AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 914
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.... (Appeals) erred in allowing the appeal on expenditure on FCCB and debenture issue under section 35D on the basis that Department accepted in the earlier assessment year 2006-07, whereas foreign currency convertible bonds is investment through SEBI in foreign currency which constitutes capital and hence capital expenditure." 3. We find that the Assessing Officer had disallowed the FCCB and debenture issue expenses in the assessment year 2006-07 and the Commissioner of Income-tax (Appeals) allowed the same. We find that the Department did not file further appeal against the order of the learned Commissioner of Income-tax (Appeals) in the assessment year 2006-07. Hence the Income- tax Appellate Tribunal has held in various decisions that the Department cannot contest/agitate the same issues for subsequent years, if they accepted the order of the Commissioner of Income-tax (Appeals) in the earlier year (i.e., 2006-07), we are of the opinion that the Commissioner of Income-tax (Appeals) has rightly held that the FCCB and debenture issues under section 35D are to be allowed. The relevant portion is the Commissioner of Income-tax (Appeals)'s order in the assessment year 2006-07 is....
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.... That is to say that the net receipt for FCCB issue is foreign currency convertible bond is net of commission/brokerage paid. This expenditure is already claimed by the assessee, hence 35D is not applicable in this case. Hence, the expenditure attributable to FCCB is already excluded in the receipts. No expenditure/allowance can be given in this transaction. For the reasons cited above, 35D cannot be allowed and hence the claim of the assessee is being disallowed." 4. The learned Commissioner of Income-tax (Appeals) held as follows : "6.1 During appeal proceedings, the appellant stated that during the year the company incurred an expenditure of Rs. 2.59 crores on debenture issue and Rs. 7.91 crores on foreign currency convertible bonds. This total expenditure amounting to Rs. 10.50 crores was adjusted against the share premium account. Being deferred revenue expenditure, the claim was made under section 35D of the Act and one fifth of the expenditure was claimed. The following written submissions were given by the appellant: 'The Assessing Officer in page 3 of the order has stated that "2.85 per cent. of the aggregate principal amount of FCCB bonds and s....
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.... and the addition is ordered to be deleted." 5. Hence, we dismiss ground Nos. 2 and 3 for the assessment years 2007-08 and 2008-09. Ground No. 4 "4. The Commissioner of Income-tax (Appeals) ought to have considered that the expenditure on issue of qualified institutional buyers are not public issue." 6. With respect to ground No. 4 for the assessment year 2008-09, we find that the Assessing Officer has not disallowed for the assessment years 2006-07 and 2007-08. However, the Assessing Officer has disallowed the expenditure on the issue of qualified institutional buyers for the assessment year 2008-09 which has been allowed by the Commissioner of Income-tax (Appeals) holding as under : "5. I have gone through the factual and legal contentions of the appellant in support of its argument that the deduction was claimed under section 35D read with section 37 i.e., both under sections 35D and 37. I agree with the argument of the appellant that the language used in section 35D is so plain and unambiguous that the only condition laid down in that section is that the issue should be offered for public subscription and the mode of placement is immaterial. Thus, the....
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....rities and in fact, this was upheld even in the case of the appellant by my predecessor, while deciding the appeal for assessment year 2006-07. In view of the above facts, Ihold that the expenditure of Rs. 2,07,00,112 claimed for assessment year 2008-09 is allowable under sections 35D and 37. As the claim of this expenditure under section 35D read with section 37 is in order, the disallowance on this account is deleted." 7. We find that during the year 2007-08, the company incurred debenture expenses of Rs. 2.07 crores and QIB issue expenditure of Rs. 8.28 crores, both totalling to Rs. 10.35 crores. The expenditure referred to above of Rs. 10.35 crores was adjusted against the share premium account as per the provision of the Companies Act. However, the expenditure being deferred revenue expenditure falls within the ambit of section 35D read with section 37 of the Income-tax Act which is eligible to be charted to profit and loss account. Accordingly as per the provisions of section 35D of the Income- tax Act, one-fifth of the QIB issue expenditure i.e., Rs. 207 lakhs was written off. Qualified Institutional Buyers (QIBs) are a class of investors as a part of the large investor c....
