M/S. ATLANTA GLOBAL REAL EST. INDIA (P) LTD.,BARODA vs. THE DY.CIT, CIRCLE-1(1), BARODA

Briefly stated, the assessing officer in the course of the scrutiny assessment observed that the assessee has wrongly claimed deduction of Rs.2,02,017/- on account of preliminary expenses written off and another amount of Rs.35,278/- towards pre-incorporation expenses. The AO drew inference against the Assessee, on the ground that the auditor's report in form no 3CD does not permit amortization of such expenses. The aggregate amount of Rs.2,37,295/- was thus disallowed and added to the total income of the assessee.

Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) found merit in the claim of expenses to the extent of Rs.35,278/- towards pre-incorporation expenses and thus allowed the aforesaid amount. However, with regard to the pre-operative expenses of Rs.2,02,017/-, the CIT(A) did not find any good reason to reverse the action of the AO and to allow the claim of amortization of expenditure in terms of section 35D of the Act.

The Ld. AR for the assessee Mr. Sunil Talati submitted at the outset that the disallowance in question of Rs.2,02,017/- mainly comprises of amount deposited with the registrar of companies towards incorporation and other incidental expenses such as printing of Memorandum of Association and Articles of Association and stamping charges etc. He thus submitted that merely on account of delinquency on the part of the tax auditor in not commenting on its allowability, the expenditure which is otherwise permissible in law, cannot be denied to the assessee.

The Ld. DR relied upon the order of the authorities below.

We have carefully considered the rival submission and perused the order of the authorities below. It is apparent that the expenses incurred towards filing fees, stamp duty, printing charges of Memorandum of Association etc., are clearly amortizable expenditure within the sphere of Section 35D of the Act. The revenue has not disputed any other aspect of Section 35D for alleged ineligibility. We thus find merit in the plea of the assessee for allowability of amortization of expenditure as claimed. Accordingly, the assessing officer is directed to delete the disallowance on this score.