TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 257
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....ory services so as to facilitate the restructure of bank debts and, therefore, for the purposes of the business. 2. The learned CIT(A) has erred in law and on facts in confirming the disallowance of Rs. 10,00,000/- incurred by the appellant in connection with issuance of shares and, as such, claimed as share issue expenses. 3. Without prejudice to the above, the Id. CIT(A) ought to have directed the Assessing Officer to allow the aforesaid expenditure of Rs. 10,00,000/ - u/s. 35D of the Act. 4. The learned CIT(A) has erred in law and on facts in sustaining the addition of Rs. 15,35,03,849/- u/s. 28(iv) of the Act, representing the waiver of the outstanding principal amount of loan. The Id. CIT (A) ought to have considered that the loan was obtained and utilized for acquisition of capital assets and, therefore, not liable to be taxed either u/s. 28(iv) or u/ s. 41(1) of the Act. 5. The learned CIT(A) has erred in law and on facts in confirm the addition of Rs. 3,25,00,000/- out of the amount of Interest waived. 6. The learned CIT(A) has erred in law and on facts in upholding the action of the Assessing Officer in bringing to tax Rs. 34,61,28,850/- as book profit u/s. ....
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....aforestated Grounds of appeal in respect of the reliefs not granted by the CIT(A) whereas Revenue in its appeal has assailed some of the reliefs allowed by the CIT(A). 5. In this background, the rival counsels have been heard and the relevant material perused. We may first take up the Grounds of appeal raised by the assessee in seriatim. By way of Ground of appeal no. 1, assessee-company has assailed the action of the CIT(A) in sustaining a disallowance of Rs. 50,50,800/- representing expenditure incurred by the assessee for obtaining advisory services in connection with the restructuring of bank debts. Such expenditure was claimed as a revenue expenditure which has been disallowed by the Assessing Officer treating the same as capital expenditure. 6. In this context, relevant facts are that assessee paid a sum of Rs. 50,50,800/- to M/s. Quartet Financial Services Pvt. Ltd. in respect of advisory services rendered by them with respect to restructuring of bank debt, identification of investor, raising equity capital and structuring of such transactions. Justifying the payment as revenue expenditure, the stand of the assessee before us as well as before the lower authorities is on t....
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....TR 323 (Guj), a decision which was relied upon by the ld. Representative for the assessee in the course of the hearing. However, the ld. Representative for the assessee, quite fairly conceded that insofar as the proportion of fee relatable to the restructuring and raising of equity share capital was concerned, such expense would fall for disallowance as per the ratio of Brooke Bond (India) Ltd. (supra). In this context, having regard to the entirety of facts and circumstances of the case, in our view, it would be in fitness of things that 10% of the expenditure, i.e. Rs. 5,05,080/- be disallowed and balance of the expense be allowed as a revenue expenditure. In our considered opinion, the aforesaid conclusion is quite justified inasmuch as the entirety of the expenditure cannot be considered as a capital expenditure by applying the judgement of the Hon'ble Supreme Court in the case of Brook Bond India Ltd. (supra) because factually speaking the fee is paid primarily for restructuring of bank debts and not entirely for raising of the equity. Therefore, we setaside the order of CIT(A) and direct the Assessing Officer to restrict the disallowance to Rs. 5,05,080/- and delete the balan....
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....uch amount was offered for taxation by way of credit in the Profit and Loss account. The other sum of Rs. 15.35 crores representing waiver of the outstanding principal amount of loan is concerned, assessee asserted that such an amount was a capital receipt not chargeable to tax. The dispute pertains to the aforesaid stand of the assessee inasmuch as according to the Assessing Officer the entire amount of waiver of the outstanding principal loan amount of Rs. 15.35 crores represents a cessation of an existing liability and accordingly such amount was treated as a benefit chargeable to tax in terms of Sec. 28(iv) of the Act. The aforesaid stand of the Assessing Officer has been further affirmed by the CIT(A) on the ground that the waiver of principal amount of loan amounting to Rs. 15.35 crores was revenue in nature and thus assessable in terms of Sec. 28(iv) of the Act. In this background, the rival counsels have made their submissions before us. 11. Before us, the Ld. Representative for the assessee has vehemently pointed out that both the authorities below have erred in denying the claim of the assessee by relying on the judgment of the Hon'ble Bombay High Court in the case of So....
