J.M FINANCIAL SECURITIES P. LTD, MUMBAI v. ITO 3(2)(3), MUMBAI

ITA 2927/MUM/2010 | 2006-2007
Pronouncement Date: 18-11-2011 | Result: Dismissed

Appeal Details

RSA Number 292719914 RSA 2010
Assessee PAN AAACJ2579E
Bench Mumbai
Appeal Number ITA 2927/MUM/2010
Duration Of Justice 1 year(s) 7 month(s) 4 day(s)
Appellant J.M FINANCIAL SECURITIES P. LTD, MUMBAI
Respondent ITO 3(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 18-11-2011
Date Of Final Hearing 03-11-2011
Next Hearing Date 03-11-2011
Assessment Year 2006-2007
Appeal Filed On 13-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI B.R. MITTAL JUDICIAL MEMBER AND SHRI P.M.JAGTAP ACCOUNTANT MEMBER I.T.A. NO. 2926 /MUM/2010. ASSESS MENT YEAR : 2006-07. M/S J.M. FINANCIAL TRUSTEE CO. PVT.LTD. DY. COMMISSIONER OF 141 MAKER CHAMBERS NO. III VS. INCOME-TAX RANGE-3(2) NARIMAN POINT MUMBAI-400 021. MUMBAI. PAN AAACJ2579E. APPELLANT. RESPONDENT. I.T.A. NO. 2927 /MUM/2010. ASSESS MENT YEAR : 2006-07. M/S J.M. SECURITIES PVT. LTD. THE INCOME-TAX OFFICER MUMBAI. VS. 3(2)3 MUMBAI. PAN AAACJ1235F APPELLANT. RESPONDENT. APPELLANT BY : DR. K. SHIVARAM. RESPONDENT BY : SHRI O.A. MAO. DATE OF HEA RING : 03-11-2011. DATE OF PRONOUNCE MENT : 18-11-2011. O R D E R PER P.M. JAGTAP A.M. : THESE TWO APPEALS FILED BY THE TWO ASSESSEES ARE D IRECTED AGAINST TWO SEPARATE ORDERS PASSED BY THE LEARNED CIT(APPEALS)- 7 MUMBAI DATED 04-01-2010 AND 19-01-2010. SINCE ONE OF THE ISSUES INVOLVED IN THESE TWO APPEALS IS COMMON 2 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS SINGLE CONSOLIDATED ORDER. 2. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL BEI NG ITA NO. 2926/MUM/2010 WHICH IS DIRECTED AGAINST THE ORDER OF LEARNED CIT (APPEALS)-7 MUMBAI DATED 19- 01-2010. 3. THE ISSUE RAISED IN GROUND NO. 1 OF THIS APPEAL RELATES TO THE ADDITION OF RS.15 00 000/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) BY WAY OF DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTI ON CLAIMED ON ACCOUNT OF COMMISSION PAID TO ITS DIRECTORS. THE ASSESSEE IN T HE PRESENT CASE IS A FINANCE AND INVESTMENT COMPANY. THE RETURN OF INCOME FOR THE YE AR UNDER CONSIDERATION WAS FILED BY IT ON 28-11-2006 DECLARING TOTAL INCOME OF RS.98 17 315/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN A SUM OF RS.15 LAKHS WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF COMMISSION PAID TO IT S DIRECTORS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO IT WAS SUB MITTED BY THE ASSESSEE THAT ITS BOARD OF DIRECTORS HAD OVERALL RESPONSIBILITY FOR T HE PROPER AND EFFICIENT MANAGEMENT OF THE COMPANY. IT WAS CONTENDED THAT TH E DIRECTORS WERE OVERALL RESPONSIBLE FOR ALL COMPLIANCES OF SEBI AND MUTUAL FUND REGULATIONS AND IN ORDER TO COMPENSATE THEM FOR THESE RESPONSIBILITIES AND A LSO FOR OVERALL CONDUCT OF THE BUSINESS ONE TIME PAYMENT OF COMMISSION WAS MADE A S APPROVED BY THE SHAREHOLDERS. IT WAS