2013 (4) TMI 828

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.... (By assessee): 2. First, we will take up assessee's appeal in ITA No. 1505/Hyd/2011 for assessment year 2006-07. The assessee raised the following grounds of appeal: (a) The order of the learned CIT(A) in erroneous to the extent it is prejudicial to the interest of the appellant herein. (b) The learned CIT(A) erred in holding that there is any nexus between the borrowed funds on which the interest was paid and the mutual funds purchased by the appellant. (c) The learned CIT(A) erred in holding that any part of interest paid on the borrowings is disallowable by applying the provisions of sec. 14A of the IT Act. The learned CIT(A) ought to have seen that there is no nexus between the borrowed funds and the investment made and that therefore, the provisions of sec. 14A have no application in respect of interest debited to the Profit and Loss A/c. 3. Brief facts of the issue are that the Assessing Officer noticed that the assessee received Rs. 2.19 crores as interest in the financial year on the investment made of Rs. 200 crores in mutual funds of ICICI Prudential Mutual Fund. The assessee stated before the Assessing Officer that it has made invest....

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....nvestment from ICICI Bank 500,000,000       17.11.2005 BR H/05-06/001016 Being deposit amount received from ICICI Prudential Liquid Plan now Cr. to ICICI   200,000,000 52 1,709,589 11.01.2006 HR H/05-06/001254 Being Amount received from PRU ICICI from 1159395/41 now Cr by Bank on dt. 9.1.2006 as per statement   150,000,000 107 2,638,356 23.01.2006 BR H/05-06/001307 Being amount received from Prudential ICICI from: 1159395/41 now Cr by Bank on dt. 23.1.2006   150,000,000 119 2,934,247 7,282,192 13.10.2005 BP H/05-06/004541 Paid towards investment in mutual fund 500,000,000       07.02.2006 BR H/05-06/001376 Being amount received from Pru- ICICI Liquid Plan vide chq No. 1159395/41 Cr by Bank on 6.2.2006   350,000,000 117 6,731,507 09.03.2006 BR H/05-06/001525 Being amount received from Prudential ICICI Liquid Plan vide chq No. 1132250/93 Cr by Bank on 9.3.2006   150,000,000 147 3,624,658 10,356,164 13.10.2005 BP H/05-06/004552 Paid towards investment in mutual f....

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....TA No. 1844/Hyd/2011 (A.Y. 2008-09) (by assessee): 9. The ground raised by the assessee is as follows: "The learned CIT(A) erred in confirming the addition made by the Assessing Officer of 2,07,00,112/- being the expenses for issue of shares to Qualified Institutional Buyers claimed in accordance with the provisions of Sec. 35D of the IT Act. The learned CIT(A) ought to have accepted the plea of the appellant that the said expenses represent the amounts allowable in accordance with the provisions of Sec. 35D and are eligible for deduction under the said section." 10. Brief facts of the issue are that the assessee company debited Rs. 90,80,000/- during the year under as expenditure towards acquisition of Asian Age brand right expenses and Editorial content under the head Miscellaneous expenditure. The assessee company explained the claim as under "Asian Age Holdings Ltd. are the printers and publishers of the English. Daily Newspaper "Asian Age" which is published from Delhi, Mumbai, Kolkata, Bangalore and London from the year 1994 onwards. The company acquired the Brand "Asian Age" and Property rights on the past editorial content for Rs. 908 lakhs in the la....

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.... In other words, in such eventuality what prevails is the special provision over the general provision. Section 35D of the Income Tax Act, 1961, being special and applicable only to certain types of expenditure incurred by the assessee in its business activity, it will prevail over the section which applies to the general category of expenditure thereby excluding its applicability. 14. We have heard both the parties and perused the material on record. Admittedly, the assessee's claim u/s. 35D was in the A.Y. 2006-07. In the A.Y. 2006-07 the CIT(A) allowed the claim of the assessee by observing as follows: "5.2 I have carefully considered the facts and evidence. The appellant 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 understand what....

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....e. The former is not debited to the P&L A/c 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. vs. CIT (1989) 177 ITR 377 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 need to 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. Further, no capital assets come into being as a....

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....is clear that 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 judgement 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 as deferred revenue expenditure and allowed as claimed by the appellant. This issue is decided in favour of the appellant." 15. Being so, for the assessment year 2006-07 the issue was decided by the CIT(A) in favour of the assessee. Nothing is brought to our notice that the Department has filed any appeal against the above finding of the CIT(A). Being so, for ....