TaxTMI 
TaxTMI 
2011 (2) TMI 1120
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....ent and the payment was made accordingly. The Assessing Officer treated the payment as capital expenditure and disallowed the claim made by the assessee-company. The assessee-company has also made alternative claim for deduction under section 35D in respect of Rs. 3,93,78,491. This amount represented payments made by the assessee-company towards stamp duty, filing fee and registration fee incurred in respect of raising the capital block of the assessee-company. Another amount of Rs. 1,40,00,000 related to documentation and term sheet fees again in respect of raising capital block of the assessee-company. The above two amounts have been debited by the assessee-company to its share premium account and brought down in the income-tax computation as expenses eligible for amortization under section 35D. The balance amount of Rs. 1,86,500 related to professional fee paid by the assessee. The assessee claimed the benefit of section 35D on the ground that the above expenditure was incurred for raising money to expand the business activities carried on by the assessee. But the assessing authority rejected the claim on the ground that entire expenditure was incurred before the commencement....
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....on certain decisions which are distinguishable on both facts and law ; (c) not appreciating that the impugned expenditure was not wholly incurred in connection with the issue of shares. 2.3. On the facts and in the circumstances of the case and law applicable, payment made to Yes Bank amounting to Rs. 1,56,87,500 should be fully allowed in computing the income for the year under consideration. 3.1. Without prejudice, the lower income-tax authorities have erred in denying deduction under section 35D in respect of the payment made to Yes Bank and other expenditure totally amounting to Rs.3,93,78,491. 3.2. On the facts and in the circumstances of the case and law applicable, strategic and financial advisory fees paid to Yes Bank and other expenditure totally amounting to Rs. 3,93,78,491 qualifies for deduction under section 35D and the same is to be allowed. 4.1. The learned Deputy Commissioner of Income-tax, LTU, Bangalore has erred in levying interest under section 234B and the learned Commissioner of Income-tax (Appeals), LTU, Bangalore has erred in confirming the action of the learned Assessing Officer. On the facts and in the circumstances of the case and law appli....
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.... issue and that decision is not applicable if enhancement of capital is made for gearing up of funds for working capital. (iii) He has also relied on the order of the Income-tax Appellate Tribunal, Bangalore "B" Bench dated May 3, 2005 passed in the case of Tata Elxsi Ltd. in I. T. Appeal Nos. 610 and 1112/Bang/2002 and on Commentary of Companies Act by Shri A. Ramaiya and also the notification of the Department of Economic Affairs, Government of India in the Ministry of Finance dated June 4, 2010 to buttress his argument that in the present case, the shares were issued to the public and the public meant, the persons other than promoters, and the promoters group, subsidiary and associates of the company. He explained that whether the shares were issued to the public was a question raised by the lower authorities and within the meaning of term "public" explained by the above authorities, the shares were offered to the public and on that ground also there was no reason to reject the claim of deduction made by the assessee. 11. Shri G. V. Gopala Rao, the learned Commissioner of Income-tax appearing for the Revenue on the other hand contended that none of the decisions relied on ....
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....tant appearing for the assessee-company. The said decision rendered by the hon'ble Third Member in the case of Lakshmi Auto Components Ltd. (supra) arises out of an intimation made under section 143(1)(a) where prima facie adjustment was made by the assessing authority. The adjustment related to disallowance of expenditure incurred in connection with the enhancement of share capital. Therefore, the question considered in that case was whether the adjustment made by the assessing authority was prima facie or not. In that context, the Tribunal had to examine in which context the expenses were incurred. It is in that scenario of the examining the scope of prima facie adjustment provided in section 143(1)(a), the Third Member has held that it is necessary to examine the object of the increase in share capital before applying the judgment of the hon'ble Supreme Court in the case of Brooke Bond (India) Ltd. (supra). We do not say that the observation of the hon'ble Third Member are obiter dicta ; but they are not in the course of track, in which, the facts of the present case are moving. Therefore, we are not in a position to follow the said observation of the Third Member decision as fa....
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....tion with raising of the capital base of the assessee-company. 19. Section 35D provides that specified expenditure shall be entitled for amortisation only if the expenditure were incurred before the commencement of the business or after the commencement in connection with the extension of the business or in connection with setting up of a new unit. 20. The argument of the assessee-company is that the expenses were incurred in raising the capital money for the expansion of the existing business carried on by the assessee-company and, therefore, it amounted to the extension of the existing business and as such, the assessee is entitled for benefit available under section 35D. 21. We considered this issue very carefully. There is no doubt that expenses were not incurred before the commencement of the business. Therefore, the first condition is not complied with. The second condition is that the expenses incurred after commencement of the business, should be incurred in connection with extension of the undertaking or in connection with setting up of a new unit. There is no case of setting up of a new unit. The question is whether there was an extension of the existing undertak....