SUBMITTED THAT THE DIRECTORS W ERE NOT BEING PAID ANY REMUNERATION FOR THE SERVICES RENDERED AND SIMILAR ONE-TIME COMMISSION PAID TO THEM IN THE EARLIER YEARS WAS ALSO ALLOWED. THE AO DID NOT DISPUTE THE FACT THAT SIMILAR COMMISSION PAID TO THE DIRECTORS BY THE ASS ESSEE COMPANY IN THE EARLIER YEARS WAS ALSO ALLOWED. HE HOWEVER HELD THAT THE TRUST DEED UNDER WHICH ALL PAYMENTS FROM THE MUTUAL FUNDS WERE REGULATED BY TH E SEBI DID NOT PROVIDE FOR ANY PAYMENT OF COMMISSION BY THE ASSESSEE COMPANY T O ITS DIRECTORS. IN THE 3 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. ABSENCE OF SUCH PROVISION IN THE TRUST DEED HE HEL D THAT THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF PAYMENT OF COMMISSION MA DE TO ITS DIRECTOR WAS NOT ALLOWABLE AND THIS WAS NEW FACT WHICH HAD NOT BEEN CONSIDERED IN THE EARLIER YEARS ALLOWING A SIMILAR DEDUCTION CLAIMED BY THE ASSESSE E. HE THEREFORE DISALLOWED THE COMMISSION AMOUNT OF RS.15 LAKHS CLAIMED BY THE ASS ESSEE IN THE YEAR UNDER CONSIDERATION AND ADDED THE SAME TO THE TOTAL INCOM E OF THE ASSESSEE. ON APPEAL THE LEARNED CIT(APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE FOR THE SAME REASONS AS GIVEN BY THE AO. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE IS A COMPANY WHICH IS ALSO ACTING AS A TRUST FOR MANAGIN G THE MUTUAL FUND. HE SUBMITTED THAT THE PAYMENT OF COMMISSION TO ITS DIR ECTORS WAS MADE BY THE ASSESSEE COMPANY OUT OF ITS OWN PROFITS AND NOT FRO M MUTUAL FUND. HE CONTENDED THAT NO APPROVAL OF SEBI THEREFORE WAS REQUIRED F OR MAKING THE SAID PAYMENT AND THERE WAS NO REQUIREMENT OF HAVING ANY PROVISION IN THE TRUST DEED FOR MAKING THE SAID PAYMENT. HE CONTENDED THAT THIS POSITION HAS B EEN ACCEPTED EVEN BY THE AO WHILE ALLOWING CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF COMMISSION PAID TO DIRECTORS IN THE SUBSEQUENT YEARS. 5. THE LEARNED DR ON THE OTHER HAND SUBMITTED THA T BESIDES THE REASON GIVEN BY THE AO FOR MAKING DISALLOWANCE ON ACCOUNT OF COM MISSION PAID BY THE ASSESSEE TO ITS DIRECTORS EVEN THE FACTUM OF SERVICES RENDE RED BY THE SAID DIRECTORS TO JUSTIFY SUCH PAYMENT WAS NOT PROVED BY THE ASSESSEE . HE CONTENDED THAT THE DISALLOWANCE MADE ON ACCOUNT OF COMMISSION PAID TO DIRECTORS THUS IS LIABLE TO BE SUSTAINED ON THIS GROUND ALSO. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT PAYMENT OF COMMISSION MADE BY THE 4 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. ASSESSEE COMPANY TO ITS DIRECTORS IS REGULATED BY T HE COMPANIES ACT AND THE SAME BEING NOT THE PAYMENT OF FEES MADE BY A MUTUAL FUND TO ITS TRUSTEES IT IS NOT GOVERNED BY THE TRUST DEED. IN OUR OPINION THE AO AND THE LEARNED CIT(APPEALS) THEREFORE WERE NOT JUSTIFIED IN DISALLOWING THE PA YMENT OF COMMISSION MADE BY THE ASSESSEE COMPANY TO ITS DIRECTORS ON THE GROUND THAT THERE WAS NO PROVISION IN THE RELEVANT TRUST DEED ALLOWING SUCH PAYMENT. IN S O FAR AS