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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI A. MOHAN ALANKAMONY & SHRI S.S. GODARA
आदेश /O R D E R
PER S.S. GODARA, JUDICIAL MEMBER:
This Revenue’s appeal for assessment year 2007-08 arises from order of the Commissioner of Income Tax (Appeals)- IV, Chennai dated 29.09.2014 passed in deleting disallowance of expenses on issue of shares amounting
- - 2 I.T.A. No. 2969/Mds/2014 to `49,31,112/-, in proceedings under Section 143(3) of the Income-tax Act, 1961 (in short 'the Act').
Facts of the case are in narrow compass. The assessee, an ‘individual’, is a director of M/s Raj TV Network Ltd. and also a partner in M/s Raj Video Vision. He had filed his return on 31.10.2007 admitting an income of ` 3,33,42,819/-. The same was ‘summarily’ processed. The A.O. took up scrutiny post issuance of Section 148 notice. He inter alia found the assessee to have declared capital gains from sale of shares and properties. This litigation pertains to former capital asset only. The assessee had deducted a sum of ` 49,31,112/- as expenses u/s 48 incurred on issue of shares jointly born with the aforesaid company and promoter shareholders in connection with a public issue of 35,68,250 shares having face value ` 10/- at a price of ` 257/-. The public issue consisted of fresh issue of 22,70,700 equity shares by the company and offloading of 12,97,550 equity shares held by the promoters/shareholders. The assessee had claimed the impugned expenditure incurred in connection with transfer of shares of shares, deductible under Section 48 of the Act. He would produce relevant prospectus, details of - - 3 I.T.A. No. 2969/Mds/2014 apportionment made on the basis of the number of shares offered for sale by the directors, agreement executed with the company for proportionate sharing of expenses, relevant MOU, etc. on record. The Assessing Officer’s order dated 19th March, 2013 held that the entire expenditure in connection with sale of shares was only the company’s liability. The assessee’s action of sharing the expenses in question was held to be gratuitous only not covered by Section 48 of the Act. This resulted in disallowance / addition of expenses of ` 49,31,112/-.
The assessee preferred an appeal. He strongly relied on the order of the ‘tribunal’ in cases pertaining to other Directors on the very issue. The CIT(Appeals) has accepted his contentions as under:-
“4.1. I have gone through the assessment order, written submissions made during the course of appellate proceedings as well as materials available on record. 4.2. During appellate proceedings the AR filed various documents, including two appellate orders – (1) of the ITAT “B” Bench (in 494 and 495/Mds/2012 dated 10.5.2012) in the cases of Mrs. Usharani Raghunathan, Shri Raghunathan and Smt. Amudha Rajenderan respectively and (2) of the ITAT “A” Bench (in ITA No.484, 485 and 486/Mds/2012 dated 171.7.2012) in the cases of Shri M. Rajarathinam, Mrs. Vijayalakshmi Ravindran and Shri M. Ravindran. On going through the above orders of the Tribunal, it is seen that these appeals were filed by the other
- - 4 I.T.A. No. 2969/Mds/2014 six directors of M/s Raj Television Network Limited. As pointed out earlier the assessee is also one of the directors of this company. As in the case of the appellant, disallowance of share issue expenses was made in the cases of other directors also. Against this disallowance they preferred appeals before the First Appellate Authority but their appeals were dismissed by the CIT(Appeals). Against the order of the CIT(Appeals) the directors went on appeal before the ITAT. The ITAT in the orders cited supra allowed the appeals filed by all the directors by observing as under: “There is no case for the revenue that any of the assessee claimed more than their share of expenses based on the ratio of shares sold. We are, therefore, of the opinion that the deduction claimed by the assessees for expenses incurred was unjustly disallowed. This disallowance is deleted.” 4.3. As the facts of the appellant’s case and the cases relating to the other directors are similar, respectfully following the decision rendered by the Hon'ble ITAT in the cases of other director, the ground raised by the appellant is allowed.”
This leaves the Revenue aggrieved.
We have heard both the counsel and gone through the relevant case file. Facts of the case already stand narrated in the preceding paragraphs. The present dispute is regarding the impugned expenditure of ` 49,31,112/- incurred on issue of shares jointly with company as stated hereinabove. The Revenue treats the same as liability of the company only. The assessee, in the course of hearing, files orders of the ‘tribunal’ deciding the very issue in the case of other directors. The - - 5 I.T.A. No. 2969/Mds/2014 Revenue does not draw any exception thereto. Therefore, we uphold the CIT(Appeals)’s order deleting the impugned disallowance. The Revenue’s ground is rejected.
This Revenue’s appeal is dismissed.
Order pronounced on Thursday, the 5th of March, 2015 at Chennai.