TaxTMI 
TaxTMI 
2025 (2) TMI 862
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....0 explaining why the adjustments are unwarranted. However, disregarding the response filed by the assessee, the CPC issued an intimation u/s 143(1) of the Act wherein the following adjustments were made to the income of the assessee calculating under the normal provisions of the Act: Sr. No. Particulars Amount (INR) 1 Total income under normal provisions as per Return of income 27,61,96,070 2 Add: Disallowance of employees' contribution to provident fund u/s 36(1)(va) 23,778 3 Add: Disallowance of IPO costs u/s 37(1) 1,17,25,562 4 Add: Disallowance of income tax and interest on TDS paid 5,816 5 Less: Disallowance of CSR expenditure not considered in intimation u/s 143(1) 38,54,277 6 Total income as per intimation u/s 143(1) 28,40,96,940 3. Before the Ld. Addl./JCIT(A) the assessee inter-alia submitted that the expenditure of Rs. 1,17,25,562/- relates to the IPO expenses in respect of abandoned / aborted project which is revenue in nature. It was submitted that there was no enduring benefit as a result of such aborted expenditure. The decision of the Hon'ble Bombay High Court in the case of Nimbus Communication Ltd. v....
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....of the Audit Report in form no.3CD, more particularly Column no.21(a), the CPC cannot be erred for having undertaken this adjustment as there is a stark difference between the values reported by the CA and the values incorporated in the return of income. Under such circumstances, the adjustment made by the CPC is upheld and the corresponding ground of appeal is dismissed." 5. Aggrieved with such order of the Ld. Addl./JCIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: Ground No. 1 1.1. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income-tax Appeals, Addl/JCIT (A)-4. ['Ld. CTT(A)') erred in upholding the order passed by Assistant Director of Income-tax, Centralised Processing Center (Ld. AO) under section 143(1) of the Income-tax A, 1961 (the Act') and not treating the same as bad-in-law and void-ab-initio 1.2. The Appellant submits that the said intimation passed under section 143(1) of the Act be declared as bad-in-law and therefore, be set-aside/quashed. Ground No. 2 2.1. On the facts and in the circumstances of the case and in law, the Ld. CI....
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.... 8. Referring to the details of the public issue expenses the Ld. Counsel for the assessee drew the attention of the Bench to the same which are as under: Name of Party Nature of expense Amount Ethos data Limited Virtual deal room services 928,010 NSDL Annual filing fees 105,000 CDSL Onetime fees 95,000 Frost & Sullivan (India) Pvt Ltd Market Research expenses 1,500,000 S & R Associates Legal fees 6,958,681 J Sagar Associates Professional fees- for review of Red Herring Prospectus 1,014,103 IIFL Holdings Ltd Reimbursement of IPO related expenses 112,768 Price water house & Co Bangalore LLP Professional fees - for restatement of Financials 10,12,000 Total 11,725,562 9. The Ld. Counsel for the assessee drew the attention of the Bench to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Nimbus Communication Ltd. vide ITA No.4244/2010, order dated 08.12.2011 and submitted that the Hon'ble High Court in the said decision has upheld the decision of the Tribunal where it has been held that where the assessee had incurred expenditure of Rs. 87,21,675/- towards initial pub....
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....he case of CIT vs. Nimbus Communication Ltd (supra), the Ld. Addl./JCIT(A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. 14. In our opinion and under the facts and circumstances of the case, the Ld. Addl./JCIT(A) is not justified in upholding the order of the Assessing Officer especially when the issue stands decided in favour of the assessee by the decision of the Hon'ble jurisdictional High Court. We find the Hon'ble Bombay High Court in the case of CIT vs. Nimbus Communication Ltd. (supra) has held as under: "2. The finding of fact recorded by the Income Tax Appellate Tribunal is that there is dispute that the assessee has in fact incurred the expenditure and that on account of the aborted public issue offer, no new asset has come into existence and consequently there is no question of the assessee getting any enduring benefit. With the approval of SEBI, the assessee was to increase the share capital and thereby promote its business activity. However, the same got aborted due to reasons beyond its control. In these circumstances, in view of the decision of this Court in the case of Commissio....
