MANAGER KESHAV HOLDINGS LTD, MUMBAI V. ITO WD 8(2)(4), MUMBAI

ITA 6903/MUM/2010

• Counselvise Citation: 690319914 RSA 2010
• Duration Of Justice: 4 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR SANTOSH MANKUSKAR
• Assessee Lawyers: PRASHANT THAKKAR; SSH NISHANT THAKKAR
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 37

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJ IT DEY ,JUDICIAL MEMBER /. ITA NO. 6903 /MUM/201 0 , / ASSESSMENT YEAR - 2007 - 08 MANGAL KESHAV HOLDINGS LIMITED 501, HERITAGE PLAZA, J.P. ROAD OPP., INDIAN OIL COLONY ANDHERI(W) , MUMBAI - 400 0053. PAN: AAECM 6524 C VS THE INCOME TA X OFFICER WARD 8(2)(4) MUMBAI. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : S/SH. NISHANT THAKKAR & PRASHANT THAKKAR / REVENUE BY : SHRI DR. SANTOSH MANKUSKAR - DR / DATE OF HEARING : 22 - 09 - 2015 / DATE OF PRONOUNCEMENT : 22 - 09 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 10/6/2010 OF CIT(A) - 17 THE ASSESSEE HAS FILED THE FOLLOWING GROUNDS OF APPEAL: GR OUND NO. 1: DISALLOWANCE OF STAMPING CHARGES OF RS 10,00,900 1.1 THE COMMISSIONER OF INCOME - TAX (APPEALS) - 17 ['THE CIT(A)'], MUMBAI ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW ERRED IN UPHOLDING THE DISALLOWANCE OF RS 10,00,900 (BEING THE ST AMPING CHARGES FOR EXECUTION OF THE SUBSCRIPTION AGREEMENT) AS PER THE ASSESSMENT ORDER. 1.2 THE APPELLANT SUBMITS THAT IT HAS ENTERED INTO A SUBSCRIPTION AGREEMENT IN THE COURSE OF ITS ORDINARY BUSINESS ACTIVITIES AND HAD GOT SUCH DOCUMENT DULY STAMP ED. THUS, THE CIT(A) OUGHT TO HAVE CONSIDERED THE STAMPING CHARGES AS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND SHOULD HAVE DELETED THE DISALLOWANCE. 1.3 THE APPELLANT PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO GIVE APPROPRIATE DI RECTION IN THIS MATTER TO DELETE THE DISALLOWANCE OF RS 10,00,900. GROUND NO. 2: REDUCTION IN CARRY FORWARD OF BUSINESS LOSS 2.1 AS A CONSEQUENCE TO THE GROUND NO. 1, THE CIT(A) ERRED IN ALLOWING CARRY FORWARD OF UNABSORBED BUSINESS LOSS OF RS.193,7 39 AS AGAINST BUSINESS LOSS OF RS. 11,94,639 AS CLAIMED IN THE RETURN OF INCOME. 2.2 THE APPELLANT PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO GIVE APPROPRIATE DIRECTION IN THIS MATTER TO ALLOW TO CARRY FORWARD OF BUSINESS OF RS.11,94,639/ - UNDER T HE PROVISIONS OF THE INCOME - TAX ACT, 1961. YOUR APPELLANTS CRAVE LEAVE TO ALTER, AMEND, OMIT, DELETE, WITHDRAW OR SUBSTITUTE THE ABOVE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING AS THEY MAY BE ADVISED TO DO SO. A SESSEE - COMPANY, EN GAGED IN THE BUSINESS O F HOLDING INVESTMENT, FILED ITS RETURN OF INCOME ON 27. 10.2007, DECLA R ING LOSS AT RS.11.94 LACS.THE ASSESSING OFFICER ( AO ) COMPLETED THE ASSESSMENT ON 30. 11.2009, U/S. 143(3) OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS.( - ) 1,93,739/ - 2. F IRST GROUND OF APPEAL IS DISALLOWANCE OF STAMPING CHARGE OF RS.10,00,900/ - . D URING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE H AD CLAIMED A SUM OF RS.21.07 LACS ITA/ 6903/M/10 , MAN GAL KESHAV AY. 0 7 - 08 2 UNDER THE HEAD OPERATING AND OTHER EXPENSES, THAT IT INCLUDED RATE S AND TAXES OF RS.19.46 LACS.HE DIRECTED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM WITH DOCUME NTARY EVIDENCES.VIDE ITS LETTER, DT.12. 11.2009, THE ASSESSEE FURNISHED THE BREAKUP OF RS. 19.39 LACS AND CONTENDED THAT IT INCLUDED STAMP DUTY PAID FOR INCREASE IN AUT H ORIS ED SHARE CAPITAL (RS.2.20 LACS ) ,FEES PAID TO REGISTRAR OF COMPANIES FOR INCREASE IN AUTHORIS ED SHARE CAPITAL ( RS.5.54 LACS ) , STAMP DUTY PAID FOR ADJUDICA - TION FOR ISSUANCE OF SHARES ( RS.1.63 LACS), THAT THE ASSESSEE HAD DISALLOWED RS.9.38 LACS(RS.2 .20 LACS +5.54 LACS+1.63 LACS), THAT RS.10,00,900 / - WAS PAID TOWARDS STAMPING CHARGES FOR EXECUTION OF SUBSCRIPTION AGREEMENT,THAT THE SUM WAS ALLOWABLE AS REVENUE EXPENDITURE U/S. 37 OF THE ACT. THE AO, AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE , HELD THAT EXPENDITURE WAS INCURRED FOR AND ON ACCOUNT OF STAMPING AUTHORITY FOR EXECUTION OF SUBSCRIPTION AGREEMENT FOR RAISING AUTHORIS ED SHARE CAPITAL OF THE CO MPANY, THAT IT COULD NOT BE TREATED OR CONSIDERED TO HAVE BEEN INCURRED IN THE NORMAL COURSE OF BUSINESS ACTIVITIES OF THE ASSESSEE CO MPANY , THAT IT WAS NOT INCURRED SOLELY AND EXCLUSIVELY F OR THE PURPOSE OF ITS BUSINESS, THAT SAME COULD NOT BE ALLOWED AS REVENUE EXPENDITURE U/S. 37 ( 1) OF THE A CT. 3. AGGRIEVED BY THE ORDER O F THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE A UTHORITY (FAA). BEFORE HIM , IT WAS ARGUED THAT THE SUBSCRIPTION AGREEMENT WAS EXECUTED BETWEEN THE ASSESSEE AND F OREIGN I NVESTOR B ANK OF M USCAT , THAT THE AGREEMENT WAS FOR INFUSING CAPITAL INTO THE CO MPANY BY THE INVESTOR, THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF HOLDING INVESTMENT, THAT THE CAPITAL RAISED HAD BEEN UTILI S ED FOR BUSINESS PURPOSES, THAT THE SUBSCRIPTION AGREEMENT HAD BEEN REGISTER E D TO OBTAIN GOOD LEGAL TITLE, THAT STAMPING EXPENSES INCURRED FOR RAISING CAPITAL IN THE ORDINARY COURSE OF BUSINESS WAS ALLOWABLE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THAT THE EXPENSES INCURRED IN CONNECTION WITH RAISING THE AUTHORI S ED SHARE CAPITAL HAD TO BE TREATED AS CAPIT AL EXPENDITURE AS HELD BY THE H ONBLE S UPREME C OURT IN THE CASE OF PUNJAB S TATE IND USTRIA L DEVELOPMENT CORPORATION LTD . (225 ITR 792). S HE ALSO REFERRED TO THE CASES OF SHREERAM MILLS LTD. (195 ITR 215) AND CYNAMIDE INDIA LTD. (1994 TAXLR 895)AND HELD THAT S TAMPING CHARGES FOR REGISTRATION OF THE SUBSCRIPTION AGREEMENT RELATING TO INCREASE IN SHARE CAPITAL WAS TO BE T REATED AS CAPITAL EXPENDITURE. FINALLY , UPHOLDING THE ORDER OF THE AO, SHE DISMISSED THE APPEAL FILED BY THE ASSESSEE . 4. BEFORE US, THE AUTHORISED REPRESENTATIVE ( AR ) CONTENDED THAT THE SUBSCRIPTION AGREEMENT WAS NOT FOR RAISING THE AUTHORIS ED SHARE CAPITAL, THAT THE CASES RELIED UPON BY THE FAA DEALT WITH DIFFERENT FACTS, THAT IT HAD SUBMITTED BEFORE THE AO AND THE FAA THAT THE SUBSCRIPTION AGREEMENT WAS TO BRING CAPITAL FROM MUSCAT TO ITS SUBSIDIARY COMPANIES . DEPARTMENTAL REPRESENTATIVE ( DR ) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. ON A SPECIFIC QUERY BY THE BENCH ABOUT THE SUBMISSION OF THE SUBSCRIPTION AGREEMENT DURING THE AS SESSMENT /APPELLATE PROCEEDINGS, THE AR STATED THAT SAME WAS HAN DED OVER TO THE FAA PERSONALLY, THAT HE HAD NO EVIDENCE OF SUBMITTING IT OFFICIALLY. WE ARE OF THE OPINION THAT WITHOUT CONSIDERING THE TERMS AND CONDITIO NS OF THE AGREEMENT THE ISSUE RAISED BEFORE US CANNOT BE DECIDED .THEREFORE, WE ARE OF THE OPINION, THAT IN THE INTEREST OF JUSTICE THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORT UNITY OF HEARING TO THE ASSESSEE AND TO DECIDE THE ISSUE AFTER CONSIDERING THE SUBSCRIPTION AGREEMENT. GROUND NO.1 IS DECIDED IN ITA/ 6903/M/10 , MAN GAL KESHAV AY. 0 7 - 08 3 FAVOUR OF THE ASSESSEE , IN PART. 6 . GROUND NO.2 IS ABOUT REDUCTION IN CARRY FORWARD OF BUSINESS LOSS.WE FIND THAT THE ASSESSEE H AS RAISED THE ISSUE BEFORE THE FAA, BUT SHE HAS NOT ADJUDICATED THE SAME.THEREFORE, MATTER IS RESTORED BACK TO THE FILE OF THE FAA . GROUND NO.2 IS ALLOWED IN FAVOUR OF THE ASSESSEE IN PART. AS A RESULT APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND , SEPTEMBER,2015. 22 , 2015 SD/ - SD/ - ( / SAKTIJIT DEY ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE:22. 09. . 2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.