ESCORTS HEART AND SUPER SPECIALTY HOSPITAL LTD.,NEW DELHI vs. ASSISTANT DIRECTOR OF INCOME TAX, BENGALURU

Against the said order, assessee filed an appeal before Ld. CIT(A) who vide impugned order dated 17.12.2024, dismissed the appeal of the assessee.

Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. “That Ld. CIT(A) erred both on facts and in law in upholding the disallowance made by the Ld. Assessing Officer for an amount of Rs.38,02,910/- on account of fees for stamp duty paid for increase in authorized share capital, despite the fact that the same has been booked in retained earnings.

That learned CIT(A) has erred both on facts and in law in disallowing Rs.38,02,910 without appreciating the fact that the amount has not been debited to Profit and Loss Account and hence, has not been claimed as deduction in the ITR filed.

That learned CIT(A) failed to appreciate that the Tax Auditor has wrongly reported this amount in the Tax Audit Report as amount debited to Profit and Loss Account being Capital in Nature grossly ignoring that the same has been booked in retained earnings in the balance sheet and that tax auditor has stated that "paid towards increase in authorized share capital and directly debited in the retained earnings.

The Appellant craves leave to add, alter, amend or vary any of the above grounds either before or at the time of hearing as may be advised.”

Before us, Ld.AR for the assessee submits that increase in authorized share capital of INR 38,03,980/- was directly added to Miscellaneous Expenditure appearing in the assets side of Balance Sheet under the head “retained earnings” the same is appearing as negative figure and no expenditure on this count was claimed in the P&L Account therefore, the same was wrongly disallowed by the CPC. Ld.AR submits that Auditor in Point No.21A at Serial No.1 in Form 3CD appended with Tax Audit Report under Form 3CB has clearly observed as under:- “paid towards increase in authorized share capital and directly debited in the retained earnings”

Ld.AR thus submits that when this amount has not been claimed in P&L Account nor has been claimed as expenses in the return of income filed under any head of P&L Account, no disallowance could be made and the action of ld. CIT(A) in confirming the same is incorrect and thus the same deserves to be deleted.

On the other hand, Ld. Sr. DR vehemently supported the orders of the lower authorities and submits that CPC has made the adjustment solely on the basis of the tax audit report issued by the tax auditor where this amount was shown under the head amounts debited to P&L Account being nature of capital, personal, advertisement expenses etc. He, therefore, prayed for the confirmations of the same.

Heard the contentions of both the parties and perused the material available on record. From the perusal of the Note No. 15 to the Balance Sheet it is seen that under the title “other equity”, the assessee has shown this amount under the head “retained earnings- as share issue expenses”. The relevant extracts of the Balance Sheet are available at page 4 of the Paper Book filed by the assessee. It is further seen that in the Tax Audit Report, it is clearly observed by Auditor that the amount was directly debited in the retained earnings therefore, it is not the case where assessee has claimed the expenses on account of the fee paid to ROC for increase in share capital as revenue expenditure in P&L Account and accordingly, we find no reason for making disallowance on this amount therefore, the same is hereby, deleted. Accordingly, all the grounds of appeal raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.