KMTC (INDIA) PRIVATE LIMITED,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI

(A.Y. 2014-15) KMTC (India) Private Limited vs.CIT(A) delay, the assessee has not justified as to why there was a delay in requesting the PF Department for the user name and password. It is also observed that the assessee has made a written submission only on 30.01.2014 requesting for the user name and password from the PF department. As this issue of delayed deposit of PF and ESIC is no longer res integra subsequent to the decision of Hon'ble Supreme Court in the case of Checkmate Services P. Ltd.(supra), we find no merits in the submission of the ld. AR on this ground and we, therefore, dismiss ground no. 1 raised by the assessee.

Ground no. 2 pertains to the disallowance of Rs.3 lacs towards consultancy fee and holding it to be preliminary expenses and allowing @ 1/5th deduction u/s. 35D of the Act. It is observed that the assessee company has been incorporated during the impugned year and had incurred consultancy fees paid to Lenus Construction Ltd. for the purpose of obtaining Department of Industries Certificate (DOI) (MMMR) Maharashtra. The ld. A.O. has disallowed the expenditure pertaining to consultancy fees on the ground that the same is of enduring benefit and had allowed 1/5th deduction u/s. 35D of the Act. The assessee contended that the said expenditure was incurred for obtaining DOI for the purpose of renting India Bulls Premises for running of its office for ITES Services. The assessee further contended that it is of revenue expenditure and not of enduring benefit as alleged by the lower authorities. The contention of the assessee was rejected and the ld. A.O. held the same to be the nature of the preliminary expenses which is to be allowed u/s. 35D of the Act and not as business expenditure.

The ld. CIT(A) upheld the addition made by the ld. A.O. on the ground that the assessee has failed to substantiate that obtaining DOI was prerequisite for hiring the India

We have heard the rival submissions and perused the materials available on record. The ld. AR had contended that the certificate from the DOI is mandatory for taking the office premises from India Bulls on rental basis for services. It is further observed that the assessee has incurred the impugned expenditure for the purpose of consultancy fees to Lenus Construction for obtaining the said certificate. The ld. AR had relied on the catena of decisions wherein a similar nature of expenditure has been treated as revenue expenditure which is eligible for deduction u/s. 37(1) of the Act. The lower authorities have not disputed the fact that the assessee has incurred the said expenses paid to Lenus Constructions ltd. In our considered view, the impugned expenditure will not come under the purview of section 35D of the Act and rather would be a revenue expenditure allowable as deduction u/s. 37(1) of the Act. We, therefore, are inclined to allow ground no. 2 raised by the assessee.

In the result, the appeal filed by the assessee is partly allowed.