THE COMMERCIAL EXPEDIENCY OF THE SAID PAYMENT IS CONCERNED IT IS OBSERVED THAT THE SAME WAS DULY ESTABLISHED BY THE ASSESSEE BY EXPLAINING THE SERVI CES RENDERED BY THE DIRECTORS AND THE RESPONSIBILITIES UNDERTAKEN BY THEM DURING THE COURSE OF OVERALL CONDUCT OF ITS BUSINESS. EVEN THE AO IMPLIEDLY ACCEPTED THE CO MMERCIAL EXPEDIENCY FOR MAKING THE SAID PAYMENT BY OBSERVING IN THE ASSESSM ENT ORDER THAT THERE WAS NO ISSUE OF BUSINESS EXPEDIENCY INVOLVED IN THIS CASE. WE THEREFORE FIND NO MERIT IN THE CONTENTIONS RAISED BY THE LEARNED DR THAT THE F ACTUM OF SERVICES RENDERED BY THE DIRECTORS TO JUSTIFY THE PAYMENT OF COMMISSION TO THEM WAS NOT ESTABLISHED BY THE ASSESSEE. MOREOVER A SIMILAR PAYMENT OF COMMIS SION MADE BY THE ASSESSEE TO ITS DIRECTORS WAS ALLOWED BY THE AO IN THE EARLIER YEARS AND EVEN IN THE SUBSEQUENT YEARS. AS SUCH CONSIDERING ALL THE FACTS OF THE CA SE WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LE ARNED CIT(APPEALS) ON ACCOUNT OF COMMISSION PAID BY THE ASSESSEE COMPANY TO ITS DIRECTORS IS NOT SUSTAINABLE AND DELETING THE SAME WE ALLOW GROUND NO. 1 OF THE ASSESSEES APPEAL. 7. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.1 27 902/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APP EALS) U/S 14A READ WITH RULE 8D OF THE INCOME-TAX RULES 1962. 8. DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E COMPANY HAD EARNED DIVIDEND INCOME OF RS.39 71 155/- WHICH WAS CLAIMED TO BE EXEMPT FROM TAX. NO DISALLOWANCE ON ACCOUNT OF ANY EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT 5 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. INCOME HOWEVER WAS MADE BY THE ASSESSEE AS REQUIR ED BY THE PROVISIONS OF SECTION 14A. IN THE ASSESSMENT COMPLETED U/S 143(3) THE AO WORKED OUT SUCH EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EX EMPT INCOME AT RS.1 27 907/- BY APPLYING RULE 8D OF INCOME-TAX RULES 1962 AND MADE A DISALLOWANCE TO THAT EXTENT U/S 14A. ON APPEAL THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO RELYING ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT P. LTD. 117 I TD 169 (MUM.)(S.B.) WHEREIN IT WAS HELD THAT RULE 8D HAS A RETROSPECTIVE APPLIC ATION. 9 WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS AGREED BY THE LEARNED REPRES ENTATIVES OF BOTH THE SIDES THE ISSUE INVOLVED IN THIS APPEAL NOW STANDS SQUARELY C OVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CE MANUFACTURING CO. LTD. (2010) 234 CTR (BOM) 1 WHEREIN IT HAS BEEN HELD TH AT RULE 8D OF INCOME-TAX RULES 1962 IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09. AS FURTHER HELD BY HONBLE HIGH COURT THE DISALLOWANCE U/S 14A FOR TH E YEARS PRIOR TO ASSESSMENT YEAR 2008-09 HAS TO BE MADE BY ADOPTING SOME REASON ABLE METHOD. