2012 (12) TMI 984 - HC - Income Tax

Court allows set off of interest income from share application money against share issue expenses. Disallowance under section 35D remanded for fresh consideration.

Commissioner of Income-tax-IV Versus Shree Rama Multi Tech Ltd

The Court allowed the set off of interest income from share application money against share issue expenses. The disallowance under section 35D was ... Set off of interest income from share application money against public issue expenses - Tribunal allowed claim - Held that:- Tribunal had in the impugned judgment allowed the benefit of set off of interest income from share application money as followed the decision of this Court in Panama Petrochem Ltd. case [2011 (7) TMI 1110 - GUJARAT HIGH COURT] wherein held the assessee was statutorily required to keep share application money in the separate account till the allotment of shares was completed. Interest earned on such separately kept amount was adjusted towards expenditure for raising share capital. We are therefore, of the opinion that interest earned was inextricably linked with requirement of company to raise share capital and was thus adjustable towards the expenditures involved for the share issue - Decided against revenue Disallowance u/s.35D - Tribunal remanded the issue for fresh consideration - Held that:- Revenue rightly pointed out that the Tribunal remanded the issue for fresh consideration erroneously relying on a remand order passed in Mandvi Mercantile Co Op Bank Ltd. case [2005 (12) TMI 554 - GUJARAT HIGH COURT] for the assessment year 2001-02. She pointed out that such issue had reached the Tribunal after a round of remand and full consideration by the Assessing Officer and CIT(Appeals). The Tribunal was, therefore, required to examine the issue on merits and give its decision. Such issue, therefore, shall have to be placed back before the Tribunal for consideration on merits. Disallowance of deduction u/s 80IA on account of Exchange rate fluctuation, Excise credit, Kasar/vatav and Excess provision written back of bonus - Held that:- Tribunal has granted certain benefits as claimed by the assessee for deduction under section 80IA of the Act without full discussion. Tribunal has not given any specific verdict on some of the issues raised at the hands of the assessee in rectification application. We are sure, the Tribunal will consider the same and take steps on such application irrespective of the order in this appeal. Disallowance out of shares and debentures issue expenses - Held that:- Tribunal has remanded the issue once gain relying on a remand in the case of this very assessee for another year. Here also, the issue had been discussed and decided by the Assessing Officer and the CIT(Appeals) on merits. The Tribunal, therefore, would have to judge issue on merits rather than remanding the issue all over again. Issues:1. Set off of interest income from share application money against public issue expenses2. Disallowance u/s.35D of the Act3. Deduction u/s 80IA of the Act on income on account of Exchange rate fluctuation, Excise credit, Kasar/vatav, and Excess provision written back of bonus4. Disallowance out of shares and debentures issue expensesAnalysis:1. The Tribunal allowed the set off of interest income from share application money, following a previous decision of the Court. The Court stated that the interest earned was linked to the company's need to raise share capital and could be adjusted towards share issue expenses. As the issue was covered by the previous decision, no legal question arose.2. The Tribunal remanded the disallowance u/s.35D issue for fresh consideration, which the Revenue argued was erroneous as the issue had already undergone thorough consideration by the Assessing Officer and CIT(Appeals). The Court agreed with the Revenue, directing the Tribunal to reexamine the issue on merits.3. Regarding the deduction u/s 80IA, the Court found that the Tribunal had granted benefits to the assessee without full discussion. These issues were to be reconsidered by the Tribunal for a detailed decision. Specific issues raised by the assessee in a rectification application were to be addressed by the Tribunal separately.4. The Tribunal remanded the issue of disallowance out of shares and debentures issue expenses, which had already been decided by the Assessing Officer and CIT(Appeals). The Court instructed the Tribunal to evaluate this issue on its merits rather than remanding it again.In conclusion, the Court disposed of the Tax Appeal, directing the Tribunal to reconsider the issues related to questions B, C, and D on their merits and issue a fresh decision in accordance with the law.