ACIT, New Delhi vs. Drishti Soft Solutions Private Limited - (Income Tax Appellate Tribunal) (10 Feb 2023)

Expenses claimed by the assessee incurred during the regular course of business cannot be treated as capital expenses

MANU/ID/0195/2023

Direct Taxation

Assessee is a company stated to be engaged in the business of software development. Assessee electronically filed its return of income for A.Y. 2016-17 on 17.10.2016 declaring total income at Rs.1,69,85,280. The case of the assessee was selected for scrutiny and, thereafter, assessment was framed under Section 143(3) of the Income Tax Act, 1961 vide order and the total income was determined at Rs.24,26,59,340. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal before the Tribunal.

The issue in the present ground is with respect to deleting the addition made by AO on account of issue of shares at a premium under Section 56(2)(viib) of the IT Act. Another ground is with respect to the deleting the addition of Rs.1,36,000 under Section 37(1) of the IT Act.

Proviso of Section 56(2)(viib) of the Act provides that the provision of Section 56(2)(viib) would not be applicable where the consideration for issuance of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund. As per Explanation (b) to Section 56(2)(viib) "venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meaning assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of Section 10.

CIT(A) after considering the submissions made by assessee and considering the material on record has given a finding that the investor, Forum Synergies India Trust (FSIT) is a Venture Capital Fund (VCF) and assessee is a Venture Capital Undertaking. The aforesaid finding of CIT(A) has not been demonstrated by Revenue to incorrect or not in accordance with the provisions of the Act. Further, assessee has also demonstrated that the business of the assessee does not fall under the negative business list as specified by the Central Government. Revenue has not pointed to any fallacy in the findings of CIT(A) nor has demonstrated that the assessee's case does not fall under proviso to Section 56(2)(viib) of the Act.

The issue in the present ground is with respect to the deleting the addition of Rs.1,36,000 that was made by AO and deleted by CIT(A). It is an undisputed fact that the aggregate amount of Rs.1,36,000 has been paid to Vineet K. Gupta & Co. Chartered Accountant. It is the submission of the assessee that the payment is towards the professional fee, which include monthly retainership fees for the professional services. CIT(A) after considering the submissions made by assessee has given a finding that the expenses claimed by the assessee have been incurred during the regular course of business and cannot be treated as capital expenses. Revenue has not pointed to any fallacy in the findings of CIT(A). There is no reason to interfere with the order of CIT(A). Appeal of the Revenue is dismissed.

Tags : ASSESSMENT DELETION LEGALITY