MULTI FLEX LAMI PRINT LTD, MUMBAI v. DCIT 9(2), MUMBAI

CO 121/MUM/2011 | 2007-2008
Pronouncement Date: 31-07-2012 | Result: Allowed

Appeal Details

RSA Number 12119923 RSA 2011
Assessee PAN AAACM3316J
Bench Mumbai
Appeal Number CO 121/MUM/2011
Duration Of Justice 11 month(s) 29 day(s)
Appellant MULTI FLEX LAMI PRINT LTD, MUMBAI
Respondent DCIT 9(2), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 31-07-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 31-07-2012
Date Of Final Hearing 24-07-2012
Next Hearing Date 24-07-2012
Assessment Year 2007-2008
Appeal Filed On 02-08-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI .. ! ' # ! $ BEFORE SHRI R.S.SYAL AM AND SHRI VIVEK VARMA JM ./ ITA NO.5630/MUM/2010 ( #& ' #& ' #& ' #& ' / / / / ASSESSMENT YEAR : 2007-2008) THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 9(2) MUMBAI. M/S.MULTI-FLEX LAMI PRINT LIMITED 210 SHALIMAR MORYA PARK LINK ROAD ANDHERI (WEST) MUMBAI 400 053. PAN : AAACM3316J. ( () / // / APPELLANT) & & & & / VS. ( *+()/ RESPONDENT) *+$ ./ CO NO.121/MUM/2011 ( #& ' #& ' #& ' #& ' / / / / ASSESSMENT YEAR :2007-2008) M/S.MULTI-FLEX LAMI PRINT LIMITED 210 SHALIMAR MORYA PARK LINK ROAD ANDHERI (WEST) MUMBAI 400 053. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 9(2) MUMBAI. ( *+$ / CROSS OBJECTOR) & && & / VS. ( *+()/ RESPONDENT) - -- - . . . . / REVENUE BY : SHRI MOHIT JAIN #& /0 #& /0 #& /0 #& /0 - . - . - . - . / ASSESSEE BY : SHRI BHUPENDRA SHAH & - 0 / / / / DATE OF HEARING : 24.07.2012 12' - 0 / DATE OF PRONOUNCEMENT : 31.07.2012 !3 !3 !3 !3 / / / / O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) ON 14.05.2010 IN RELATION TO THE ASSESSME NT 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 ITA NO.5630/MUM/2010 & CO.121/M/11 M/S.MULTI-FLEX LAMI PRINT LIMITED. 2 EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS INCREA SE IN CAPITAL BASE. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E ASSESSEE DEBITED A SUM OF ` 1.07 CRORE AS LEGAL AND PROFESSIONAL EXPENSES. ON T HE PERUSAL OF THE DETAILS IT WAS OBSERVED BY THE A.O. THAT T HIS AMOUNT INCLUDED A SUM OF ` 10.59 LAKH PAID TO M/S. DUA AND ASSOCIATES FOR LEGA L 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 INCREAS ED SHARE CAPITAL AND FURTHER OVERSEAS COMPANY VIZ. CLEAR WATER CAPITA L PARTNERS (CYPRUS) LTD. ALSO INVESTED ` 22.49 CRORE. CONSIDERING THE RATIO OF THE JUDGMENT RENDERED BY THE HONBLE SUPREME COURT IN T HE CASE OF PSIDC LTD. V. CIT (225 ITR 792) AND BROKE BOND INDI A LTD. V. CIT [225 ITR 798 (SC)] THE ASSESSING OFFICER HELD THAT THE EXPENDITURE INCURRED FOR INCREASE IN THE CAPITAL BASE WAS NOT D EDUCTIBLE. 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 REGA RDS 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 REQUI REMENTS. 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. ITA NO.5630/MUM/2010 & CO.121/M/11 M/S.MULTI-FLEX LAMI PRINT LIMITED. 3 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD THERE IS NO DISPUTE ABO UT THE FACT THAT ANY EXPENDITURE INCURRED FOR INCREASING THE CAPITAL BAS E OF THE COMPANY CANNOT BE ALLOWED AS DEDUCTION. IF ON THE OTHER H AND ANY EXPENDITURE IS INCURRED IN CONNECTION WITH OBTAININ G LOAN AND NOT AUGMENTING THE CAPITAL BASE THE SAME CANNOT BE DIS ALLOWED. FROM THE ASSESSMENT ORDER IT IS OBSERVED THAT THE A.O. H AS 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 L OANS. THE LEARNED AR COULD NOT GIVE DETAILS OF THESE TWO AMOUNTS TO SHOW THEIR TRUE NATURE. UNDER THESE CIRCUMSTANCES WE ARE OF THE CO NSIDERED OPINION THAT IT WILL BE IN THE INTEREST OF JUSTICE IF THE I MPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO TH E FILE OF AO. WE ORDER ACCORDINGLY AND DIRECT HIM TO EXAMINE THE NAT URE 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 CORPO RATE ADVISORS LTD. IF EITHER OR BOTH OF THESE AMOUNTS ARE FOUND T O 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 I NCREASE IN THE CAPITAL BASE SHOULD BE DISALLOWED. 4. THE ONLY GROUND RAISED BY THE ASSESSEE IN ITS CR OSS OBJECTION IS AGAINST SUSTENANCE OF ADDITION U/S 14A READ WITH RU LE 8D. ITA NO.5630/MUM/2010 & CO.121/M/11 M/S.MULTI-FLEX LAMI PRINT LIMITED. 4 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. IT IS NOTED THAT THE QUESTION O F MAKING DISALLOWANCE U/S 14A IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE 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 MAT TER TO THE FILE OF THE AO FOR DECIDING THE QUANTUM OF DISALLOWANCE AS PER THE AFORE- NOTED JUDGMENT AFTER ALLOWING A REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 6. / 04 - 5 #& /0 - *+$ 6- 789 : 0 ; - 0 <=. IN THE RESULT THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF T HE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 31 ST JULY 2012. . !3 - 12' >!&4 2 - ? SD/- SD/- (VIVEK VARMA) (R.S.SYAL) # ! # ! # ! # ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI ; >!& DATED 31 ST JULY 2012. DEVDAS* ITA NO.5630/MUM/2010 & CO.121/M/11 M/S.MULTI-FLEX LAMI PRINT LIMITED. 5 !3 - *#0:' @''0 !3 - *#0:' @''0 !3 - *#0:' @''0 !3 - *#0:' @''0/ COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. A () / THE CIT(A)-IX MUMBAI. 4. A / CIT 5. 'D? *#0#& / DR ITAT MUMBAI 6. ?E F / GUARD FILE. !3& !3& !3& !3& / BY ORDER +'0 *#0 //TRUE COPY// 7 7 7 7/ // /< < < < ( DY./ASSTT. REGISTRAR) / ITAT MUMBAI