TaxTMI 
TaxTMI 
TaxTMI 
2020 (8) TMI 86
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....espect of expenses incurred in connection with the QIP on the alleged ground that the issue of shares to QIP does not tantamount to public subscription and such capital expenses are not eligible for deduction u/s. 35D of the Act. 3rd ground On the facts and circumstances of the case and in law, the ld.CIT(A) erred in disallowing the expenses in connection with QIP on the ground that the expense may not be allowable in view of section 40(a)(i)/(ia) of the Act. 3. Briefly stated, the facts of the case are that the appellant, a public limited company raised Rs. 1033.87 crore by issue of share capital (38,362,709 shares at Rs. 269.50 per share) through a Qualified Institution Placement ("QIP") in which it placed its share capital with Qualified Institutional Buyers ("QIB"). In connection with the QIP, the appellant incurred expenses aggregating to Rs. 14,14,01,453/- on account of payments to Lead Managers of the Issue and payments to Legal consultants and Auditors for the finalization of placement document for the QIP. The appellant has claimed 1/5th of these expenses amounting to Rs. 2,82,80,290/- u/s 35D of the Act for the captioned year. The question involved in this appeal is w....
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....lic qualifies as public". 5. On the other hand, the Ld. Departmental Representative (DR) refers to the following: "3.6 (5) clause 84 (1) of the SEBI-ICDR 2009 prescribes that the QIP shall be made on the basis of a placement document which will contain all material information including those specified in Schedule XVIII and column (1) of the schedule XVIII named disclosures in placement document reads as follows:- "Disclaimer to the effect that the memorandum relates to an issue made to QIBs under chapter VIII of the SEBI-ICDR 2009 and that "no offer is being made to the public or any other class of investors." It is argued by him that the allotment of equity shares made by the assessee under the QIP scheme under Chapter VIII of SEBI-ICDR 2009 to QIBs was not made to the public but to a select band of investors called QIBs as defined in SEBI-ICDR 2009 whose details are not made available to the tax authorities. Reiterating the findings of the ld. CIT(A), the Ld. DR explains that SEBI-ICDR 2009 govern the allotment of equity shares to QIBs under QIP scheme that "the offer made under the QIP scheme cannot be equated with offer of equity shares of public" and hence, these guide....
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....o considering the facts with regard to the utility of funds raised through QIB issue, I hold that the issue expenditure, to the extent attributable to the funds utilised for extension of the appellant's undertakings, is eligible for deduction under section 35D. So far as the remaining funds, utilised for modernisation and working capital requirements of the appellant's business are concerned, I have considered both factual and legal submissions of the applicant, in support of its contention that the expenditure was in the nature of revenue expenditure since the primary object and intent of raising these funds was to meet the operational requirements, in order to run the business more efficiently and profitably. The Hon'ble High Court of Delhi, after analysing plethora of case law on this subject, had laid down certain broad guidelines, in the case of CIT v. J.K. Synthetics Ltd. [2009] 309 ITR 371 (Delhi), to decide whether a particular expenditure is capital or revenue in nature. Tested against these broad legal principles, I am of the opinion that there is considerable force in the arguments of the appellant-company that the expenditure claimed by it clearly falls in t....
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....[1986] 162 ITR 819 (MP). Hence on the merits of the issue, the QIB expenditure can be treated as revenue expenditure and eligible for deduction under section 35D of the Income-tax Act is confirmed. Hence on merits of the issue as well as the fact that the same issue has been allowed in the earlier years and the Department cannot come upon in appeals in the subsequent years would be the reason to dismiss the Departmental appeal. We confirm the order of the Commissioner of Income-tax (Appeals) with respect to qualified institutional buyers expenses and dismiss the Departmental appeal on this issue. In the result, the Departmental appeal for the assessment years 2007-08 and 2008-09 are dismissed." 6.1 A perusal of the above order of the Tribunal clearly indicates that the present issue is directly covered in favour of the appellant. 6.2 Further, we find that the appellant being a listed company is bound by "Listing Agreement", which provides for the disclosure requirements for the share holding pattern of a listed company. As can be seen there from, there are only two categories of shareholders- "promoter/promoter group" and "public". For the definition of these terms in clause 35, ....
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....A) and allow the 1st , 2nd and 3rd ground filed by the assessee. 8. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 20-2-2020, this order thereon is being pronounced today, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income-tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid-19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income-tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid-19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, ther....