TaxTMI 
TaxTMI 
2024 (3) TMI 31
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....ich dispute is settled. 2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the disallowance of long term capital loss of Rs. 96.81 crores on sale of investment in Esconet Services Ltd. and Escosoft Technologies Ltd. in spite of the fact that the transfer of shares and ownership in these companies had taken place during the relevant assessment year and the learned CIT(A) himself recorded the' finding of the fact that the transaction is not sham as opposed to the Assessing Officer's remarks that the transaction is sham and collusive. 3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting only Rs. 24.50 lacs out of the disallowance of Rs. 7,00,11,165/- on account of prior period expenses claimed during the year. 4. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting only Rs. 4,35,150/- out of total disallowance of Rs. 10.00 lacs made by the Assessing Officer on account of expenses claimed towards gifts and presents." 3. Grounds of appeal taken by the Revenue read as under :- "1(a) On the facts and in law and....
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....e considered the facts and circumstances of the case. The submissions of the appellant have also been gone through. Though I agree in principle with the Id AR that the date of receipt of consideration is not relevant to decide the date of transfer but in the case of the appellant it definitely creates a prima facie doubt as the transaction appears to have been done in hurry admittedly to get a capital loss which may be claimed for set off against huge capital gains arising on account of shale of its shares in EHIRCL. The paltry consideration of Rs. 40,000/- against such huge investments also needed examination. Accordingly I myself tried to verify cursorily the claim of the appellant that the NAV of the shares of these companies has become negative and this is evidenced by equity valuation and due Diligence Reports. Accordingly I have gone through the Due Diligence Report and also the Balance Sheet of these companies. 7.3.1. It is seen that M/s Escosoft Technology Ltd is having investment in three companies namely Escotoonz Entertainment Pvt. Ltd, CA-Escosoft Limited and E-Soft Mauritius Holdings Ltd. Only in the case of E-Soft Mauritius Holdings Ltd, the fair value of sha....
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.... Book page 105 to 125) whereas in other set of shares, it is 30/3/2006 (Paper Book page No.144 to 155). It is not understood as to how the share can be transferred in the name of Acquirer on 30103/2006 i.e. before agreement is signed which is done on 31/312006. The appellant also could not throw any light on this aspect during appellate proceedings except submitting search report accessed from ROC website duly attested from Neelam Gupta & Associates, Company Secretary. But this certificate only gives the date on which the name of acquirer has been entered in the list of shareholders as it is appearing in the record of ROC. In no way, it explains the discrepancy. It is also noticed that the share certificates have been shown as transferred in physical form without getting it De-matted. It is not understood how the same can be transferred which in my opinion is against SEBI guidelines. In case had it been Dematted the exact date of transfer could have been verified. In absence of D-mat account the claim of appellant of transfer cannot be conclusively established as the evidence filed in support of the transfer of shares during the year is not conclusive as it is not a third party evi....
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....below. 10. Upon careful consideration, we note that AO has not made proper enquiry in this regard. Similarly, the buyer has not been examined by the Revenue authorities. Furthermore, it is the submission of the ld. Counsel for the assessee that the value of shares of subsidiaries is not correct and that the value has been arrived at without giving assessee an opportunity to rebut. Furthermore, ld. CIT (A) has passed an order in which he has tried to verify cursorily the claim of the assessee that the NAV of the shares of these companies has become negative. Thereafter, ld. CIT (A) has embarked upon the valuation which the assessee contended that it is not based upon full details and assessee was not confronted also. In this view of the matter, in our considered view, there are shortcomings in the assessment order as well as in the order of ld. CIT (A) which need to be examined afresh. We refer to the decision of Hon'ble Apex Court in the case of Kapurchand Shrimal vs Commissioner Of Income Tax 131 ITR 451 wherein it is held that it is the duty of the appellate authority to correct the lacunae in the orders of the authority below and remit the matter with or without direction unl....
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.... no such addition was required to be made." "10. Without prejudice to Ground No.9, a 'double addition' in respect of the previous year expenses has been made in a sum of Rs. 6,71,83,363/- under the head "prior period expenses". This double addition even otherwise is required to be deleted. " 10.1. During appellate proceedings, it was brought to my notice that the double addition of Rs. 6,71,83,363/- made in this order has been deleted by A.O. in the order passed u/s 154 dated 9/3/2009. Accordingly, this ground is not pressed. Thus, ground No.10 is treated as dismissed as not pressed. 10.1.1. Thus, the only ground No.9 has to be discussed which is regarding non allowance of expenditure to the extent of Rs. 7,00,11,165/- which according to A.O. does not pertain to Assessment Year 2006-07. 10.2. Before undersigned details have been submitted by the appellant and it has been argued that all these expenses have been accrued during assessment year 2006-07 only though they may be pertaining to the prior period. The expenses are definitely incurred in connection with the business of the company. Therefore, the same should be allowed. The appellan....
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....nditure relates to advertisement on Punjabi TV Channel during the month of November 2004. The bill of the party was received in May 2005 and hence accounted for in the A.Y.2006-07." On going through the invoice, it is seen that there is no mention about the date of receipt of the bill and the. appellant also could not establish that bill was received in Financial Year 2005-06. In the circumstances, it is held as prior period expenses and, therefore, correctly held as not allowable. (viii) Sales Promotion Rs. 80,000/- The reasons given by the appellant for the allowability of the same is as under:- "The expenditure relates to participation in Surajkund Trade Fair held in December, 2004. The consent was given for participation but the payment note was received and entered in June 2005." A copy of letter from Dy.Commissioner, Faridabad addressed to the Chairman of the appellant company has been filed. On perusal of the same it is seen that the payment is related to participation in Surajkund Trade Fair which was held from 22 to 30/1212004. An amount of rent was also fixed in this letter itself. Thus, there is no need of any invoice. The exp....
