M/S RMP INFOTEC PRIVATE LIMITED,CHENNAI vs. ACIT, CORPORATE CIRCLE-5(2), CHENNAI

PER MANOMOHAN DAS, J.M: This appeal by the assessee is directed against the order of the learned Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 22-05-2023 pertaining to Assessment Year [AY] 2008-09.

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products like solar heater, suiting lengths, dealing in insurance policies

etc. On 27-02-2008, a survey u/s. 133A of the Act was conducted at

the business premises of the assessee. During the course of survey

proceedings, books and documents were impounded by the survey

team. Thereafter, statutory notice u/s. 142(1) of the Act was issued

and served upon the assessee on 16-03-2009. As there was no

response from the assessee, another notice u/s 142(1) of the Act was

issued on 16-03-2009 asking the assessee to file return of Income

within 30 days. The assessee in responds sought further time till 01-

09-2009 to file return of income but failed to file return of income.

Thereafter, notice u/s.148 of the Act was issued along with penalty

notice u/s 271(1)(b) of the Act, which were served on the assessee on

02-12-2009. The assessee in responds filed its return of income on 07-

01-2010 electronically. The Ld. Assessing Officer completed the

assessment u/s. 143(3) of the Act on 30-12-2010 by making

additions/disallowances as under:

(i) 40(a)(ia) of Rs. 3,59,47,376/-, (ii) Administrative expenses of Rs. 59,65,309/- and (iii) 14A r.w.r. 8D of Rs. 2,56,721/-. 3. The aforesaid assessment was subsequently reopened by

issuing notice u/s 148 of the Act dated 20-03-2013 and assessed the

income u/s 147 of the Act by making addition of Rs. 5,00,000/- towards

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service tax instead of Rs. 50,00,000/-. Being aggrieved, the assessee

preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order

dated 29-08-2016 granted relief to the assessee in respect of addition

made u/s 40(a)(ia) of the Act of Rs. 3,59,47,376 and rejected the other

grounds of the assessee.

2016 before the Income-Tax Appellate Tribunal, Chennai. The ITAT,

Chennai vide order dated 15-03-2017 remitted the matter to the Ld.

AO for a de-novo consideration. The ld. AO in compliance to that order

of the Tribunal completed the assessment vide order dated 31-12-

2018. The ld. A.O disallowed the following amounts and added to the

total income of the assessee.

(i) Land registration charges Rs. 26,14,248/- (ii) Service Tax Rs. 50,00,000/- (iii) Disallowance u/s 14A Rs. 2,56,721/-

Aggrieved, the assessee filed appeal before the ld. CIT(A). The

Ld. CIT(A) vide order dated 22-05-2023 partly allowed the appeal of

the assessee.

the Tribunal. Heard the rival submissions of the parties and perused

the materials on record. The Ld. AR submitted that the registration

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charges incurred by the assessee in executing the agreement ought to

be allowed as it was a revenue expenditure. The Ld. AR further

submitted that the service tax paid by the assessee also should be

allowed.

were made by him before the Ld. CIT(A). Regarding the issue on

disallowance made under section 14A of the Act, the Ld. AR submitted

for remand of the matter.

an ex-parte order. The assessee failed to appear before the Ld. CIT(A)

despite getting of sufficient opportunity to appear and make necessary

submissions in support of his case. The Ld. CIT(A) could have

dismissed the case of the assessee straightway as discussed by him in the order due to non-participation by the assessee in the 1st

appellate proceedings. However, the Ld. CIT(A) has disposed of the

appeal of the assessee on merit.

registration charges of Rs. 26,14,248/- made by the Ld. AO. The Ld.

AO observed that the registration fees incurred by the assessee while

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executing agreements for business premises are capital expenditure

not revenue expenditure. However, it is our considered opinion that the

registration charges incurred by the assessee while executing the

agreements for taking business premises on rent are revenue

expenditure. Because, lease is not a permanent transfer of immovable

property. It is for a specific period only and terminable as per terms

and conditions of the agreement even before the expiry of the period

of the lease by both the parties. Secondly, the assessee has incurred

that registration expenses in connection of his business. The assessee

needed premises in order to carrying on the business in various places

and accordingly, the assessee taken property on rent. The period of

the agreement perhaps is more than one year and attracted the

compulsory registration of the agreement. The assessee cannot enjoy

that property forever under a rent agreement/lease. The assessee may

have to vacate that property before efflux of time depending on the

business conditions of that particular place. Therefore, we are of the

view that the lower authorities erred in treating the registration fees

incurred by the assessee as capital expenditure. Accordingly, we

decide this issue in favour of the assessee.

CIT(A) has directed the Ld. AO to verify the claim and allow if found

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proper. Therefore, the Ld. AO shall comply the direction given by the

Ld. CIT(A).

during the assessment proceeding, the Ld. CIT(A) confirmed this

addition by observing that no submission was made by the assessee

to substantiate his claim. We observe that the assessee failed to participate in the 1st appellate proceedings before the Ld. CIT(A) and

therefore, the Ld. CIT(A) disposed of the appeal ex-parte. Secondly,

the Ld. AR sought remand of the matter and the Ld. DR also has no

objection for remanding of the issue. Accordingly, we set aside the

order of the Ld. CIT(A) dated 22.05.2023 to the extent of the issue of

disallowance u/s 14A of the Act and remand this issue to the Ld.

CIT(A) for fresh consideration. It is needless to add here that the Ld.

CIT(A) shall provide a reasonable opportunity to the assessee to

substantiate his claim on the issue and thereafter dispose of the

matter. We, at the same time direct the assessee to substantiate his

claim before the Ld. CIT(A) accordingly.

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Order pronounced on 20th October, 2023.

Sd/- Sd/- (मंजुनाथ. जी) (मनोमोहन दास) (Manjunatha. G) (Manomohan Das) �ाियक सद�/Judicial Member लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य चे�ई/Chennai, �दनांक/Dated: 20th October, 2023. EDN/-

आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ*/Appellant 2. +,थ*/Respondent 3. आयकर आयु-/CIT 4. िवभागीय +ितिनिध/DR 5. गाड( फाईल/GF