C. L. Educate Limited Vs ACIT (ITAT Delhi)
Summary: The Delhi Bench of the Income Tax Appellate Tribunal partly allowed the appeals of C L Educate Limited for Assessment Years 2013-14 and 2017-18. In AY 2013-14, the Tribunal deleted the addition of Rs. 3,59,22,304 under section 56(2)(viib), holding that the provision could not apply where shares were allotted as consideration other than cash pursuant to acquisition of a business undertaking. The Tribunal also allowed deduction of Rs. 11,61,86,712 written off as irrecoverable from Career Launcher Education Foundation under section 36(1)(vii), deleted the Rs. 1,41,71,192 disallowance under section 14A in the absence of exempt income, deleted the Rs. 1,88,42,329 addition relating to liabilities no longer required, and allowed Rs. 19,04,795 of loan processing charges as revenue expenditure. The royalty disallowance of Rs. 14,33,356 under section 40(a)(ia) was also deleted because the payee had included the receipt in its taxable income. However, the 100% disallowance of advertisement/business promotion expenses was sustained and the disallowance of prior-period expenses of Rs. 32,87,466 was upheld.
For AY 2017-18, the Tribunal deleted the Rs. 34,10,731 ad hoc bad-debt disallowance, holding that the Assessing Officer had no basis to disallow 1/11th of the claim merely on the basis of sample verification. The disallowance of commission to non-executive directors was restricted to 30% under section 40(a)(ia). The issue concerning Rs. 1,18,75,095 provision for expenses was restored to the Assessing Officer for de novo verification. The addition of Rs. 3,61,24,452 under section 41(1) relating to outstanding sundry creditors was deleted as the liabilities continued to be reflected in the balance sheet and were subsequently settled.
