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Income Tax Appellate Tribunal, MUMBAI ‘J’ BENCH, MUMBAI
order
: February 29th, 2016 O R D E R
Per Pramod Kumar AM:
This appeal is filed by the Assessing Officer and is directed against the order dated 10th February, 2002 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter), for the Assessment Year 1999-2000. This appeal was disposed of by the Tribunal vide order dated 8th February, 2012, but as a result of Hon’ble Bombay High Court’s directions dated 13th November, 2014, this appeal is now fixed before us for fresh adjudication on the following issue :- “On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing the assessee’s claim for deduction of Rs.53,74,474/- and directing the Assessing Officer to rework out the deduction u/s. 35D relating to the Assessment Year: 1999-2000 Page 2 of 4 expenditure incurred on Global Depository Receipts, relying on his order for the A.Y. 1998-99 in the assessee’s own case, which has not been accepted by the department and contested in further appeal to the ITAT.”
Learned Representatives fairly agree that whatever we decide in & 3541/Mum/2002 for the assessment year 1998-99, which we have heard along with this appeal, will apply, mutatis mutandis, to this assessment year as well. It is an agreed position that all the relevant material facts are the same in this assessment year as well.
Vide our order of even date, and in assessee’s own case for the assessment year 1998-99, we have observed as follows:- “12. We now take up ground no.6 of the Assessing Officer i.e. grievance against disallowance of “Rs.53,74,474/-, being 1/10th of Rs.5,37,44,740/- incurred by the assessee on Global Depository Receipts, without appreciating that the GDR is nothing but increase in the capital and expenses relating to the same is capital in nature” 13. So far as this grievance of the Assessing Officer is concerned, only a few undisputed material facts need to be taken note of. During the course of assessment proceedings, the Assessing Officer noted that while the assessee has debited GDR (Global Depository Receipts) share issue expenses amounting to Rs.5,37,44,741/- to share premium account, he has claimed deduction of 1/10th of the GDR share expenses, i.e. Rs.53,74,474/-. While the Assessing Officer accepted that the said treatment is in accordance with the ICAI guidelines, he was of the view that “there is no reason for the assessee to deviate from the treatment in books of accounts”. The Assessing Officer further noted that these expenses are capital in nature, as held by the Hon’ble Supreme Court in the case of Punjab State Industrial Development Corporation Limited vs. CIT (225 ITR 792) and Brooke Bond India Limited vs. CIT (225 ITR 798). The claim of deduction was, accordingly, disallowed. In appeal, however, learned CIT(A) allowed the claim of the assessee by observing as follows :- “Ground no.16 On the facts & circumstances of the case, the Ld. JC has erred in not allowing a deduction of Rs.53,74,474/- being amortisation u/s 35D at 1/10 of Rs.5,37,44,740/- expenses incurred on Global Depository Receipts (GDR) and debited to capital reserve. He ought not to have done so. 18. At the time of hearing of this appeal, the Ld. A.Rs. of the appellant have submitted that the 1/10th expenditure on this account has already been allowed by the A.O. in the A.Y. 97-98 as because, this expenditure was Assessment Year: 1999-2000 Page 3 of 4 incurred in F.Y. 96-97 relevant to A.Y. 97-98. They have further submitted that the company has issued shares in the international market which have been purchased by the persons of various countries abroad. They have, therefore, submitted that this claim is covered under the provisions of section 35D of the I.T. Act and on that basis, 1/10th portion has been claimed as expenditure for each assessment year. 18.1 Considering the facts and arguments of the case, I am also of the view that this is the expenditure covered by the provisions of section 35D of the Act, and, therefore, as per the provisions of that section, the claim has been made by the appellant. Hence, the ground of appeal
is allowed and the disallowance made by the A.O. is hereby deleted.”
14. The Assessing Officer is not satisfied and is in appeal before us.
15. We have noted that the grievance of the assessee is confined to the issue that these expenses are capital in nature, and he has not even disputed applicability of section 35D. However, what the Assessing Officer has overlooked is that there is no bar on capital expenses being amortised under section 35D. Section 35D deals with amortisation of expenses over a period of ten years and such an amortisation is not dependent upon the expenses being revenue in nature. Section 35D(2)(iv) categorically deals with the expenses in connection with the issue, or public subscription of shares and debentures of the Company. In view of these discussions, in our considered view, grievance of the Assessing Officer is ill conceived. As regards learned Departmental Representative’s reliance on Hon’ble Delhi High Court’s judgement in the case of CIT vs. Hindustan Insecticides Limited (250 ITR 338), suffice to say that the short issue in that case was whether fee for enhancing share capital can indeed be amortised under section 35D(2)(iii) and that is not even the claim of the assessee before us.
16. Ground no.10 of the Assessing Officer is thus dismissed.”