Brilliant Bio Pharma Private Limited(Formerly Brilliant Bio Pharma Ltd), Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(2), Hyderabad

ITA 2034/Hyd/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4861 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2014-2015
• Appeal Filed On: 11-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOKAMBIKEYAN
• Assessee Lawyers: K K GUPTA
• Section: 143(3); 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 2034/HYD/2018 ASSESSMENT YEAR: 2014 - 15 BRILLIANT BIO PHARMA PVT LTD., (FORMERLY BRILLIANT BIO PHARMA LTD), 6 - 2 - 1012, 5 TH FLOOR, TGV MANSION, KHAIRATHABAD, HYDERABAD 500 004. PAN: AAECB 1799 G VS. DCIT, CIRCLE - 1(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI K.K. GUPTA REVENUE BY: SRI MOKAMBIKEYAN, DR DATE OF HEARING: 21/11/2019 DATE OF PRONOUNCEMENT: 18 / 0 2 /2020 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 1, HYDERABAD IN APPEAL NO. 0211/CIT(A) - 1/HYD /2016 - 17/2017 - 18, DATED 10/08/2018 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE A.Y. 2014 - 15. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: 1. THE APPELLANT COMPANY INCURRED EXPENDITURE RELATING TO DEMERGER OF THE COMPANY WHI CH INCLUDES FEES OF RS. 5,52,500 PAID TO 2 REGISTRAR OF COMPANIES AND RS. 16,85,155/ - TO THE SUB - REGISTRAR, IN PURSUANCE OF ORDER OF HONBLE HIGH COURT. THE EXPENDITURE WAS ADDED BACK TO THE INCOME, AS SHOWN IN COMPUTATION AND DEDUCTION OF 1/5 TH THEREOF WAS CLAIMED U/S. 35DD. THE DISALLOWANCE OF THE EXPENDITURE OF RS. 22,37,655/ - IN THE ASSESSMENT IS NOT CORRECT AS BOTH THE EXPENDITURES WERE INCURRED FOR DEMERGER AND THE ADDITION OF THE SAME IS A MISTAKE. 2. THE ABOVE AND THE OTHER GROUNDS THAT MAY ARISE DURING THE APPEAL, THE APPELLANT REQUESTS FOR AN ORDER DELETING THE ADDITION OF RS. 22,37,655/ - MADE IN THE ASSESSMENT ORDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN PHARMACEUTICALS FILED ITS RETURN OF INCOME FOR THE AY 2014 - 15 ON 7/3/2014. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED ON 19/12/2016 WHEREIN THE LD. AO DISALLOWED EXPENDITURE OF RS. 22,37,655/ - BECAUSE IT WAS INCURRED TOWARDS ROC FEES FOR INCREASING THE AUTHORISED SHARE CAPITAL OF THE COMPANY. THE LD. AO FURTHER HELD THAT THE AFORESAID EXPENDITURE CANNOT BE CLAIMED AS DEDUCTION BY THE ASSESSEE COMPANY U/S. 35D (2)(C)(IV) OF THE ACT ALSO BECAUSE IT RELATES T O PAYMENT MADE IN CONNECTION WITH PUBLIC SUBSCRIPTION OF SHARES / DEBENTURES OF THE COMPANY, ETC. WHICH FALLS IN THE CAPITAL FIELD . ON APPEAL, THE LD. CIT (A) UPHELD THE ORDER OF THE LD. AO BECAUSE IT WAS EVIDENT THAT THE ASSESSEE HAS INCURRED THE EXPENDI TURE OF RS. 4,25,000/ - TOWARDS ROC FEES FOR INCREASING THE AUTHORISED CAPITAL, RS. 1,27,500/ - TOWARDS STAMP DUTY PAID TO ROC FOR INCREASING THE AUTHORISED CAPITAL AND RS. 16,18,155/ - TOWARDS STAMP DUTY PAID TO JOINT SUB - REGISTRAR . 3 4. AT THE OUTSET, THE LD. AR SUBMITTED BEFORE US THAT THE LD. AO HAS ERRONEOUSLY DISALLOWED THE EXPENDITURE OF RS. 22,37,655/ - WHEN THE ASSESSEE HAS CLAIMED ONLY RS. 8,44,035/ - AS DEDUCTION U/S. 35DD OF THE ACT BEING 1/5 TH OF THE TOTAL EXPENDITURE OF RS. 42,2 0,172/ - AS DETAILED HEREINBELOW: SL NO. AMOUNT DETAILS 1. 4,24,000 ROC FEE PAID FOR INCREASE OF AUTHORISED CAPITAL 2 1,27,500 STAMP DUTY PAID 3 16,85,155 STAMP DUTY PAID TO SRO, SR NAGAR, HYD. STAMP DUTY PAID @ 2% ON RS. 8,42,57,720, VALUE OF SHARES ALLOTTED. 4 8,55,340 PROFESSIONAL EXPENSES 5 35,921 PUBLICATION AND PRINTING EXPENSES (A) 31,28,916 (A) TOTAL DEMERGER EXPENSES FOR THE FY 2013 - 14 (B) 10,91,256 (B) TOTAL DEMERGER EXPENSES FOR THE FY 2012 - 13 (A)+(B) 42,20,172 TOTAL DEMERGER EXPENSES 8,44,034 1/5 TH SHARE CLAIMED DURING THE FY 2013 - 14. 4.1. THE LD. AR FURTHER SUBMITTED THAT THE FINDING OF THE LD. AO IS A MISTAKE OF FACT AND IT IS REQUIRED TO BE RE - APPRECIATED . THE LD. AR FURTHER EXPLAINED THAT THE ENTIRE EX PENDITURE CLAIMED BY THE ASSESSEE WAS 1/5 TH OF THE TOTAL EXPENDITURE OF RS. 42,20,172 U/S. 35DD OF THE ACT WITH RESPECT TO DEMERGER EXPENSES. IT WAS THEREFORE PRAYED THAT APPROPRIATE RELIEF MAY BE GRANTED. THE LD. DR ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDERS OF THE LD. REVENUE AUTHORITIES. 5. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE THE ENTIRE F ACT S OF THE CASE IS REQUIRED TO BE RE - EXAMINED BY THE LD. AO AS IT IS APPARENT FROM THE ORDERS OF THE LD. REVENUE AUTHORITIES THAT THE DISALLOWANCE MAD E IS IN LIEU OF SECTION 4 35D(2)(C)(IV) OF THE ACT FOR RS. 22,37,655 WHILE AS IT IS EMPHASIZED BY THE LD. A R TH A T THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 35 D D OF THE ACT FOR RS. 8,44,034/ - ONLY BEING 1/5 TH OF THE TOTAL EXPENDITURE OF RS. 42,20,172 INCURRED TOWARDS DEMERGER EXPENSES. ACCORDINGLY, WE HEREBY REMIT THE ENTIRE MATTER BACK TO THE FILE OF THE LD. AO F OR DE NOVO CONSIDERATION. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 18 TH FEBR UARY, 2020. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED : 18 TH FEBR UARY, 2020 OKK COPY TO: - 1) BRILLIANT BIO PHARMA PVT LTD (FORMERLY BRILLIANT BIO PHARMA LTD), C/O. SRI K.K. GUPTA, CHARTERED ACCOUNTANT, 3464, DUNDOO VIHAR, RP ROAD, SECUNDERABAD 500 003, TELANGANA. 2) THE DCIT, CIRCLE - 1(2), AAYAKAR BHAVAN, BASHEER BAGH, HYDERABAD. 3) THE CIT(A) - 1, 7THFLOOR, A - BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 4) THE PR. CIT - 1, HYDERABAD. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE