Income Tax Appellate Tribunal - Mumbai
Multi-Flex Print Ltd, Mumbai vs Department Of Income Tax on 31 July, 2012
आयकर अपील य अ धकरण,
धकरण, मंुबई यायपीठ 'बी', मंुबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "B", MUMBAI
सव ी आर.एस. याल, लेखा सद य एवं ी ववेक वमा, या यक सद य, के सम ।
Before Shri R.S.Syal, AM and Shri Vivek Varma, JM
आयकर अपील सं./ITA No.5630/Mum/2010
( नधारण वष / Assessment Year : 2007-2008)
The Dy.Commissioner of Income-tax M/s.Multi-Flex Lami Print Limited
Circle - 9(2) बनाम/
210 Shalimar Morya Park
Mumbai. Link Road, Andheri (West)
Vs. Mumbai - 400 053.
PAN : AAACM3316J.
(अपीलाथ /Appellant) ( यथ /Respondent)
या ेप सं./CO No.121/Mum/2011
( नधारण वष / Assessment Year :2007-2008)
M/s.Multi-Flex Lami Print Limited The Dy.Commissioner of Income-tax
210 Shalimar Morya Park बनाम/
Circle - 9(2)
Link Road, Andheri (West) Mumbai.
Mumbai - 400 053. Vs.
( या ेपक / Cross Objector) ( यथ /Respondent)
राज व क ओर से /Revenue by : Shri Mohit Jain
नधा रती क ओर से/Assessee by : Shri Bhupendra Shah
सनवाई
ु क तार ख / घोषणा क तार ख /
Date of Hearing : 24.07.2012 Date of Pronouncement : 31.07.2012
आदे श / O R D E R
Per R.S.Syal, AM :
This appeal by the Revenue and cross objection by the assessee arise out of the order passed by the Commissioner of Income-tax (Appeals) on 14.05.2010 in relation to the assessment year 2007- 2008.
2. Only ground raised by the Revenue in its appeal is against the deletion of addition of `79,77,702 which represents aggregate 2 ITA No.5630/Mum/2010 & CO.121/M/11 M/s.Multi-Flex Lami Print Limited.
expenditure incurred by the assessee towards increase in capital base. Briefly stated the facts of this ground are that the assessee debited a sum of `1.07 crore as legal and professional expenses. On the perusal of the details, it was observed by the A.O. that this amount included a sum of `10.59 lakh paid to M/s. Dua and Associates for legal Due diligence audit report, `69.17 lakh to Brescon Corporate Advisors as success fees for arranging finance and `4.90 lakh for the purpose of stamp duty and filing charges paid to Registrar of Companies. The Assessing Officer noticed that the assessee increased share capital and further overseas company viz. Clear Water Capital Partners (Cyprus) Ltd. also invested `22.49 crore. Considering the ratio of the judgment rendered by the Hon'ble Supreme Court in the case of PSIDC Ltd. v. CIT (225 ITR 792) and Broke Bond India Ltd. v. CIT [225 ITR 798 (SC)], the Assessing Officer held that the expenditure incurred for increase in the capital base was not deductible. The said sum totaling to `84.67 lakh was therefore added. The learned CIT(A) sustained the addition to the tune of `4.90 lakh being the expenditure incurred for increase in the share capital. As regards other two amounts of `10.59 lakh and `69.17 lakh he observed that it was for raising funds to work out its working capital requirements. Co- relating such expenditure with the raising of loan and not the share capital, the learned CIT(A) deleted the addition of `79.77 lakh, against which the Revenue has come up in appeal.
3 ITA No.5630/Mum/2010 & CO.121/M/11M/s.Multi-Flex Lami Print Limited.
3. After considering the rival submissions and perusing the relevant material on record there is no dispute about the fact that any expenditure incurred for increasing the capital base of the company cannot be allowed as deduction. If, on the other hand, any expenditure is incurred in connection with obtaining loan and not augmenting the capital base, the same cannot be disallowed. From the assessment order it is observed that the A.O. has considered these two amounts disallowed as relatable to the increase in the capital base. On the other hand, the learned CIT(A) deleted such addition by considering these amounts towards the raising of loans. The learned AR could not give details of these two amounts to show their true nature. Under these circumstances, we are of the considered opinion that it will be in the interest of justice if the impugned order on this issue is set aside and the matter is restored to the file of AO. We order accordingly and direct him to examine the nature of these two amounts namely `10.59 lakh paid to M/s.Dua and Associates and `69.17 lakh paid as success fee to M/s.Brescon Corporate Advisors Ltd. If either or both of these amounts are found to be relatable to the raising of loans, then deduction should be allowed to that extent. If on the other hand the amount found to be relating to increase in the capital base, should be disallowed.
4. The only ground raised by the assessee in its cross objection is against sustenance of addition u/s 14A read with rule 8D.
4 ITA No.5630/Mum/2010 & CO.121/M/11M/s.Multi-Flex Lami Print Limited.
5. We have heard the rival submissions and perused the relevant material on record. It is noted that the question of making disallowance u/s 14A is no more res integra in view of the judgment of the Hon'ble Bombay High Court in Godrej & Boyce Ltd. Mfg. Co. VS. DCIT [(2010) 328 ITR 81 (Bom)] holding that the provisions of section 14A are applicable in circumstances as are prevailing presently and the disallowance has to be worked out by the AO on some `reasonable basis' and not rule 8D. Under such circumstances, we set aside the impugned order and restore the matter to the file of the AO for deciding the quantum of disallowance, as per the afore- noted judgment, after allowing a reasonable opportunity of being heard to the assessee.
6. प रणामतः राज व क अपील एवं नधा रती क या ेप सां यक य उ े य के लए वीकत ृ क जाती है .। In the result, the appeal of the Revenue and the cross objection of the assessee are allowed for statistical purposes.
Order pronounced on this 31st July, 2012. .
आदे श क घोषणा दनांकः को क गई ।
Sd/- Sd/-
(Vivek Varma) (R.S.Syal)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मंुबई Mumbai; दनांक Dated 31st July, 2012.
Devdas*
5 ITA No.5630/Mum/2010 & CO.121/M/11
M/s.Multi-Flex Lami Print Limited.
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-IX, Mumbai.
4. आयकर आयु / CIT
5. वभागीय त न ध, आयकर अपील य अ धकरण, मंुबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
ु / BY ORDER,
आदे शानसार
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.
उप/ Registrar)
आयकर अपील य अ धकरण,
धकरण, मंुबई / ITAT, Mumbai