TaxTMI 
TaxTMI 
2014 (10) TMI 321
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.... and sale of Electric wiring accessories of Zinc, Aluminium and Copper alloys. Semco is registered as a 100% export oriented unit claiming a tax holiday u/s.10B of the I.T.Act, 1961. It had sold more than 96% of its production to its Associated Enterprise (AE) Sigma Electric Manufacturing Corporation (Sigma). Sigma is a tax resident of USA and is engaged in the business of distribution of Electrical Wiring accessories. It sells customized and non standard products which are manufactured by Semco and sold to Sigma. Sigma serves customers in the American market viz., USA, Canada, South America and Mexico. 2.2 The assessee filed its return of income on 26-09-2008 declaring total income of Rs. 17,55,50,720/-. During the course of assessment proceedings the Assessing Officer observed from the details filed by the assessee that during the year under consideration Goldman Sachs Capital Partner VI Fund (GSCP Fund), a private Equity fund, acquired the majority equity stake in Semco from Sajjan Kumar Agarwal and others. Post acquisition and subsequent to the change in the corporate structure, Semco became a wholly owned subsidiary of Mauritius-based company Sigma Electric Holding Inc. (Form....
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....lions (b) the second resolution is dated 12-01-2008 where the amount is raised to US$ 4.71 millions, i.e. Rs. 18.50 crores (@39.30 per dollar) by resolution passed at the board meeting held on 02-12-2008, i.e. after the change of the stake holders payable at any time on or before 31-03-2008. The Assessing Officer observed from the above resolutions that the amounts of the bonus has been changed before and after the change of stake holders. He, therefore, concluded that the bonus is not the liability of the company but that of the shareholders whether old or new or both and therefore not an allowable business expenditure of the assessee company. He, therefore, again asked the assessee to justify the same and explain as to why the expenses incurred as special bonus paid to employees should not be treated as expenses of the shareholders, i.e. paid on behalf of the share holders and therefore not an allowable expenditure u/s.37 of the I.T. Act. He also asked the assessee to submit the copy of the entire set of share "acquisition agreement titled acquisition of Sigma Electric Group by GS capital Partners VI from Sajjan Kumar Agarwal and others selling shareholders". Rejecting the variou....
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....ed the rival arguments made by both the sides, perused the orders of the AO/TPO and DRP. We have also considered the series of decisions cited by the Ld. Counsel for the assessee. In the instant case, the payment of special bonus was disallowed by the Assessing Officer on the ground that the assessee did not produce the full copy of the shareholders agreement which is the basic document for determining the allowability of the payment of special bonus. Despite being asked by the Assessing Officer the assessee did not produce the same on the ground that the same was not available at the time of assessment proceedings. On being questioned by the Bench during the course of hearing of the impugned appeal, the Ld. Counsel for the assessee submitted that given an opportunity the assessee will produce the shareholder's agreement before the Assessing Officer which could not be produced before the lower authorities since the same was not available at the relevant point of time. Considering the totality of the facts of the case and considering the fact that the shareholders agreement is the basic document for determining the allowability or otherwise of the expenditure relating to special bon....
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....iness. Therefore, the deduction should not be denied in respect of such interest. Alternatively, relying on various decisions, he submitted that netting should be allowed and net interest income should be disallowed for claim of deduction u/s.10B. For the above proposition, he relied on the following decisions : 1. CIT Vs. Krishan Kumr Aggarawal 170 Taxmann 23 (Delhi) 2. CIT Vs. Anand Kumar 164 Taxmann 330 (Delhi) 3. CIT Vs. Gokuldas Exports & Others 333 ITR 214 (Kar.) 4. CIT Vs. Hycron India Ltd. 308 ITR 251 (Raj.) 5. M/s. Motorola India Electronics Pvt. Ltd. - ITA No.428/2007 7. The Ld. Departmental Representative on the other hand heavily relied on the order of the AO. 8. We have considered the rival arguments made by both the sides, perused the order of the AO/TPO and the DRP on this issue and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by the Ld. Counsel for the assessee. Since the assessee has not justified before the AO the reasons for not excluding the other income while working out the exemption u/s.10B and since nothing is coming out of the records as to what has happened finally in the preceding assessmen....