SAM FINE O CHEM LIMITED, MUMBAI V. ACIT- 11 (1)(2), MUMBAI

ITA 3755/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 29-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N PADMANABHANSR
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

ITA NO.3755/MUM/2018 M/S. SAM FINE O CHEM LIMITED ASSESSMENT YEAR :2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE HONBLE SHRI MANOJ KUMAR AGGARWAL, AM AND HONBLE SHRI RAVISH SOOD, JM ./ I.T.A. NO.3755/MUM/2018 ( / ASSESSMENT YEAR:2013-14) M/S. SAM FINE O CHEM L TD. B-601, PARAS APARTMENT, ROKADIA LANE, BORIVALI WEST MUMBAI-400 092. / VS. A CIT - 11(1)(2) 3 RD FLOOR, B-WING MITTAL COURT, NARIMAN POINT MUMBAI- 400 021. ./ ./PAN/GIR NO. AAJCS-2469-P ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ASSESSEE BY : WRITTEN SUBMISSIONS REVENUE BY : SHRI N. PADMANABHAN-SR.AR / DATE OF HEARING : 09/01/2020 / DATE OF PRONOUNCEMENT : 09/01/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2013-14 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-18, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-18/IT-114/ACIT-11(1)(2)/2016-17 DATED 13/04/2018 ON FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER REGISTRATION & E-FILING FEES PAID CAN BE DISALLOWED EVEN WHEN THE FUND FLOW HAS NOT INCREASED BUT ONLY AUTHORIZED SHA RE CAPITAL HAS INCREASED. ITA NO.3755/MUM/2018 M/S. SAM FINE O CHEM LIMITED ASSESSMENT YEAR :2013-14 2 2. IF THE EXPENSES WERE TREATED AS CAPITAL EXPENDI TURE, THEN WHY IT SHOULD NOT BE ALLOWED U/S 35D OF THE INCOME TAX ACT, 1961? 3.. WHEN THE EXPENSE IS PURELY BUSINESS-RELATED EX PENDITURE, CAN IT BE DISALLOWED UNDER ONE PRETEXT OR ANOTHER? 2. THE ASSESSEE HAS CHOSEN TO FILED WRITTEN SUBMISS IONS ON 12/08/2019 WHICH WE HAVE CONSIDERED. WE HAVE ALSO C ONSIDERED THE ARGUMENTS ADVANCED BY THE LD. DR. AS EVIDENT FROM G ROUNDS OF APPEAL, THE SOLE ISSUE THAT FALL FOR OUR CONSIDERATION IS T O DETERMINE THE DEDUCTIBILITY OF EXPENDITURE OF RS.6.65 LACS INCURR ED BY THE ASSESSEE AS REGISTRATION FEES / STAMP DUTY TO INCREASE THE AUTH ORIZED SHARE CAPITAL. OUR ADJUDICATION TO THE ISSUE WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3. FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE B EING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN THE BUSI NESS OF MANUFACTURING OF CHEMICALS AND PHARMACEUTICALS, WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S. 143(3) ON 23/03/2016 WHERE IN IT WAS SADDLED WITH STATED ADDITION OF RS.6.65 LACS, TREATING THE EXPENDITURE TO BE CAPITAL IN NATURE. THE LD. AO OPINED THAT THE SAID EXPENDITURE COULD NOT BE ALLOWED AS REVENUE EXPENSES SINCE IT WAS INCURRE D TO INCREASE THE SHARE CAPITAL OF THE ASSESSEE COMPANY AND THEREFORE , EXPENDITURE ON CAPITAL ACCOUNT. 4. THE LD. CIT(A), RELYING UPON THE DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LIMITED VS. CIT (225 ITR 798) AND PUNJAB STATE INDUSTRIAL CORPORATION LTD. VS. CIT ( 225 ITR 792) CONFIRMED THE STAND OF LD. AO. IN THE STATED DECISI ONS, IT WAS HELD THAT INCREASE IN CAPITAL RESULTS IN EXPANSION OF CAPITAL BASE AND THEREFORE, THE ITA NO.3755/MUM/2018 M/S. SAM FINE O CHEM LIMITED ASSESSMENT YEAR :2013-14 3 EXPENDITURE WOULD RETAIN THE CHARACTER OF CAPITAL E XPENDITURE. REGARDING ALTERNATIVE