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE JURISDICTION AL HIGH COURT WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO RECOMPUTE TH E DISALLOWANCE OF EXPENSES TO BE MADE U/S 14A BY APPLYING SOME REASONABLE METHOD AFT ER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. GROUND NO. 2 OF THE ASS ESSEES APPEAL IS THUS PARTLY ALLOWED. 10. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE BEING ITA NO. 2927/MUM/2010 WHICH IS DIRECTED AGAINST THE ORDER O F THE LEARNED CIT(APPEALS)-7 MUMBAI DATED 04-01-2010. 6 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. 11. THE ISSUE RAISED IN GROUND NO. 1 OF THIS APPEAL RELATES TO THE DISALLOWANCE OF RS.15 LAKHS MADE BY THE AO OUT OF PROFESSIONAL FEES WHICH HAS BEEN SUSTAINED BY THE LEARNED CIT(APPEALS) TO THE EXTENT OF RS.12 LAK HS. 12. DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE COMPANY GOT MERGED WITH J.M. FINANCIAL LTD. WITH EFFECT FROM 01-11-2005. IN THE PROFIT & LOSS ACCOUNT PREPARED FOR THE PERIOD 01-04-2005 TO 31-10-2005 A SUM OF RS.15 LAKHS WAS DEBITED BY THE ASSESSEE UNDER THE HEAD LEGAL AND P ROFESSIONAL FEES. THE SAID AMOUNT WAS PAID TO M/S M.P. CHITLE & CO. FOR MAKING THE VALUATION OF THE BUSINESS OF THE ASSESSEE COMPANY WHICH WAS DONE IN THE PROCESS OF REORGANIZATION. ACCORDING TO THE AO THE EXPENDITURE INCURRED BY TH E ASSESSEE ON PAYMENT OF FEES FOR VALUATION OF ITS BUSINESS RESULTED IN THE ADVAN TAGE OF ENDURING NATURE TO IT AND THE SAME THEREFORE WAS A CAPITAL EXPENDITURE. ACC ORDINGLY THE DEDUCTION CLAIMED BY THE ASSESSEE FOR THE SAID AMOUNT WAS DISALLOWED BY HIM IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 23-12-2008 . 13. AGAINST THE ORDER PASSED BY THE AO U/S 143(3) AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS). DURIN G THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(APPEALS) IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT LEGAL AND PROFESSIONAL FEES WAS PAID FOR THE PURPOSE OF VALUATION OF ITS BUSINESS IN THE PROCESS OF ONGOING REORGANIZATION A ND THE SAME THEREFORE WAS EXPENDITURE OF REVENUE NATURE. IN THE ALTERNATIVE IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESSEE THAT THE SAID EXPENDITURE BEING PART O F AMALGAMATION EXPENSES SHOULD BE ALLOWED AT LEAST TO THE EXTENT OF 1/5 TH AS PER THE PROVISIONS OF SECTION 35DD. THE LEARNED CIT(APPEALS) DID NOT FIND MERIT IN THE MAIN CONTENTION RAISED BY THE ASSESSEE BUT ACCEPTED ITS ALTERNATIVE CONTENTION AN D RESTRICTED THE DISALLOWANCE OF RS.15 LAKHS MADE BY THE AO TO THE EXTENT OF RS.12 L AKHS FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER : 7 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T AND THE FINDING OF THE AO AND OBSERVE THAT IN THE SCHEME OF AMALGAMATI ON THE LEGAL AND PROFESSIONAL FEES INCURRED BY THE APPELLANT FOR THE PURPOSE OF VALUATION OF ASSESSEES BUSINESS ARE DEFINITELY CAPITAL IN NATUR E AND AS SUCH CANNOT BE ALLOWED AS REVENUE EXPENSES U/S 37(1) OF THE ACT. T HE APPELLANT ITSELF HAS ADMITTED THAT PROVISIONS OF SECTION 35DD WERE INSER TED AFTER THE DECISION OF