TaxTMI 
TaxTMI 
2021 (8) TMI 690
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....PE/PP bags, and trading of HDPE granules woven bags and is following the mercantile system of accounts. The assessee filed its return of income on 20.11.2013 declaring total income of loss of Rs. 3,83,50,423/-. Under scrutiny assessment notice under Section 143(2) dated 04.09.2014 was issued and the same was ultimately finalized with certain additions including the addition of Rs. 5,31,82,295/- as claimed as the expenditure of product development expenses by the assessee company which was ultimately deleted by the Ld. CIT(A). Hence, the instant appeal by the Revenue before us. 3. During the course of assessment proceeding upon verification of audited balance sheet and Profit & Loss accounts it was found that the assessee has shown in its balance sheet under the head of long term capital loans and advances product development expenses worth of Rs. 1,77,27,431/- and also under the head other current assets product development expenses worth Rs. 3,18,79,772/-. The assessee company also claimed amortization on product development expenses to the tune of Rs. 5,31,82,295/- as revenue expenditure. It appears from the order passed by the Ld. AO that the assessee did not submit the docum....
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....2,295/- on account of disallowance of product development expenditure being treated as capital expenditure. According to A.O the appellant had shown in its balance sheet under the head Long Term loans and advances, product development expenses of Rs. 1,77,27,431/- and also under the head other current assets, product development expenses of Rs. 3,18,79,772/-. Further according to A.O the appellant has also claimed amortization on product development expenses worth Rs. 5,31,82,295/- in its computation of income. The appellant tried to explain to the A.O that Rs. 5,31,82,295/- is capitalized and Rs. 6,31,80,619/- was debited back to P & L A/c. Accordingly, the net amount remaining in the balance sheet under the head other current assets and long term loans and advances was Rs. 3,18,79,772/- and Rs. 1,77,27431/- respectively. However, the A.O has not agreed with the contention of the appellant. On failure of the appellant to produce any documentary details and evidences regarding these expenses as well as by relying on the note of the statutory auditor of the appellant that the expenses of Rs, 5,31,82,295/- being related to R & D activities, the A.O has proceeded to disallow ....
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....iture incurred for the product development. The only issue that remains on hand is whether the expenditure incurred is of capital in nature or revenue in natures The appellant further submitted that it has not claimed in double deduction in respect of the said expenses. I According to appellant although the amount amortized in the books is different from/ the amount claimed as deduction, it has neither written off the product development expenses in A.Y.2016-17 nor claimed the same as deduction in furnishing the return of income for A.Y.2016-17. Considering all these facts I disagree with the A.O for the reason that although the appellant has treated the capitalized R & D expenses as revenue expenditure, but at the same time it has added back the amortized amount debited to P & L A/c. This has resulted into the income of Rs. 99,98,324/-. Further neither during the remand proceedings or the assessment proceedings the A.O has ever questioned the genuineness of the expenses. In earlier assessment years as well the appellant has been allowed to claim the product development expenses as revenue expenses. Therefore, I hereby delete the addition of Rs. 5,31,82,295/- being disallowed on ac....
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....for business purposes and the same was adjusted against the items received in subsequent Financial Year 2013-14, the details whereof were also submitted. However, the same was not found acceptable by the Ld. AO and proportionate interest of Rs. 9,41,211/- has been disallowed and added back to the income of the assessee on the premise that the assessee failed to proof that no interest bearing funds was utilized for making advance for purchase of capital asset. 8. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. 9. The case of the assessee is this that the assessee having sufficient own funds of Rs. 3466.21 lakhs which is far more than the money advanced to the tune of Rs. 1,11,70,827/- and that too for business purposes. If that be so, the disallowance as made by the authorities below is not sustainable in the eye of law. We have perused the balance sheet as on 31.03.2013 available at Page 26 of the Paper Book filed before us by the assessee which was brought to our notice by the Ld. AR depicting the opening balance of Rs. 346,621,488/- as on 31.03.2012 as the fund towards share capital and ....
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....e authorities below under Section 56(2)(viib) of the Act has been challenged before us. 13. The appellant allotted 48000 and 3200 shares to one M/s. Plastene India Ltd. being the holding company and to Shri Chetan Parekh, Director of the appellant company respectively @ 250 per share; the face value of each share whereof is Rs. 10/- and the premium charged is Rs. 240/- per share. Upon perusal of the valuation under Section 11UA of the IT Rules as furnished by the appellant it was found that the fair market value of each share was Rs. 246/- and therefore, show-cause was issued upon the appellant as to why the excess amount of Rs. 4/- per share should not be treated as income of the appellant under Section 56(2)(viib) of the Act. 14. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. The appellant contention before the Revenue is this that by way of insertion of Clause (viib) to Section 56(2) w.e.f. 01.04.2013 was for the purpose of preventing generation and circulation of unaccounted money. These particular shares were allotted to mainly holding company and the very small difference was only f....
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.... the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 4,90,45,701/- on account of production development expenses. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 6. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent." 17. Ground No.1:- Deletion of Rs. 21,43,976/- made under Section 14A Rule 8D of the Act has been challenged before us by the Revenue. 18. The facts culled out from the records relating to the issue is this that the assessee made investment in shares of Rs. 23,36,750/- at the beginning of the year and the assessee has not disallowed any sum of amount under Section 14A of the Act. The assessee company is having share capital of Rs. 8.80 crores and reserves and surplus of Rs. 46.12 crores. It has not earned any exempt income in the form of dividend from such shares. According to the Ld. AO investment cannot be made without help of managerial skills and other administrative aspects which involves expenditure. However, no such amount of expenditure is disallowed by the assesse....