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....re not made during the relevant financial year, these payments were made for purchase of content and brand rights of Asian Age Holdings Ltd., Newspaper Company in Delhi, which was subsequently acquired by Deccan Chronicle Holdings Ltd. While scrutiny proceedings it was found that the assessee has not taken this as an intangible capital asset. They have taken under the head as "miscellaneous expenditure" to be written off under the head current liabilities and provisions. As per profit and loss account, under the head sales and administrative expenses Rs. 45.20 lakhs under the composite head of miscellaneous expenditure they have been claimed as revenue expenditure. As these expenditures have not been claimed under section 35A, nor capitalised under the head assets, it cannot be taken as revenue expenditure for the relevant financial year. Hence, an amount of Rs. 45.20 lakhs is disallowed, not being a revenue expenditure." 8.1. The Commissioner of Income-tax (Appeals) held as follows : "During appeal proceedings, the appellant contended that it had paid Rs. 9.08 crores for content rights to M/s. Asian Age Holdings. This amount was taken to the balance sheet and the....
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.... • JCIT V. Modi Olivetti Ltd [(2005)4 SOT 859 (Delhi)] • ACIT Vs. Medicamen Biotech Ltd [(2005) 1 SOT 347 (Delhi)] • Hero Honda Motors Ltd v. Joint Commissioner of Inco9me Tax [(2005) • Charak Pharmaceuticals v. JCIT [(2005) 4SOT 393 (Mumbai)] Alternatively, the acquisition costs could have been capitalised under the head "fixed assets" as "intangible assets" and amortised over a period of time at a rate of 25 per cent. If the intangible asset was amortised under section 32, the charge to profit and loss account would be Rs. 227 lakhs instead of Rs. 45.20 lakhs.' 5.2 I have carefully considered the facts and evidence. The appel lant has not shown this asset in the balance sheet. Therefore, it cannot claim depreciation on the same. The appellant has insisted that the expenditure is classified as deferred revenue expenditure, in view of the fact that it cannot be classified as an intangible asset under section 35A and the benefits of this expense are available over a period of many years. 5.2.1 In order to understand whether the accounting treatment given by the appellant is correct or not, one has to unders....
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.... i.e., capital and revenue. The former is not debited to the profit and loss account and is inexplicably linked to an asset, for which depreciation is allowed every year. On the other hand, revenue expenditure is allowed in one financial year. 5.2.4 The Supreme Court in the case of Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 (SC) has itself observed that the idea of 'once for all' payment and 'enduring benefit' are not to be treated as something akin to statutory conditions; nor are the notions of 'capital' or 'revenue' a judicial fetish. What is capital expenditure and what is revenue are not eternal verities but must needs be flexible so as to respond to the changing economic realities of business. The expression 'asset or advantage of an enduring nature' was evolved to emphasise the element of a sufficient degree of durability appropriate to the context. Thus while, for the purpose of the issue under consideration, the test of the enduring benefit fails at the initial stage itself, and even if the said test were to be explicitly applied it cannot be said that the said expenditure is of a capital nature. Furt....
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....the benefits of the expense will accrue to the appellant over many financial years. But, it cannot be quantified accurately as to how much would be the benefit in a particular financial year. Unlike in bonds, where quantifications are simple and accurate, in this case, it is ultimately the judgment of the business head based on realities of the industry and economy which will determine the amount by which or the percentage of benefit available in a particular year. In the present case, the management has decided that the benefits of the expense will accrue to the company over a period of 12 years. The Assessing Officer does not have any contrary information to indicate a shorter or longer period. 5.3.1 In view of the above facts and circumstances, I hold that the expense in question is to be treated a deferred revenue expenditure and allowed as claimed by the appellant. This issue is decided in favour of the appellant." 8.2. With respect to Asian age brand rights and editorial contends rights, we find that the Commissioner of Income-tax (Appeals) has allowed the Asian age brand rights and editorial contents rights in the assessment year 2006-07 and the department did no....