M/S FIRE ARCOR INFRASTRUCTURE PVT. LTD, Nagpur V. A.C.I.T. CENTRAL CIR.,- 2(1), Nagpur

ITA 27/NAG/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0386 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 26-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADIP HEDAOO
• Keywords: Share purchase agreement; Capital expenditure
• Section: 153C

Judgement Text

आयकर अपीऱीय अधिकरण न्यायपीठ नागप ू र म ें । IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR (At e-Court, Pune) BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपीऱ सं. / ITA Nos.26, 27 & 28/NAG/2017 ननिाारण वषा / Assessment Years : 2009-10, 2010-11 & 2011-12 Fire Arcor Infrastructure Pvt. Ltd., 53, Saroj, Ramdaspeth, Nagpur – 440010 PAN : AABCF0909M .......अऩीऱाथी / Appellant बनाम / V/s. Asstt. Commissioner of Income Tax, Central Circle – 2(1), Nagpur ......प्रत्यथी / Respondent Assessee by : N O N E Revenue by : Shri Pradip Hedaoo स ु नवाई की तारीख / Date of Hearing : 11-11-2021 घोषणा की तारीख / Date of Pronouncement : 10-01-2022 आदेश / ORDER PER S.S. VISWANETHRA RAVI, JM : These three appeals by the assessee against the common order dated 30-11-2016 passed by the Commissioner of Income Tax (Appeals)-3, Nagpur [‘CIT(A)’] for assessment years 2009-10, 2010-11 and 2011-12, respectively. 2. We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent 2 ITA Nos. 26, 27 & 28/NAG/2017, A.Ys. 2009-10, 2010-11 & 2011-12 and set ex-parte. Therefore, we proceed to dispose of the appeal by hearing the ld. DR and perusing the material available on record. 3. First, we shall take up appeal in ITA No. 26/NAG/2017 for A.Y. 2009-10. 4. The assessee raised as many as 19 grounds of appeal amongst which the only issue emanates for our consideration is as to whether the CIT(A) is justified in confirming the addition made by the AO on account of fee paid to ROC is capital expenditure in the facts and circumstances of the case. 5. Heard ld. DR and perused the material available on record. We note that the assessee is a company engaged in the business of developing township. Under assessment proceedings conducted u/s. 153C of the Act the AO disallowed Rs.2,31,240/- treating the payment made to ROC to increase authorized share capital and expenses incurred on stamping of share certificates. Before the CIT(A), it was contended by the assessee the expenditure incurred on the increase in the authorized capital which is used for raising the funds to meet the financial obligation for operation of business and in which requires huge funds to meet the requirement to complete the township developing project. The fund was utilized for working capital requirement to make payment for construction activity of township and contended the expenditure for increase in authorized capital for working capital and business activity is revenue expenditure which is allowable as deduction. We note that further, the assessee submitted that the expenditure incurred for increase of authorized capital is for the operation of company which not amount to capital in nature as the same is 3 ITA Nos. 26, 27 & 28/NAG/2017, A.Ys. 2009-10, 2010-11 & 2011-12 used for day to day operation of the company. The CIT(A) sought remand report from the AO. The AO in his remand report observed that the assessee’s contention is not acceptable in view of the law laid down by the Hon’ble Supreme Court in the case of M/s. Punjab State Industrial Corporation Vs. CIT reported in 225 ITR 792 (SC) which held that the fee paid to the Registrar for expansion of the capital base of the company was directly related to the capital expenditure incurred by the company and although incidentally that certainly help in the business of the company and may also help in profit-making, it still retains the character of a capital expenditure. The said remand report was furnished to the assessee wherein we note that the assessee replied by reiterating its arguments made earlier which were discussed by us here-in-above. Therefore, the question before us the expenditure incurred for payment of charges to ROC represents revenue account or capital account. 6. We note that the assessee incurred said expenditure as preliminary expenses which includes payment made to ROC to increase authorized share capital and expenses incurred on stamping of share certificates to an extent of Rs.2,31,240/- which is recorded vide Para No. 5 of the AO’s order. Further, in first appeal before the CIT(A) it was contended that the assessee has utilized the fund for its township project and invested for same for its current assets. Thus, the expenditure incurred for increase of authorized capital is for the operation of the company which not amount to capital in nature as the same is used for day to day operation of the company. Exactly on this point the Hon’ble Supreme Court by referring to decision in the case of Empire Jute Co. Ltd. Vs. CIT reported in 124 ITR 0001 (SC) observed for expansion of the capital base of the company was 4 ITA Nos. 26, 27 & 28/NAG/2017, A.Ys. 2009-10, 2010-11 & 2011-12 directly related to the capital expenditure incurred by the company, although incidentally that would certainly help in the business of the company and may also help in profit-making, it still retains the character of a capital expenditure. Therefore, in the present case, the assessee incurred by way of expenditure towards payment of fee to Registrar of the companies in expansion of authorized share capital which incidentally would help in the business of the company resulting into profit-making, in our opinion is in the character of a capital expenditure. 7. Further, we note that in ground No. 17 it was contended that sum of Rs.50,000/- is contra entry which was entered by mistake and Rs.5,610/- + Rs.510/- paid as filing fee to ROC towards regular expansions which are eligible for deduction. To sum up, the expenditure incurred towards ROC of Rs.1,75,110/- is disallowed and to this effect the order of CIT(A) is justified. Regarding Rs.50,000/- + Rs.5,610/- + Rs.510/- we find in Para No. 12 of the impugned order, the CIT(A) directed the AO to verify the same while giving effect to its order, therefore, we uphold the directions of CIT(A) rendered vide Para No. 12 of the impugned order, thus, the order of CIT(A) is justified and the grounds raised by the assessee are dismissed. 8. In the result, the appeal of assessee in ITA No. 26/NAG/2017 is dismissed. ITA Nos. 27 & 28/NAG/2017, A.Ys. 2010-11 & 2011-12 9. Both sides are unanimous in stating that the issues raised in the appeal and the facts in ITA No.26/NAG/2017 are identical to ITA Nos. 27 & 28/NAG/2017 except the variance in amount. Since, the facts in ITA Nos. 5 ITA Nos. 26, 27 & 28/NAG/2017, A.Ys. 2009-10, 2010-11 & 2011-12 27 & 28/NAG/2017 are similar to in ITA No.26/NAG/2017, the findings given by us while deciding the appeal of assessee in ITA No.26/NAG/2017 would mutatis mutandis apply to ITA Nos. 27 & 28/NAG/2017, as well. Thus, both the appeals of assessee are dismissed, accordingly. 10. To sum up, all the three appeals of assessee are dismissed. Order pronounced in the open court on 10 th January, 2022. Sd/- Sd/- (Inturi Rama Rao) (S.S. Viswanethra Ravi) ACCOUNTANT MEMBER JUDICIAL MEMBER ऩ ु णे / Pune; ददनाांक / Dated : 10 th January, 2022. रवव आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : 1. अऩीऱाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The CIT(A)-3, Nagpur 4. The CIT(Central), Nagpur 5. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, नागऩ ू र, / DR, ITAT, Nagpur. 6. गार्ड फ़ाइऱ / Guard File. //सत्यावऩत प्रतत// True Copy// आदेशान ु सार / BY ORDER, वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩ ु णे / ITAT, Pune