TaxTMI 
TaxTMI 
2023 (9) TMI 1035
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.... (the Act) dated 3rd July, 2019, by The Assistant Commissioner of Income Tax, Circle 6(2)(1), Mumbai, was allowed partly. 03. In ITA No.2941/Mum/2022, the learned Assessing Officer is aggrieved by the deletion of the addition made by the learned Assessing Officer on account of Share issue receipt of Rs.33,33,15,000/- received by Assessee from its Holding Company Cleartrip Inc. Mauritius. Addition is made by the LD AO based on past assessment years and deleted by the LD CIT (A) based on past years appellate orders. 04. Following solitary ground was taken as under:- "Whether on the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in deleting the addition made by the Assessing Officer on the issue of share premium Rs.33,33,15,000/-, considering that genuineness & creditworthiness of foreign entities/ ultimate investors were not properly established by the assessee and considering further that the assessee failed to discharge its onus to prove the genuineness of these transactions as the Cleartrip Inc. (Mauritius) did not have its own fund to invest and money trial revealed that main source of these funds were routed through various accoun....
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....ii. Copy of shareholders registered by Cleartrip Mauritius showing issue of shares to Cleartrip Inc., Cayman Island. iv. Copy of certificate of current outstanding of cleartrip Inc. Mauritius. v. Copy of foreign inward remittance certificate issued by its authorized dealer bank on receipt of money from cleartrip Inc., Mauritius. vi. Copy of form number FCGPR filed with Reserve Bank of India. vii. Copy of return of allotment of shares filed with the Registrar of Companies. viii. Copy of the valuation report justifying the fair price of the share. ix. Copy of bank statement of the assessee x. Copy of bank statement of Cleartrip Inc., Mauritius. xi. Copy of financial statement of cleartrip incorporation Mauritius. ix. The learned Assessing Officer asked the assessee to show the ultimate source of the funds. The learned Assessing Officer also referred matter to FT&TR to ascertain the real nature of these transactions and actual source of the funds. x. The learned Assessing Officer further verified the valuation report and found that assessee has used Discounted Cash Flow (DCF) and Net Asset Value ....
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....- was made by the learned Assessing Officer. 07. Accordingly, assessment order under Section 143(3) of the Act was passed on 3rd July, 2019, determining the total income of the assessee at a loss of Rs.2,99,59,387/- against the returned loss of Rs.59,95,10,511/-. 08. Aggrieved by the assessment order, assessee preferred an appeal before the learned Commissioner of Income tax (Appeals). The learned CIT (A) i. vide Para no.6.3 deleted the addition of Rs.33,33,15,000/- following his own finding for A.Y. 2017-18. He followed his predecessor order for A.Y. 2012-13 to A.Y. 2014-15, while deciding the deletion of the addition for A.Y. 2017-18. Thus, the addition of Rs.33,33,15,000/- was deleted and the learned Assessing Officer is in appeal before us against this issue. ii. With respect to the disallowance of advertisement and sales promotion expenses under Section 37 of the Act amounting to Rs.20,77,77,391/-, the learned CIT (A) vide paragraph no.7.2 held that identical issue has been decided by him for A.Y. 2015-16 confirming the disallowance of 20% of advertisement and sales promotion expenses. Accordingly, he confirmed the above disallowance and assessee aggrie....
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....investors, the assessee has submitted a certificate of incorporation, certificate of incumbency and tax residency certificate issued by Mauritius revenue authorities of investor. She further referred to various documents to substantiate identity of Cleartrip Inc., Cayman of Island by submitting certificate of incorporation and shareholder register of Mauritius entity evidencing the issue of shares to its Cayman Island holding company. v. To substantiate the identity of ultimate shareholders, she submitted the list of shareholders in Cayman Island Company and their profiles. vi. She referred to the financial statements of Cleatrip Inc., Mauritius and the bank statement of Mauritius entity along with the bank statement of Assessee to show the sources of fund in the bank account of Mauritius Company. This was shown to prove the creditworthiness of the investors. vii. To show the genuineness of the transaction, she referred to the foreign inward remittance certificate issued by the banks being an authorized dealer, form no. FCGPR filed with the Reserve Bank of India and Valuation Report issued by SLM Company LLP Chartered Accountant. She referred to the valua....
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....uritius) did not have its own fund to invest and that the money trail revealed that main source of these funds were routed through various accounts. Ld. DR prayed that the order of the Ld.CIT (A) be set-aside and that of order of the Assessing Officer be restored. 22. On the other hand, Ld. AR of the assessee reiterated the submissions made before the Ld.CIT (A) and submitted that assessee provided supporting documents such as certificate of incorporation, certificate of incumbency, etc. to establish the identity of Cleartrip Inc, Mauritius and Cleartrip Inc, Cayman Island. Ld. AR submitted that to prove "Source of Source" assessee has submitted documents to establish identity of immediate and ultimate investors. It's not required to establish source of source. Further, Ld. AR submitted that transactions are genuine as they have been undertaken through normal banking channels. Copies of FIRCs and bank statements of Assessee and Mauritian entity submitted. Copies of FC-GPR and Form 2 filed before regulatory authorities submitted to establish genuineness. Ld. AR further submitted that issuance of shares at a premium is a commercial decision. Companies Act, 1956 also does....