SUBMISSIONS THAT 1/5 TH OF EXPENDITURE SHOULD BE ALLOWED U/S 35D, WAS ALSO DISMISSED IN VIEW OF THE FACT THAT EX PENSES WERE NOT IN THE NATURE OF PRELIMINARY EXPENSES AND BUSINESS HAD ALREADY COMMENCED. AGGRIEVED, THE ASSESSEE IS IN FURTHER AP PEAL BEFORE US. 5. WE FIND THAT THE ASSESSEE, IN THE WRITTEN SUBMIS SIONS, SEEK TO RELY UPON THE DECISION OF THIS TRIBUNAL IN ACIT VS. WEST GUJARAT EXPRESSWAY LTD. (2015 57 TAXMAN.COM 384). HOWEVER, IN THE SAID DECISION IT WAS ADMITTED POSITION THAT THE EXPENDIT URE WAS IN THE NATURE OF PRELIMINARY EXPENSES INCURRED TOWARDS EXTENSION OF THE BUSINESS. NO SUCH FACTS EMANATE IN THE INSTANT CASE. THE ASSESSE E HAS ALSO SOUGHT TO RELY UPON THE DECISION OF DELHI TRIBUNAL IN DCIT V/S RAJ LAXMI STONE CRUSHER (21 TAXMANN.COM 475). HOWEVER, THIS DECISION DOES NOT CONSIDER THE RATIO LAID DOWN BY HONBLE APEX COURT IN THE AFORESAID DECISIONS AS RELIED UPON BY LD. CIT(A). 6. THE RELEVANT OBSERVATION OF HONBLE SUPREME COUR T IN PUNJAB STATE INDUSTRIAL CORPORATION LTD. VS. CIT (225 ITR 792) WAS AS FOLLOWS: - 7. WE DO NOT CONSIDER IT NECESSARY TO EXAMINE ALL THE DECISIONS IN EXTENSO BECAUSE WE ARE OF THE OPINION THAT THE FEE PAID TO THE REGI STRAR FOR EXPANSION OF THE CAPITAL BASE OF THE COMPANY WAS DIRECTLY RELATED TO THE CAP ITAL EXPENDITURE INCURRED BY THE COMPANY AND ALTHOUGH INCIDENTALLY THAT WOULD CERTAI NLY HELP IN THE BUSINESS OF THE COMPANY AND MAY ALSO HELP IN PROFIT-MAKING, IT STIL L RETAINS THE CHARACTER OF A CAPITAL EXPENDITURE SINCE THE EXPENDITURE WAS DIRECTLY RELA TED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY. WE ARE, THEREFORE, OF THE OPINION THAT THE VIEW TAKEN BY THE DIFFERENT HIGH COURTS IN FAVOUR OF THE REVENUE IN THIS BEHALF IS THE PREFERABLE VIEW AS COMPARED TO THE VIEW BASED ON THE DECISION OF TH E MADRAS HIGH COURT IN KISENCHAND CHELLARAM (INDIA) (P.) LTD.'S CASE (SUPR A) . WE, THEREFORE, ANSWER THE QUESTION RAISED FOR OUR DETERMINATION IN THE AFFIRM ATIVE, I.E., IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. ITA NO.3755/MUM/2018 M/S. SAM FINE O CHEM LIMITED ASSESSMENT YEAR :2013-14 4 SIMILAR VIEW WAS TAKEN BY HONBLE APEX COURT IN ITS SUBSEQUENT DECISION TITLED AS BROOKE BOND INDIA LIMITED VS. CIT (225 ITR 798). SUBSEQUENTLY, THE HONBLE BOMBAY HIGH COURT IN CIT V/S ZENITH STEEL PIPES & INDUSTRIES LTD. (315 ITR 95 14/01/2009), AFTER CONSIDERING BOTH THE DECISIONS OF HONBLE APEX COURT, HAS TAKEN SIMI LAR VIEW. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE E XPENDITURE WAS CAPITAL IN NATURE. REGARDING ALTERNATIVE SUBMISSIONS THAT 1 /5 TH OF EXPENDITURE SHOULD BE ALLOWED U/S 35D, THE SAME ALSO WOULD STAN D DISMISSED IN VIEW OF THE FACT THAT EXPENSES WERE NOT IN THE NATURE OF PRELIMINARY EXPENSES AND BUSINESS HAD ALREADY COMMENCED. THEREFORE, NO F AULT COULD BE FOUND IN THE REASONING OF LEARNED FIRST APPELLATE A UTHORITY. 7. THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JANUARY, 2020. SD/- SD/- (RAVISH SOOD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 09/01/2020 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !/ THE APPELLANT 2. '#!/ THE RESPONDENT 3. G ( ) / THE CIT(A) 4. G / CIT CONCERNED 5. QR'%S, S, / DR, ITAT, M UMBAI 6. RVWX / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.