THE BOMBAY DYEING AND MANUFACTURING CO. LTD. TO COV ER SUCH CAPITAL EXPENDITURE. HENCE AS PER THE PROVISIONS OF SECTIO N 35DD ONLY 1/5 TH OF AMALGAMATION EXPENSES CAN BE CLAIMED BY THE AMALGAM ATING COMPANY AS DEDUCTION U/S 35DD OF THE ACT. NO FURTHER DEDUCTION CAN BE ALLOWED TO THE APPELLANT COMPANY FOR ANY SUCCEEDING YEARS BECAUSE AS PER THE SCHEME OF AMALGAMATION THE AMALGAMATING APPELLANT COMPANY WO ULD CEASE TO EXIST AFTER AMALGAMATION ON 01.11.2005. HOWEVER UNDER TH E SCHEME OF AMALGAMATION THE AMALGAMATION PARENT COMPANY I.E. M/S J.M. FINANCIAL LTD. WOULD BE ALLOWED TO CLAIM 1/5 TH OF THE AMALGAMATION EXPENDITURE INCURRED BY IT U/S 35DD IN THE CURRENT YEAR AS WELL AS IN THE NEXT FOLLOWING FOUR YEARS. KEEPING IN VIEW THE SAID PROVISIONS TH E APPELLANT IS ALLOWED ONE-TIME DEDUCTION OF RS.3 00 000/- OUT OF THE TOTA L EXPENDITURE OF RS.15 00 000/- INCURRED BY THE APPELLANT FOR THE PU RPOSE OF VALUATION OF ITS BUSINESS UNDER THE SCHEME OF AMALGAMATION. ACCORDIN GLY THE BALANCE DISALLOWANCE OF RS.12 00 000/- MADE BY THE AO BEING CAPITAL IN NATURE IS SUSTAINED. 14. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS CONTENDED THAT THE PROVISIONS OF SECTION 35DD ARE NOT APPLICABLE IN TH E CASE OF THE ASSESSEE COMPANY BEING AN AMALGAMATING COMPANY AS THE SAID PROVISION S ARE APPLICABLE IN THE CASE OF AMALGAMATED COMPANY ONLY. HE HAS ALSO CONTENDED THAT THE ASSESSEE COMPANY HAS CEASED TO EXIST WITH EFFECT FROM 01-11-2005 ON ITS AMALGAMATION WITH M/S J.M. FINANCIALS LTD. AND IT THEREFORE CANNOT CLAIM DED UCTION ON ACCOUNT OF EXPENSES IN QUESTION AT THE RATE OF 1/5 TH IN THE SUBSEQUENT YEARS AS PER THE PROVISIONS OF S ECTION 35DD. HE HAS CONTENDED THAT THE PROVISIONS OF SECTI ON 35DD THEREFORE CANNOT BE SAID TO HAVE ANY APPLICATION IN THE CASE OF THE ASS ESSEE COMPANY BEING AN AMALGAMATING COMPANY. THE PROVISIONS OF SECTION 35D D BEING RELEVANT IN THE PRESENT CONTEXT ARE REPRODUCED HEREUNDER : 35DD (1) WHERE AN ASSESSEE BEING AN INDIAN COMPA NY INCURS ANY EXPENDITURE ON OR AFTER THE 1 ST DAY OF APRIL 1999 WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF AMALGAMATION OR DEMERGER OF AN UNDERTAKING THE ASSESSEE SHALL BE ALLOWED A DEDUCTION OF AN AMOUNT EQUAL TO ONE-FIFTH OF SUCH 8 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. EXPENDITURE FOR EACH OF THE FIVE SUCCESSIVE PREVIOU S YEARS BEGINNING WITH THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR DEMERGER TAKES PLACE. (2) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF TH E EXPENDITURE MENTIONED IN SUB-SECTION (1) UNDER ANY OTHER PROVISION OF THI S ACT. 15. A PERUSAL OF THE PROVISIONS OF SECTION 35DD CLE ARLY SHOWS THAT THE SAME DEAL WITH AMORTISATION OF ANY EXPENDITURE INCURRED BY T HE ASSESSEE BEING AN INDIAN COMPANY WHOLLY AND EXCLUSIVELY FOR THE PURPOSES O F AMALGAMATION AND THERE IS NOTHING CONTAINED IN THE SAID PROVISIONS TO EVEN IN DICATE THAT