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....[ FDI] in the equity shares from cleartrip incorporation Mauritius on various dates in three trenches. Assessee issued 1,66,65,750 equity shares having face value of Rs. 10 per share to its holding company Cleartrip incorporation Mauritius at a premium of Rs. 10 per share raising sum amounting to Rs. 333,315,000/-. Assessee submitted before the learned assessing officer the details of share issued during the year showing the name of the shareholder, number of shares issued, face value of such shares and issue price etc. To prove the identity of the investor assessee submitted certificate of incorporation issued by Republic of Mauritius of the investor dated 23rd day of September 2005. Assessee also submitted the certificate of current standing of the entity showing that Cleartrip incorporation Mauritius was duly incorporated under the provisions of The Companies Act 2001 on 23rd day of September 2005 as Category 1 Global Business Company. The certificate was dated 18th day of September 2017. Assessee also submitted the Tax Residency Certificate dated 27/11/2015 of the investor having tax account number 25078149 which was valid for the period of 25 November 2015 - 24 November 2016. ....
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.... has proved identity and creditworthiness of investor as well as the genuineness of the transaction of investment in equity shares of the company. Apparently, assessee has discharged its initial onus cast upon the assessee under the provisions of section 68 of the income tax act. Therefore, we find that the assessee has fairly demonstrated the identity, creditworthiness and the genuineness of the transition by producing extensive material independently for this year also. Proviso to section 68 does not apply to a non-resident investor. Even otherwise assessee has shown nature and source of funds in the hands of Nonresident 100 % holding company investor also independently. Hence, we confirm the order of the learned CIT (A) deleting the above addition. Accordingly, we do not find any merit in the appeal of the learned Assessing Officer. Hence, the solitary ground of appeal against the deletion of addition of Rs.33,33,15,000/- is dismissed. 013. Accordingly, ITA No.2941/Mum/2022 filed by the learned Assessing Officer is dismissed. 014. In the appeal of the assessee in ITA No. 2598/Mum/2022, the solitary ground raised is disallowance of advertisement and sales promotion expenses....
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....on the turnover on examination. 018. We have carefully considered the rival contention and perused the orders of the lower authorities as well as perused the order of the coordinate bench in assessee's own case for earlier years. It held as under :- "33. Considered the rival submissions and material placed on record. We observe that the assessee is web based service provider and all its services are rendered through website: www.cleartrip.com and it is not meant to service only the Indian customers. It is a global web site and unlike territory based "sites" which provides the services only to the extent of Indian territory. We also observe that anybody would like to use the facility anywhere in the world has to book through the common web site as stated above. It was also informed and submitted that the services are provided mainly to the customers in India and UAE. For UAE customers, there is separate website called www.cleartrip.ae. We observe that even to use the above said site the customers has to utilize the main site www.cleartrip.com and it will reroute the customers to other sites. Therefore all the services are rendered through main web platform i.e., www.clea....
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.... of Turnover) of the group. Accordingly, we are remitting this issue back to the file of Assessing Officer to disallow the above said expenses based on the above direction and we direct assessee to provide all the relevant information to the assessing officer to apportion the expenses. For abundance caution, in case assessee fails to provide the informations within the time provided by the assessing officer, the addition may be sustained as per the direction of the Ld CIT(A)." 019. During the year the assessee has debited the advertisement and sales promotion expenses of Rs. 1,038,851,955/-. The learned assessing officer following the assessment order is for assessment year 2012 - 13 and 2013 - 14 to 2015 - 2016 made disallowance of 20% of such expenditure amounting to Rs. 207,770,391/-. When the matter reached before the learned CIT - A he also following his own order in assessee's own case for earlier years confirm the above disallowance. The coordinate bench has also decided the issue for assessment years 2012 - 13, 2013 - 14, 2014 - 15 and 2015 - 16. Before the coordinate bench, the assessee submitted that the conditions for allowance of expenditure under section 37 of the I....
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.... assessee, the revenue is duty-bound to analyze the fact of each case and then deal with the amount of income and expenditure offered and claimed by the assessee respectively for determination of taxable income for that AY. During this year, there is merely an allegation without pointing out failure on the part of the assessee. Accordingly, the facts of the present year are different from the finding of the facts given by the coordinate bench for assessment year 2012 - 13. Firstly, the ad hoc disallowance made by the learned assessing officer and confirmed by the learned CIT - A is not sustainable. The coordinate bench in assessee's own case also confirms this for earlier year. Now coming to the disallowance of expenditure, we find that assessee has submitted the details of such expenditure to the assessing officer. Assessing officer straightway issued show cause notice that why the identical disallowance should not be made in the present assessment year which was made in the earlier assessment years. As per letter dated 20 June 2019, assessee submitted the details of advertisement and sales promotion expenditure categorized party wise into various heads. Assessee specifically obje....
