant company regarding issue of shares - application in Form FC GPR. 6.6 I have duly considered the rival contentions and gone through the record carefully. Section 68 of the Act contemplates that where any sum found credited in the books of an assessee maintained for any pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before me are that assessee has proved the identity and it has demonstrated the genuineness of the transactions. 6.7 From the above, it is very much clear that amounts aggregating to Rs. 2,23,92,400/ have flowed to the appellant from the remittance through Banking Channel of M/s. Carlisle International BV. and it is the money of M/s Carlisle International BV. that has come to the appellant and M/s Carlisle International BV had the capacity to invest this much of amount with the appellant during the F.Y. 2013-14. Thus, credit worthiness of M/s. Carlisle International BV, also stands established. Since all the ingredients as are required to be satisfied for accepting the deposit as genuine u/s 68 are fulfilled in respect of this investment of Rs. 2,23,92,400/- by M/s. Carlisle International BV. with the appellant company, in my considered view Assessing Officer was not justified in drawing adverse inference in respect of this amount under reference 6.8 The appellant has also submitted various decisions on the above identical issue. One of the decision of Hon'ble Bombay in the case of M/s Vodafone Services Pvt. Ltd. Vs. Union of India Others (2014) 368 ITR 01 (Bom HC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 10 each to its holding company M/s Carlisle Europe B.V.(CUBV) at issue of price of Rs. 100 per share including a premium of Rs. 90 per share. During the course of assessment the assessee submitted various documentary proof along with RBI permission, detail of share premium, copy of certificate of foreign inword remittance by bank of America, Chennai, copy of bank statement of the assessee showing amount of share premium received copy of annual report i.e balance sheet and profit and loss account of M/s Carlisle Europe B.V.(CUBV), copy of letter issued by RBI to assessee regarding of issue of share application in the form of FCGPR etc. However, the AO has treated the amount received by the assessee from its holding company as unexplained cash credit u/s 68 on the ground that source of funds has not been explained. We find that assessee has explained before the ld. CIT(A) that it has submitted the relevant details as sought by the assessing officer during the course of assessment proceedings and no further any notice was received for calling any other details. Therefore, the assessee has further submitted the following details before the ld. CIT(A) as additional evidences unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding we don t find any error in the decision of ld. CIT(A). Therefore, these ground of appeal of the revenue stand dismissed. Ground Nos. 4 5: Deleting of disallowance of 20% of advertisement and Sales promotion expenses and deleting of disallowance of 25% of travelling expenses: 6. During the course of assessment the assessing officer noticed that assessee has debited advertisement and sales promotion expenses to the amount of Rs. 46,07,829/- in the profit and loss account. The AO pointed out that assessee has provided details for an expenditure of Rs. 31,22,565/- however, not filed any detail for the expenses to the amount of Rs. 14,85,262/-. The AO was of the view that assessee had claimed these expenses without actually incurring such expenses. Therefore, the claim of deduction of Rs. 14,85,262/- was disallowed. In respect of balance expenditure the assessing officer stated that assessee has not furnished the consolidated turnover of the entire Carlisle Group. Therefore, 20% of the expenditure of advertisement and sales promotion to the amount of Rs. 21,09,775/- was disallowed and added to the total income of the assessee. The assessing officer also noticed that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ravel, number of days, stay, etc. Hence, the AO as per his observation contained that there is huge increase in expenses claimed under this head as compared to the preceding year. However, the business expediency cannot be ruled out. Hence, the AO has disallowed 25% of expenditure claimed of Rs. 1,68,56,669/ which comes to Rs. 42,14,167/ and added back to the Income of appellant 7.2 I have also carefully considered the submissions filed by appellant during the appellate proceedings. The appellant has submitted statement of details of expenses incurred on its employees under the head advertisement sales promotion and travelling expenses alongwith certain sample of invoices and TDS deducted in connection to expenses. The appellant further stated that such expenses are bonafide including payments of reimbursement to the employees for the out-of-pocket expenses incurred by them for official purposes and thereby incurred wholly and exclusively for the purposes of the business of the appellant. It is urged by appellant that the A) has made disallowances purely on presumptions even though the appellant furnished the details called for. 7.3 In light of the material produced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that it has reimbursed the claim of its employee for incurring expenses for business travel and such expenses comprised incidental expenses towards meals refreshment and travel expenses for which it is not feasible to furnish invoices and vouchers for all such expenses. The ld. CIT(A) has elaborated in his finding that assessing officer has not brought on record any cogent basis for disallowing such expenditure without considering the percentage of expenditure compared to the revenue generated by the assessee company. 9. During the course of appellate proceedings before us the ld. Counsel has also referred decision of Hon ble Supreme Court in the case of Pr. CIT Vs. R.G. Buildwell Engineers Ltd. (2018) 99 taxman.com 284 (SC) wherein the decision of Hon ble High Court was upheld for not making adhoc disallowance of expenses without rejecting the books of account. In view of the above facts and finding we don t find any infirmity in the decision of ld. CIT(A), therefore all these grounds of appeal of the revenue are dismissed. ITA No. 2311/Mum/2023 10. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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