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....apital expenditure "so long as the benefit is not so transitory as to have no endurance at all". 21. Further, it was held that there may be cases where expenditure even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. It was pointed out that it is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. 22. Further, it was pointed out that if the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. Thus, it was held that the test of enduring benefit is not a certain or conclusive test and it can....
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....sessee, but on account of the decision of the Government of Tamil Nadu. In our considered view, the decision of the Government of Tamil Nadu to sell the project is a very important fact, which has to be borne in mind to decide as to whether the expenditure incurred by the assessee was capital or revenue in nature. 26. The Assessing Officer fell in error in going by the fact that the expenditure was incurred from the capital account forgetting that the test to be applied to ascertain as to whether the expenditure is revenue or capital is not based on where the funds were drawn from. The broad parameters and tests, which have been laid down by various decisions are that there should be an enduring benefit, which should accrue to the assessee and there should be a creation of a new asset. In the instant case, both these parameters remain unfulfilled. 27. The High Court of Delhi in Indo Rama Synthetics Ltd. (supra) held that if the expenditure is incurred for starting a new business, which was not carried out by the assessee earlier, then such expenditure was held to be capital in nature. However, if the expenditure incurred is in respect of the same business, which i....
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....ld that film production expenses of abandoned films should be treated as revenue expenditure. This decision was followed in the case of Asia Power Projects P. Ltd. (supra). 32. The learned counsel for the Revenue strenuously contended that a new project had emerged and it is immaterial whether machinery was reduced to scrap and ordered to be sold and what is required to be seen is that the expenditure was incurred from the capital account. 33. In our considered view, reliance placed on the decision of this Court in the case of E.I.D. Parry (India) Ltd. (supra) and the Kerala High Court in the case of Malabar & Pioneer Hosiery (P.) Ltd. (supra) is of little avail, as in both cases, it was for a new project, in contra distinction with the factual position in the case on hand. Therefore, those decisions are factually distinguishable. Heavy reliance was placed on the decision of this Court in the case of Mascon Technical Services Ltd. (supra). 34. At the first blush it appears that the decision would help the case of the revenue, but on a closer reading it proves otherwise. The question was whether the assessee was justified in seeking for bifurcation of the ....
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....of the Bench relied upon by the Ld. Counsel for the assessee in the paper book. 17. So far as the observations of the Ld. Addl./JCIT(A) that when there is mismatch of corresponding item as per column 21(a)(2) of Form No.3CD and Schedule BP of e-filed ITR, the corresponding difference has to be necessarily added to the total income as adjustment u/s 143(1) of the Act is concerned, we find the Mumbai Bench of the Tribunal in the case of Kalpesh Synthetics (P.) Ltd. vs. DCIT (2022) 195 ITD 142 (Mumbai-Trib.) has held that the Assessing Officer could not make disallowance based on observations made in tax audit report that payments were made after due date specified under respective Acts. The relevant observations read as under: "9. What a tax auditor states in his report are his opinion and his opinion cannot bind the auditee at all. In this light, when one considers what has been reported to be „due date‟ in column 20 (b) in respect of contributions received from employees for various funds as referred to in Section 36(1)(va) and the fact that the expression „due date‟ has been defined under Explanation (now Explanation 1) to Section 36(1)(va) prov....
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....s which can be carried out under section 143(1) and that we see no need to deal with the question, which is rather academic in the present context, as to whether if such an adjustment was to be permissible in the scheme of Section 143(1), whether the insertion of Explanation 2 to Section 36(1)(va), with effect from 1st April 2021, must mean that so far as the assessment years prior to the assessment years 2021-22 are concerned, the provisions of Section 43B cannot be applied for determining the due date under Explanation (now Explanation 1) to Section 36(1)(va). That question, in our humble understanding, can be relevant, for example, when a call is required to be taken on merits in respect of an assessment under section 143(3) or under section 143(3) r.w.s. 147 of the Act, or when no findings were to be given on the scope of permissible adjustments under section 143(1)(a)(iv). That is not the situation before us. We, therefore, see no need to deal with that aspect of the matter at this stage. 18. In view of the above discussion and relying on various other decisions cited before us, we set aside the order of the Ld. Addl./JCIT(A) and direct the Assessing Officer to delete the d....