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....uritius. The learned assessing officer referred to the FT &TR division on 17 March 2021 to ascertain the real nature of the transaction of issue of shares issued by the appellant and to establish the actual source of the sum so invested by the cleartrip incorporation Mauritius. The assessee submitted identical details, which it submitted in the earlier assessment years whenever the shares were issued to the cleartrip incorporation Mauritius. The learned assessing officer based on the assessment orders of its earlier year made an addition of Rs. 387,547,500/- under section, 68 of The Income Tax Act and applied the provisions of section 115BBE of the act. ii. The assessee has also incurred the advertisement and sales promotion expenditure amounting to Rs. 1,097,769,117/-. Based on the earlier years assessment order the learned assessing officer disallowed 20% of such expenditure amounting to Rs. 219,553,823/-. iii. The assessee has also debited a sum of Rs. 6,065,232/- to the profit and loss account because of employee stock option scheme cost. The AO noted that it has been granted by the ultimate holding company i.e. clearTrip incorporation Cayman Island. The asses....
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....limited. 023. Accordingly, against the returned income of a loss of Rs. 501,490,907/-, the assessment under section 143 (3) of the act was passed on 21/3/2022 determining the total income of the assessee at Rs. 387,547,500. The assessee was aggrieved by the following additions/disallowances made by the learned assessing officer in the assessment order: - i. disallowance of advertisement and sales promotion expenditure of Rs. 219,553,823 ii. disallowance of employee stock option expenses claimed of Rs. 6,065,232 iii. disallowance of payments made to tech process payment services Ltd and M/s Avenue India private limited of Rs. 198,284,197/- iv. addition on account of unexplained share capital and premium received from holding company under section 68 of the income tax act of Rs. 387,547,500 024. Assessee aggrieved with assessment order preferred an appeal before the learned CIT - A. He passed an appellate order dated 29/8/2022. The learned that CIT - A i. deleted the addition under section 68 of the income tax act of Rs. 387,547,500 based on the findings given in the appellate order in assessee's own case by the learned CIT - F for a....
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....ing company was added by the learned assessing officer under section 68 of the income tax act but deleted by the learned CIT - A. 026. Both the parties confirmed that identical issue arose in the assessee's own case for earlier years wherein the coordinate bench has confirmed the order of the learned CIT - A deleting the addition. 027. The ld DR reiterated the findings of the ld AO and submitted that there is reference made to FT & TR division but it is still awaited. 028. The learned authorized representative submitted that identical details are available in paper book filed for assessment year 2018 - 19 containing 63 pages wherein complete details with respect to the identity of the investor, identity of the ultimate holding company, identity of ultimate shareholders in ultimate holding company to prove the identity of the investor. To prove the creditworthiness of the investor, the financial statement and bank statement of the investor along with the source of the funds available with the investor are also evidenced. With respect to the genuineness of the transaction, assessee submitted the valuation report, foreign inward remittance certificate as well as the relevant ....
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....k of India for allotment of shares to a non-resident entity. Respective details of the investor of the ultimate holding company and their brief profile was provided. Assessee also substantiated the valuation at which the shares have been issued by furnishing the valuation Report of a chartered accountant dated 1 March 2018 holding that the fair value of the shares of the company is of Rs. 6.81 are fully paid up equity shares. The valuation was derived at by taking into consideration the average of the net asset value method and the discounted free cash flow method. In view of the above facts independently for assessment year 2018 - 19 assessee has established identity and creditworthiness of investor and genuineness of the transaction. Further orders of the coordinate bench in assessee's own case on identical facts and circumstances with respect to the allotment of share to the holding company of the assessee in earlier Assessment Years, we do not find any infirmity in the order of the learned CIT - A in deleting the addition of Rs. 387,547,500. Accordingly, solitary ground of appeal raised by the learned AO in his appeal is dismissed. 030. In the result, appeal of the learned a....
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....he honourable Karnataka High Court in CIT versus Biocon Ltd 430 ITR 151 and of honourable Delhi High Court in case of Lemon Tree Hotels Ltd 104 taxmann.com 26 and honourable Madras High Court in case of PVP Ventures limited, this expenditure are revenue in nature. Accordingly we direct the learned assessing officer to delete the disallowance of employee stock option expenditure of Rs. 6,064,232/-. Accordingly, ground number 2 of the appeal of the assessee is allowed. 037. Ground number [3] of the appeal of the assessee is with respect to the disallowance of expenditure paid to two parties [1] Techprocess process payment services Ltd and [2] Avenue India private limited amounting to Rs. 15.64 crores and Rs. 4.18 crores. These expenses are disallowed by the learned assessing officer holding that the assessee has failed to substantiate these expenditure as both these parties did not respond to the notices under section 133 (6) of the act and assessee also failed to file confirmation of the above parties. Further, the learned assessing officer found that both these entities did not file the return of income despite being huge amount paid by the assessee to them. Therefore the disall....