ANY DISTINCTION IS MADE BETWEEN AMALGAMATED COMPANY AND AMALGAMATION C OMPANY SO AS TO SAY THAT IT IS APPLICABLE ONLY TO THE AMALGAMATED AND NOT TO THE AMALGAMATING COMPANY. IN OUR OPINION THE SAID PROVISIONS ARE APPLICABLE TO ANY EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF AMALGAMATION O R DEMERGER BY AN UNDERTAKING IRRESPECTIVE OF WHETHER SUCH EXPENDITURE IS INCURRE D BY AN AMALGAMATING COMPANY OR AMALGAMATED COMPANY. IN THE PRESENT CASE THE EX PENDITURE OF RS.15 LAKHS ON PAYMENT OF FEES FOR VALUATION OF ASSESSEES BUSINES S IN THE PROCESS OF REORGANIZATION WAS UNDISPUTEDLY FOR THE PURPOSES OF ITS AMALGAMATION WITH M/S J.M. FINANCIAL LTD. AND WE THEREFORE FIND OURSELV ES IN AGREEMENT WITH THE LEARNED CIT(APPEALS) THAT THE SAME WAS COVERED BY THE PROVI SIONS OF SECTION 35DD AND THE ASSESSEE WAS ENTITLED FOR DEDUCTION FOR THE SAI D EXPENDITURE ONLY TO THE EXTENT OF 1/5 TH IN THE YEAR UNDER CONSIDERATION. AS REGARDS THE CO NTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE COMPANY HAVING BEEN CEASED TO EXIST ON ITS AMALGAMATION WITH M/S J.M. FINANCIAL LTD. DURIN G THE YEAR UNDER CONSIDERATION IT IS NOT IN A POSITION TO CLAIM DEDUCTION FOR THE REMAINING EXPENDITURE TO THE EXTENT OF 4/5 TH IN THE SUBSEQUENT YEARS AS ENVISAGED IN THE PROVIS ION OF SECTION 35D WE FIND THAT THE LEARNED CIT(APPEALS) HAS ALREADY OBSE RVED IN HIS IMPUGNED ORDER THAT THE SAME COULD BE CLAIMED BY THE AMALGAMATED COMPAN Y IN THE NEXT FOLLOWING FOUR 9 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. YEARS AS PER THE SCHEME OF AMALGAMATION AND THE ASS ESSEE IN OUR OPINION CANNOT BE SAID TO HAVE ANY GRIEVANCE ON THIS ASPECT OF MAT TER WHICH HAS ALREADY BEEN ADDRESSED BY THE LEARNED CIT(APPEALS). AS SUCH CON SIDERING ALL THE FACTS OF THE CASE WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) SUSTAINING THE DISALLOWANCE OF RS.15 LAKHS MADE BY THE AO ON ACCOUNT OF EXPENSES INCURRED FOR AMALGAMATION TO THE EXTENT OF RS.12 LA KHS BY RELYING ON THE PROVISIONS OF SECTION 35DD AND UPHOLDING THE SAME ON THIS ISSU E WE DISMISS GROUND NO.1 OF THE ASSESSEES APPEAL. 16. GROUND NO. 2 RAISED BY THE ASSESSEE IN THIS APP EAL RELATING TO DISALLOWANCE OF RS.12 08 130/- MADE BY THE AO AND CONFIRMED BY T HE LEARNED CIT(APPEALS) U/S 14A HAS NOT BEEN PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE SAME IS ACCORDINGLY DISMISSE D AS NOT PRESSED. 17. IN THE RESULT THE ASSESSEES APPEAL BEING ITA NO. 2926/MUM/2010 IS PARTLY ALLOWED WHEREAS THE ASSESSEES APPEAL BEING ITA NO. 2927/MUM/2010 IS DISMISSED. ORDER PRONOUNCED ON THIS 18 TH DAY OF NOV. 2011. SD/- SD/- (B.R. MITTAL) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI DATED: 18 TH NOV. 2011. WAKODE 10 ITA NO.2926/MUM/2010& ITA NO. 2927/MUM/2010. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR I-BENCH. ( TRUE COPY) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI BEN CHES MUMBAI