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....ncentive Rs. 195,00,000/- Though the appellant has given a detailed reason as to why the same cannot be said as prior period expenses, however, alternatively it was submitted by them that this provision is no more required and accordingly it was reversed during Assessment Year 2008-09. It was submitted that in case this disallowance is upheld here then in assessment year 2008-09 when the assessee itself has added back this amount, the same may be directed to be withdrawn else it will amount to double addition. I agree with the alternate submission of the appellant. Thus the disallowance in this year is upheld on the ground that this pertains to earlier year. However the A.O. at the same time is directed to reduce the income by identical amount after due verification of the claim of the appellant that this amount has been written back in the Profit and Loss Account and in turn to the total income of the assessee for AY 2008-09. (xiii) Homolagation Expenses Rs. 18802143/- Though the appellant has given a detailed reason as to why the same cannot be said as prior period expenses, however, alternatively it was submitted by them that this provision is no more ....
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....,850/- is to be upheld and the AO is directed to give relief of Rs. 4,35,150/-. 17. Against the above order, assessee and Revenue are in cross appeals before us. We have heard both the parties on this issue and perused the records. 18. We find that this addition has been made on ad hoc basis without bringing out necessary details. Hence, in our considered view, orders of authorities below on this issue are liable to be reversed. Accordingly, we hold that entire expenditure in this regard is allowable. The Revenue's appeal on this issue is dismissed and assessee's appeal on this issue is allowed. 19. Apropos misc. expenses : on this issue, AO noted that assessee had debited Rs. 95,66,089/- towards misc. expenses under the head 'sales & administration expenses'. He noted that in absence of any details, an amount of Rs. 15,00,000/- is disallowed on estimate basis. 20. Upon assessee's appeal, ld. CIT (A) on this issue examined the details and gave a finding that none of the expenditure could be said as not pertaining to the purpose of business of the assessee. He also noted that AO has not made out any case by brining any evidence whatsoever on record to show that some or a....
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.... in Escort Heart Institute and Research Centre Ltd. as per the terms of the agreement letter dated 18/1/2005." 6.3.1. I have also gone through the copy of letter dated 18/1/2005 addressed by JMMS to the appellant which had been referred by the A.O. as well as in this bill. For ready reference the relevant portion is reproduced as under: "Pursuant to our recent discussions, we are pleased to confirm the arrangement under which JM Morgan Stanley Limited ("JMMS'J is engaged by Escorts limited ("Escorts" or "Company") to render services as its exclusive financial advisor in connection with a possible sale/divestiture/disposal of some or all of the share capital of, or the business or assets of Escorts Heart Institute and Research Centre Limited and/or some or all of its subsidiaries (together "Healthcare Business') (the "Transaction"). Scope of Services During the term of our engagement JMMS will provide you with advice and assistance in connection with this transaction, which may include, if appropriate, advice and assistance with respect to: 1. Defining Objectives. 2. Identifying potential investors. 3. Perform.in....
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....ssets of entire EHIRCL and/or some or all of its subsidiaries. The term "some or all of its subsidiaries" is not qualifying the appellant but EHIRCL. Thus I do not agree with the interpretation of the AO that the fee paid by the appellant was in connection with affairs of the entire group including health care business. Further in the bill from JMMS, as reproduced hereinabove, it has been very clearly mentioned that fee payable is in connection with divestment of the stake of the appellant in EHIRCL. Thus even though there are other parties also who have sold the shares of EHIRCL, but JMMS has not been engaged by them and the bill raised by JMMS is also only in connection to the sale of shares of the appellant in EHIRCL. The other shareholders might have been benefited but it can not be said that any part of payment is pertaining to them. It is therefore held that entire payment is wholly and exclusively in connection with the transfer under reference of shares of the appellant in EHIRCL and therefore AO was not justified in making even part disallowance. The entire disallowance of Rs. 12,89,34,000/- is therefore directed to be deleted. (Relief Rs. 12,89,34,000/-)." 26. We find ....
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....ance 25% of expenditure. During the relevant accounting period, the assessee company made payment of Rs. 4.03 crores as royalty to M/s. Harprasad & Co. Ltd. From the details of agreement filed during the course of assessment proceedings, it is found that the assessee has been continuously payment royalty since 1954 and as such enduring benefit was derived by the assessee. Following the decision of the Apex Court in the case of M/s. Southern Switchgear Ltd. vs. CIT (1997) (232 ITR 359) wherein it had been held that entire payment towards royalty could not be allowed as revenue expenditure and that 25% of the expenditure would have to be taken as capital in nature. In view of this, AO disallowed the amount of Rs. 100,75,000/- and added back to income. 34. Upon assessee's appeal, ld. CIT (A) deleted the addition. We may gainfully refer to ld. CIT (A)'s order in this regard as under :- " I have considered the facts of the case. The submissions of the appellant have also been gone through. It is true based on the material submitted by the appellant that the payment of royalty @ 0.25% of the total turnover is evidenced by Minutes of the Meeting of Board of Directors of Harpar....