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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI A. MOHAN ALANKAMONY & SHRI DUVVURU R.L.REDDY
आयकर अपील"य अ"धकरण, ’सी’ "यायपीठ, चे"नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI "ी ए. मोहन अलंकामणी, लेखा सद"य एवं "ी धु"वु" आर.एल. रे"डी, "या"यक सद"य के सम" BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU R.L.REDDY, JUDICIAL MEMBER Miscellaneous Petition Nos.50 & 51, 52 & 53, 54/Chny/2018 (In & 1544/Chny/2012, ITA Nos.1349 & 1350/Chny/2014, Years: 2007-08 to 2011-12 Vs. The ACIT/DCIT, M/s.Jennys Hotel Pvt. Ltd., No.3/14, Mcdonalds Road, Company Circle-I Contonment, Trichy-620 001. Trichy. [PAN: AABCJ 1281 G] (अपीलाथ'/Appellant) (()यथ'/Respondent) ITA Nos.1543 & 1544/Chny/2012, ITA Nos.1349 & 1350/Chny/2014, ITA No.1657/Chny/2015 #नधा$रण वष$ /Assessment Years: 2007-08 to 2011-12 Vs. M/s.Jennys Hotel Pvt. Ltd., The ACIT/DCIT, Company Circle-I No.3/14, Mcdonalds Road, Trichy. Contonment, Trichy-620 001. [PAN: AABCJ 1281 G] (अपीलाथ'/Appellant) (()यथ'/Respondent) Assessee by : Mr.B.Ramakrishnan, CA Department by : Mr.R.Clement Ramesh, Addl.CIT : 02.11.2018 सुनवाई क* तार"ख/Date of Hearing : 08.11.2018 घोषणा क* तार"ख /Date of Pronouncement आदेश / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER:
These Miscellaneous Petitions Nos.50 to 54 of 2018 are filed by the assessee seeking rectification of the erroneous computation with respect to amortization of share premium that has crept into the order of the MP Nos.50 to 54/Chny/2018 & & 1544/Chny/2012 ITA Nos.1349 & 1350/Chny/2014 & :- 2 -:
Tribunal due to some errors in the orders of the Revenue. Further the assessee had made the following submissions:
“It would be pertinent to note that a common issue for all the impugned years is respect of which the revenue had filed its appeal and the petitioner had filed its cross objection is in relation to the deduction with respect to amortization of premium on debentures. In this connection, the details of the issue of 67,500 debentures to M/s.Exim Rajathi Pvt. Ltd. are as follows:
Particulars Amount (Rs.) Issue Price / face value per debenture 1,000 Redemption price per debenture 4,000 Premium per share 3,000 Therefore, the premium on redemption of 67,500 debentures is as follows:
Particulars Amount (Rs.) Redemption value (67,500 x Rs.4,000/-) 27,00,00,000 Less: Issue value (67,500 x Rs.1 ,000/-) 6,75,00,000 Premium on redemption 20,25,00,000 The premium of Rs.20,25,00,000/- has been amortized by the petitioner over a period of debentures i.e. 10 years. Therefore, the petitioner amortized Rs.2,02,50,000/- (20,25,00,000/10 = Rs.2,02,50,000/-) every year for a period of 10 years and claimed the same as deduction.
The Hon’ble Bench in deciding this issue in its order dated 18.01.2018 has held as follows (para 12.3 at page 17):
In the case of the assessee, the assessee has received Rs. 6,25,00,000/- from M/s.Exim Rajathi Pvt. Ltd., to acquire 67,500 debentures having face value of Rs.3000/- per debenture to be redeemed after the expiry of 10 years. Therefore the assessee has to re-pay Rs.20,25,00,000/- (67500 x 3000) on redemption of debentures at the end of the 10th year. Therefore the interest / financial charge / premium on amortization etc., as the case may be, works out to Rs. 14 crores (20,25,00,000 — 6,25,00,000). This cost has to be spread over for the period of debentures as held by the Hon’ble Apex Court in the case Madras Industrial Corporation Limited cited supra. Hence the allowable deduction for the relevant assessment years including the assessment year 2007-08 would be Rs.1,40,00,000/- (Rs. 1,40,00,000/10). Hence, we hereby direct the Ld.AO to grant the deduction of Rs.1,40,00,000/- in the relevant assessment year towards the interest / financial charge / premium on amortization etc., as the case may be, on debentures redeemable after the period of years.
