PTC ENERGY LIMITED,NEW DELHI vs. DCIT, NEW DELHI

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ITA 6136/DEL/2015Status: DisposedITAT Delhi11 December 2018AY 2012-133 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the fees paid to the Registrar of Companies for increasing the authorized share capital are capital expenditure. The Tribunal found that such expenditure is not covered under any clause of Section 35D(2)(c) of the Act, unless it is in connection with the issue for public subscription. The Tribunal noted that this was not the case before them, as the assessee had not incurred the expenditure in connection with a public issue. The Tribunal relied on the decision of a coordinate bench, which followed the decision of the Hon'ble Rajasthan High Court in 188 ITR 151. Consequently, the Tribunal found no merit in the assessee's appeal and dismissed all grounds. The operative direction was the dismissal of the appeal.

What were the facts?

The assessee, PTC Energy Limited, filed an appeal against the order of the CIT(A)-7, New Delhi, for Assessment Year 2012-13. The dispute concerns the allowability of Rs. 41 lakhs claimed as a deduction under Section 35D of the Income Tax Act, 1961. This amount represents 1/5th of Rs. 2,22,68,000 incurred by the assessee in Financial Year 2008-09 towards fees and stamping charges paid to the Registrar of Companies for increasing the company's authorized share capital. The Assessing Officer (AO) disallowed the claim, treating the expenditure as capital in nature. The CIT(A) confirmed the AO's disallowance. The assessee is aggrieved by this confirmation and has approached the Tribunal.

What were the issues?

1. Whether the expenditure of Rs. 41 lakhs, representing fees paid to the Registrar of Companies for increasing authorized share capital, is allowable as a deduction under Section 35D of the Income Tax Act, 1961, for the Assessment Year 2012-13? Assessee's contentions: The assessee argued that although the expenditure is capital in nature, it is allowable as a deduction under Section 35D of the Act. The assessee relied on the decision of the Jodhpur Bench in Neelu Textiles Ltd. Vs. CIT (128 Taxmann 93). The assessee further contended that the expenditure is covered under Section 35D(2)(c)(i) as legal charges in drafting the memorandum and articles of association. Revenue's contentions: The revenue supported the orders of the lower authorities, arguing that the expenditure is capital in nature and was correctly disallowed. The revenue contended that the decision of the Jodhpur Bench is not applicable to the facts of the present case.

Which sections of the Income-tax Act were involved?

Section 35D,Section 35D(2)(c)(i),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI

Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI

For Appellant: Shri Sanat Kapur, Adv
For Respondent: Shri Surender Pal, Sr. DR
Hearing: 10/12/2018Pronounced: 11/12/2018

O R D E R PER PRASHANT MAHARISHI, A. M.

1.

This appeal is filed by the assessee against the order of the ld CIT(A)-7, New Delhi dated 11.09.2015 for the Assessment Year 2012-13. The solitary issue in this appeal is that whether Rs. 41 lakhs claimed by the assessee of expenditure for increase in authorised share capital of the company to the Registrar of Companies is allowable as deduction u/s 35D of the Act or not.

2.

The ld AO examined the return of income filed by the assessee on 26.09.2012, wherein, income of Rs. 39202630/- was declared and he found that the assessee has incurred Rs. 22268000/- for ROC fees for increase of authorised capital during the Financial Year 2008-09 and for this year has claimed 1/5th of the same i.e. Rs. 41 lakhs as deduction u/s 35D of the Act. The ld AO noted that such expenditure is a capital expenditure, therefore, he disallowed the above claim and passed an assessment order u/s 143(3) of the Act on 02.03.2015 determining the total income of the assessee of Rs. 44472760/-.

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