ACIT, CENTRAL CIRCLE-2(2), HYDERABAD vs. RITHWIK PROJECTS PRIVATE LIMITED, HYDERABAD

ITA 518/HYD/2022Status: DisposedITAT Hyderabad31 October 2025AY 2019-2055 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

On the issue of ROC fee for increased authorized share capital, the Tribunal held that the expenditure is capital in nature. While the assessee argued it was revenue expenditure under Section 37(1) and potentially amortizable under Section 35D, the Tribunal found that the conditions for Section 35D were not met, and the expenditure was related to the expansion of the capital base, thus retaining its character as capital expenditure. The Tribunal dismissed the assessee's appeal on this ground. Regarding the Rs. 1,00,00,000/- addition, the Tribunal upheld the CIT(A)'s deletion. The CIT(A) had found that the payments to Shri Suresh Chukkapalli, as reflected in ledger accounts, were for salaries, wages, and labour charges at project sites (Tupakulagudem and Veligonda), constituting legitimate business expenditure. The Tribunal agreed that the AO's addition based on an email was unsustainable given the evidence presented.

What were the facts?

The assessee, M/s. Rithwik Projects Private Limited, is engaged in construction and infrastructure development. The appeals concern assessment years 2016-2017, 2017-2018, 2019-2020, and 2020-2021. The assessee filed appeals against orders of the CIT(A) upholding disallowances made by the Assessing Officer (AO). The Revenue also filed appeals against orders of the CIT(A) deleting additions made by the AO. The primary dispute in the assessee's appeal (AY 2020-21) concerns the disallowance of Rs. 9,38,000/- paid as ROC fee for increasing authorized share capital. In the Revenue's appeals (AYs 2016-17, 2017-18, 2019-20), the issue is the deletion of an addition of Rs. 1,00,00,000/- made by the AO for unexplained expenditure, which the CIT(A) allowed as business expenditure.

What were the issues?

1. Whether the fee paid to the Registrar of Companies (ROC) for an increase in authorized share capital is a revenue expenditure allowable under Section 37(1) of the Income Tax Act, 1961, or a capital expenditure. The assessee argued it facilitates business operations and is directly proportional to business needs, relying on various ITAT decisions. The Revenue contended it is capital expenditure, citing the Supreme Court in M/s. Punjab State Industrial Development Corpn. Ltd. vs. CIT. 2. Whether the addition of Rs. 1,00,00,000/- made by the AO on account of unexplained expenditure, allegedly paid to Shri Suresh Chukkapalli, was rightly deleted by the CIT(A) as business expenditure. The Revenue argued the assessee failed to provide supporting evidence for the payment and its purpose. The assessee countered that ledger accounts and explanations regarding salaries, wages, and labour charges at project sites supported the expenditure.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 35D,Section 143(3),Section 132,Section 142(1),Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD

Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD

PER MANJUNATHA G. A.M. :

The assessee has f

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 37(1)

All 6,995 judgments and leading authorities on Section 37(1) →

Recent GST High Court judgments

Search GST case law →