In this connection, the petitioner most humbly submits the following:
It has been stated that the petitioner received Rs.6,25,00,000/- from M/s.Exim Rajathi Pvt. Ltd. to acquire 67,500 debentures. However, the petitioner had received Rs.6,75,00,000/- as consideration for the 67,500 debentures issued to M/s.Exim Rajathi Pvt. Ltd. (Please refer pages 2 & 3; paras I & 2 of the order of the Commissioner of Income Tax (Appeals) dated 04.05.2012 for the Assessment Year 2007-08).
The face value of the debentures has been stated as Rs.3,000/- per debenture. However, petitioner had issued the debentures at a face value of Rs.1,000/- and redemption price is Rs.4,000/- per debenture. Thereby, the premium on debenture is Rs.3,000/- per debenture. (Please refer pages 2 & 3; paras I & 2 of the order of the Commissioner of Income Tax (Appeals) dated 04.05.2012 for Assessment Year 2007-0 8)
Therefore, the premium to be amortized would be Rs.2,02,50,000/- as claimed by the petitioner and not Rs.1,40,00,000/- as stated by the Hon’ble Tribunal if:
• the redemption price of Rs.4,000/- per debenture is considered instead of Rs.3,000/- per debenture, thereby making the redemption value to be Rs.27,00,00,000/- as against Rs.2,02,50,000/-.
• the issue value is considered to be Rs.6,75,00,000/- (67,500 x Rs.1,000/-) instead of Rs.6,25,00,000/- MP Nos.50 to 54/Chny/2018 & & 1544/Chny/2012 ITA Nos.1349 & 1350/Chny/2014 & :- 3 -:
While the Hon’ble Tribunal has upheld the method adopted by the petitioner, the difference in the petitioner’s claim and the Hon’ble Tribunal’s direction has arisen purely because of the variation in the figures adopted by the Hon’ble Bench as mentioned above. Since the above mentioned mistakes are apparent from record, it is most humbly prayed that the Hon’ble Tribunal may be pleased to rectify the same arising from the combined order of the Hon’ble Tribunal for the Assessment Years 2007-08 to 2011-12 dated 18.01.2018 and thereby allow the petitioner’s claim of amortization of premium on debentures. The petitioner also prays for a condonation of any delay that may have occurred in the filing of this petition. The petitioner undertakes to produce all the necessary material before the Hon’ble Tribunal for it to decide the matter on merits, if this petition is allowed.
2. Accordingly the Ld.AR pleaded that the computation mistake in the Order of Tribunal may be rectified. The Ld.DR could not controvert the submissions of the Ld.AR.
After hearing both sides, we are of the considered view that the factual aspects with respect to the computation of the share premium pointed out by the assessee are required to be verified by the Ld.AO.
Therefore, in the interest of the justice we hereby recall the order of the Tribunal (for the AYs 2007-08 to 2011-12 in & 1544/Chny/2012, ITA No.1349 & 1350/Chny/2014 and ITA No.1657/Chny/2015) with respect to the computation aspect of the share premium that is to be amortized. Further, we hereby dispose of those appeals of the Revenue with directions to the Ld.AO to verify and rectify the computation of share premium that is required to be amortized in accordance with the method decided by the Tribunal in its earlier order dated 18.01.2018. It is ordered accordingly.
MP Nos.50 to 54/Chny/2018 & & 1544/Chny/2012 ITA Nos.1349 & 1350/Chny/2014 & :- 4 -: 4. In the result, all the Miscellaneous Petitions filed by the assessee are allowed and all the appeals of the Revenue mentioned herein above are allowed for statistical purposes as indicated herein above.
Order pronounced on the 8th day of November, 2018 in Chennai. (धु"वु" आर.एल. रे डी) (ए. मोहन अलंकामणी) (DUVVURU R.L.REDDY) (A. MOHAN ALANKAMONY) "या#यक सद1य/JUDICIAL MEMBER लेखा सद1य/ACCOUNTANT MEMBER चे"नई/Chennai, 2दनांक/Dated: November 08, 2018. TLN