Tribunal allows appeal for ROC expenditure under section 35D

The Tribunal allowed the appeal of the assessee for statistical purposes. The AO was directed to allow the ROC expenditure under section 35D and verify the expenses for the acquisition of subsidiary companies, as well as the carry forward losses. The judgment was pronounced on 5th May 2021.

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Issues Involved:
1. Addition of Rs. 13,00,000/- towards ROC expenses.
2. Addition of Rs. 66,17,681/- towards expenses for acquisition of subsidiary companies.
3. Addition of Rs. 16,43,939/- towards carry forward loss.

Detailed Analysis:

1. Addition of Rs. 13,00,000/- towards ROC expenses:
During the assessment proceedings, the AO noticed that the assessee had paid ROC fees of Rs. 13,00,000/- for an increase in authorized share capital and treated it as revenue expenditure. The AO rejected this contention, treating it as capital expenditure based on the decision of the Hon'ble Apex Court in Punjab State Industrial Development Corporation Ltd. Vs. CIT, 220 ITR 792. The CIT(A) confirmed the AO's addition. The assessee argued that the expenditure was for bettering an established business and did not result in any tangible or intangible asset. They cited various judgments supporting the amortization of such expenses under section 35D of the IT Act, 1961. The Tribunal observed that the ROC expenses towards increasing share capital are capital in nature but allowed the expenditure to be amortized over a period as per section 35D. Thus, the AO was directed to allow the ROC expenditure under section 35D. The grounds raised on this issue were allowed.

2. Addition of Rs. 66,17,681/- towards expenses for acquisition of subsidiary companies:
The assessee claimed the expenses for the acquisition of subsidiary companies as revenue expenditure, but the AO treated it as capital expenditure due to non-compliance from the assessee. The CIT(A) directed the AO to verify the bills and evidences and allow the expenditure accordingly. The Tribunal, considering the totality of the facts, remitted the issue back to the AO for verification of the bills and vouchers. If found in order, the AO was directed to allow these expenses as revenue expenditure. This ground was allowed for statistical purposes.

3. Addition of Rs. 16,43,939/- towards carry forward loss:
The assessee did not press this ground before the CIT(A) but pressed it before the Tribunal. The Tribunal restored this ground back to the AO for factual verification. This ground of appeal was treated as allowed for statistical purposes.

Conclusion:
The appeal of the assessee was treated as allowed for statistical purposes. The Tribunal directed the AO to allow the ROC expenditure under section 35D, verify the expenses for the acquisition of subsidiary companies, and verify the carry forward losses. The judgment was pronounced in the open court on 5th May 2021.

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