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....ion letter of the bank reflects the purpose of the term loan as "working capital/For acquisition", but ultimately it is the utilization of the loan proceeds which show that the same has been utilized for acquisition of a capital asset, and it has not been used in trading operation. Ld. Representative for the assessee also relied upon the judgment of the Madras High Court in the case of Iskraemeco Regent Ltd. vs. 331 ITR 317(Mad) as also a subsequent judgment of the Hon'ble Delhi High Court in the case of Logitronics P.Ltd. vs.CIT, 333 ITR 386 (Del) in support of his submissions that the waiver of loan in the present case is not taxable under section. 28(iv) of the Act. 14. We have carefully considered the rival submissions. The crux of the controversy before us arises from a One Time Settlement(OTS) entered by the assessee with its bank, whereby upon payment of certain amount, assessee has been allowed waiver of a portion of the principal amount of loan outstanding and interest thereof. The issue regarding the taxability of waiver of interest is not in dispute before us and the only issue before us relates to the taxability of a sum of Rs. 15,35,03,849/-, which represented the pri....
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....dras High Court in the case of Iskraemeco Regent Ltd. (supra) and also the judgment of Hon'ble Delhi High Court in the case of Logitronics P.Ltd. (supra), which have been relied upon by the assessee before us. 15. In the above background, we may now come back to the facts of the present case. In the instant case, it is quite evident as per the bank sanction letter dated 29/11/2000, copy of which is placed at page-26 of the Paper Book, that the Term loans of Rs. 39.00 crores (i.e. 15.00 crores + Rs. 24.00 crores) were sanctioned for the purpose of 'working capital/For acquisition'. The assessee has been consistently asserting right from the level of the Assessing Officer that upon disbursement of loan, the loan proceeds have been utilized for acquiring shares in M/s. Applisoft Inc. and in this context our attention has also been invited to the bank statement for the relevant period placed in the Paper Book at page-2 and also the foreign remittance certificate placed at pages 3 & 4 of the Paper Book. It is quite evident that a sum of Rs. 34.95 crores has been transferred after receipt from the bank for acquiring the shares in M/s.Applisoft Inc. Such fact-situation is not disputed by....
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....ent case, the waiver of loan can be said to be relatable to acquisition of capital asset to the extent of the proportion in which the loan proceeds were utilized for acquisition of capital asset. At the time of hearing, when the aforesaid was put across to the assessee a working thereof was furnished whereby it was submitted that an amount of Rs. 1.57 crores out of the total waiver of Rs. 15.35 crores can only be considered to fall within the scope of section 28(iv) of the Act for the reason that the same related to loan funds used for the purposes of trading/business. Quite clearly, the balance of the waiver is relatable to the proportion of loan funds utilized for acquisition of the shares of M/s. Applisoft Inc. and on this aspect the ratio of the judgement of the Hon'ble Bombay High Court in the case of Mahindra and Mahindra Ltd.(supra) clearly supports the plea of the assessee. In this background of the matter, we, therefore, conclude that so far as the amount used for the purchase of capital asset is concerned, the waiver thereof is a capital receipt not chargeable to tax under section 28(iv) of the Act, which follows that the Assessing Officer is required to restrict the disa....
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....g the shares of Applisoft Inc., which was for the purpose of business and generating higher revenues. In this context, attention was invited to the order of the Tribunal in the assessee's own case for assessment year 2004-05 vide ITA No.4855/Mum/2009 dated 21/8/2013, wherein assessee had explained that the investment in the shares of Applisoft Inc. was for the purpose of business and out of commercial expediency, and this plea was accepted by the Tribunal, though in a different context relating to allowability of interest expenditure under section 36(1)(iii) of the Act. For the aforesaid reasons, it has been pointed out that the impugned income on account of waiver has to be considered as income from business carried out in SEZ Unit, which is liable for exclusion as per provisions of sub-section (6) of section 115JB of the Act. 18.4 On the other hand, the Ld. Departmental Representative for the Revenue has reiterated the reason adopted by the lower authorities in support of the case of the Revenue, which we have already noted in earlier para and the same is not being repeated for the sake of brevity. 18.5 The dispute essentially revolves around the provisions of subsection( 6) of....
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....not entitled to set-off of carried forward business loss against income from other sources. Before the CIT(Appeals), the assessee fairly admitted that the claim of set-off of carried forward business loss against income from other sources was not correct but it was contended that the claim for set off of unabsorbed depreciation against income from other sources was quite justified. Before the CIT(Appeals), the assessee placed reliance on the judgment of the Hon'ble Supreme Court in the case of Virmani Industries Pvt. Ltd., 216 ITR 607(SC). The CIT(Appeals) disagreed with the assessee and accordingly assessee is in further appeal before us. 19.1 Before us, the Ld. Representative for the assessee pointed out that having regard to the express provisions of section 32(2) of the Act, the depreciation allowance of earlier years is deemed to be the allowance of the succeeding year and hence the unabsorbed depreciation is liable to be set-off against the income from other sources in such succeeding year. It has also been contended that the judgment of the Hon'ble Supreme Court in the case of Virmani Industries Pvt. Ltd. (supra) supports the plea that unabsorbed depreciation can be carried....