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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI M. BALAGANESH, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 28.03.2019 passed by the Principal Commissioner of Income Tax-2, Mumbai [hereinafter referred to as the “PCIT”] relevant to the A.Y.2013-14 in which the Principal Commissioner of Income Tax-2 has invoked the provisions u/s 263 of the I.T. Act, 1961.
The brief facts of the case are that the assessee filed its return of income on 29.11.2013 declaring total income to the tune of Rs.1556,56,31,880/- for the A.Y. 2013-14. Thereafter, the assessment was completed u/s 143(3) of the Act on 28.12.2016 assessing the total income to the tune of Rs.1725,96,68,536/-. On verification, it was found that the order dated 28.12.2016 was prejudicial to the interest of the revenue and requires revision. The notice was issued to the assessee on the following grounds: - “On examination of the records it is seen that deduction to the tune of Rs.3,22,50,564/- has been allowed to the assessee u/s 35D of the I.T. Act, 1961. However, it was noticed that the said 2 A.Y. 2013-14 deduction was claimed by the assessee on account of the allotment of shares to Qualified Institutional Buyers (QIB). As per the provisions of section 35D of the Act, the said deduction is allowable only in case of public subscription of shares. Allotment of shares to QIB’s cannot be treated as public subscription of the shares mentioned in section 35D of the Act. Therefore, the assessee was not eligible for deduction u/s 35D amounting to Rs.3,22,50,564/-. The assessment order dated 28.12.2016 is evidently erroneous and is also prejudicial to the interests of the revenue on this point.”
3. After the reply of the notice, the Pr. CIT was of the opinion that the claimed deduction by the assessee u/s 35D of the Act of Rs.3,22,50,564/- was not allowable, hence, the AO was directed to modify the assessment accordingly. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The Ld. Representative of the assessee has argued that the claim raised u/s 35D of the Act in respect of preliminary expenses of Rs.4.55 crore incurred in connection with the issue of share to qualified Institutional Buyer nowhere caused any prejudice to the interest of the revenue specifically in the circumstances that the claim has already been allowed by Hon’ble ITAT in the assessee’s own case in ITA. No.4486 & 4464/M/2017 and ITA. No.3875 & 3876/M/2017 dated 28.02.2019 for the A.Y.2011-12 & 2012- 13, therefore, the order passed u/s 263 of the Act is not justifiable and is not liable to be sustainable in the eyes of law. However, on the other hand, the Ld. Representative of the revenue has refuted the said contention. Copy of order dated 28.02.2019 in the assessee’s own case (supra) is on the file in which the relevant finding has been given in para no. 17 to 20 which are hereby reproduced as under: - “17. The issue raised in ground Nos.4, 5 & 6 is against the order of Ld. CIT(A) holding that new claim of deduction under section 35D can be admitted first time which was not raised before the AO at all.
The facts in brief are that the assessee has raised the issue of non granting of deduction under section 35D in respect of preliminary expenses of Rs.4.55 crore incurred in connection with issue of shares 3 A.Y. 2013-14 under qualified institutional placement. The assessee has incurred expenditure of Rs.11.03 crores in A.Y. 2010-11 and Rs.14.11 crores in A.Y. 2011-12 respectively on shares issued under QIP route. As the issue was raised before the Ld. CIT(A) for the first time, the AO was asked to give his comments by way of remand report which was filed by the AO vide remand report bearing No.ACIT-2(3)(2)/remand report2016-17 dated 27.06.2016 in which the AO stated that assessee has not claimed the said expenses either in the original or in the revised return and submitted that in view of the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. 284 ITR 323 and Gurjargravurs Pvt. Ltd. 111 ITR 1 wherein it has been held that if claim is not made before the AO, the AAC can not entertain such claim in the appeal proceedings. The AO stated that the assessment order was passed after giving reasonable and adequate opportunities to the assessee and therefore requested to uphold the disallowance.
The Ld. CIT(A) admitted the issue as legal issue by following the ratio laid down by the Hon’ble Bombay High Court in the case of “CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd.” (2012) 349 ITR 336 (Bom.) and Grasim Industries Ltd. 2016-TIOL-292-HC-MUM-IT wherein the decision of the Hon’ble Supreme Court in the case of Goetz India Ltd. (supra) had been considered and it was held that appellate authorities have power to entertain the legal issues which are raised for the first time. Following the ratio laid down in the said decisions, the Ld. CIT(A) recorded a finding of fact that share issue expenditure is covered under section 35D of the Act and is a legal issue and thus came to the conclusion that the assessee is eligible for deduction under section 35D equal to 1/5th of the total preliminary expenses. Accordingly the ld CIT(A) decided the issue in favour of the assessee by directing the AO to allow the same.
After hearing both the parties and perusing the material on record, we find that the Revenue has challenged that the Ld. CIT(A) has erred in accepting the issue of grant of deduction in respect of share issue expenses under section 35D which was not raised before the AO. After perusing the appellate order, we find that the appellate authority has passed the order after following the decisions of the Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. and Grasim Industries Ltd. (supra) wherein the decisions of the Hon’ble Supreme Court in the case of Goetz India Ltd. has been considered and it was held that the fresh issue can be admitted before the appellate authority. We, therefore, do not find any infirmity in the order of the Ld. CIT(A) and accordingly the same is upheld. We also note that the similar issue has been decided by the co-ordinate bench of the Tribunal in DCIT vs. Deccan Chronicle Holding Ltd. 60 taxmann.com 240 and Transport Corporation of India vs. ACIT in ITA No.117/Hyd/2016. We, therefore, respectfully following the decisions as stated hereinabove uphold the order of the Ld. CIT(A) and the issue raised by the Revenue in ground Nos.4 to 6 is dismissed.”