AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1209
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....d on the issue of Share Capital by the Appellant cannot be taken as part of the 'Capital Employed' for allowing deduction under Section 35D of the IT Act? 3. Whether on the facts and in the circumstances of the case, the Honourable ITAT was right in law in holding that the cost of acquisition of companies cannot be treated as asset for allowing deduction under Section 35D of the IT Act?" Re. Substantial Question of Law No.1: 3. Learned counsel for the assessee argued that no revision proceedings were initiated relating to the assessment year 2007-08, the first year of the five successive previous years as provided under Section 35D for amortization of certain preliminary expenses. It was submitted that as per Section 35D and the proviso thereof, the assesse shall be entitled for deduction of an amount equal to 1/5th of such expenditure each of the five successive previous years beginning with the previous years in which the business commences or as the case may be, the previous year in which the extension of Industrial undertaking is completed or the new Industrial unit commences production or operation. The assessee's case falling under 35D[1][ii] i.e., after the commencement ....
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....r each of the five successive previous years beginning with the previous years in which the business commences, or as the case may be, the previous year in which the extension of the industrial undertaking is completed. 6. On the contrary, learned counsel for the Revenue, argued that the Commissioner exercised the revisonal powers under Section 263 of the Act to revise the order of the Assessing Officer relating to the Assessment year 2008-09 since Section 154 proceedings were initiated for the first year of the five years block period, i.e., 2007-08, which has culminated in the order of the Tribunal allowing the alternative benefits. Since the assessment order relating to the assessment year 2007-08 was disturbed as per the order passed under Section 154 of the Act, the assessee cannot contend, initiation of revisional proceedings under Section 263 of the Act for the assessment year 2008-09 sans disturbing the assessment order relating to the assessment year 2007-08 is bad in law. Section 35D of the Act deals with the extension of the undertaking, not expansion. Thus, it was argued that there is vast difference between expansion and extension. Expansion would relate to another bu....
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....all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction iss....
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....uccessive previous years" had been substituted. (2) The expenditure referred to in subsection (1) shall be the expenditure specified in any one or more of the following clauses, namely :- (a) expenditure in connection with- (i) xxxxx (ii) xxxxx (iii) xxxxx (iv) xxxxx (b) xxxxx (c) xxxxx (d) xxxxxx (3) Where the aggregate amount of the expenditure referred to in sub-section (2) exceeds an amount calculated at two and one-half per cent- (a) of the cost of the project, or (b) where the assessee is an Indian company, at the option of the company, of the capital employed in the business of the company, the excess shall be ignored for the purpose of computing the deduction allowable under sub-section (1) : Provided that where the aggregate amount of expenditure referred to in subsection (2) is incurred after the 31st day of March, 1998, the provisions of this subsection shall have effect as if for the words "two and one-half per cent", the words "five per cent" had been substituted." 10. In Shasun Chemicals & Drugs Ltd., supra, the Hon'ble Apex Court while considering Section 35D of the Act has held thus: "13. In the Income Tax Return which was f....
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....Gujarat, while considering the correctness of the order of the Commissioner of Income tax under Section 263 of the Act read with Section 35D of the Act relating to the assessment year 2007-08 observed that, the Tribunal, has recorded that the first year of the claim under Section 35D of the Act was for the assessment year 2007-08 and in that year, the claim of the assessee had been accepted under Section 143[1] and no action under Section 147 or 263 of the Act had been taken in relation to the said assessment year. The benefit claimed relating to the assessment year 2007-08 which was allowed was not disturbed. Subsequently in the year 2009-10, the Commissioner of Income Tax has taken the matter in revision under Section 35D, referring to the case of Dy. CIT V/s. Gujarat Narmada Valley Fertilizers Co. Ltd., [(2013) 356 ITR 460], wherein the Hon'ble High Court of Gujarat had recorded that it was an admitted position that the claim under Section 35D of the Act did not arise for consideration for the first time and that since the last several years, the Assessing Officer had allowed such a claim. The Hon'ble Court was of the view that the Tribunal, therefore, correctly held that such c....
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.... Revenue in Berger Paints India Ltd., V/s. Commissioner of Income-tax, Delhi-V, [(2017) 79 taxmann.com 450 (SC)]. Accordingly, this substantial question of law is answered in favour of the Revenue and against the Assessee. Re. Substantial Question of Law No.3: 14. Section 35D[3] provides that where the aggregate amount of the expenditure referred to in subsection [2] exceeds an amount calculated at two and one-half per cent of the cost of the project, the excess shall be ignored for the purpose of computing the deduction allowable under Sub-section[1] which is relevant herein. As per the explanation to Section 35D[3], - "(a) "cost of the project" means- (i) in a case referred to in clause (i) of sub-section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences; (ii) in a case referred to in clause (ii) of sub-section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, mac....
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....h the issue of shares for public subscription : (1) issue of prospectus and invitation to the public to subscribe, (2) making of calls, that is, entertainment of applications by subscribers, (3) acceptance by the company represented by allotment of shares, (4) actual issue of share scrip and entering the names of the shareholders in the register of members ; and (5) expenses incurred after issue, i.e., payment of brokerage and underwriting commission, as also refund of excess amount oversubscribed. The dictionary meaning of the word " being " is "such as, especially, also, etc. " Therefore, it is illustrative and must be read with reference to the context in which the words are used. In our opinion, this phrase has been used which would include the last stage in connection with the issue of shares, namely, even refund of the amount of over subscription in relation to those shares for which applications were invited. Clause (c) of Sub-section (2) of Section 35D starts with the words " where the assessee is a company, also expenditure ", which if read with Sub-clause (iv) " in connection with the issue, for public subscription, of shares in or debentures of the comp....
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....y the Assessing Officer. The aspects and questions examined during the course of assessment proceedings itself may indicate that the Assessing Officer must have applied his mind on the entry, claim or deduction etc. It may be apparent and obvious to hold that the Assessing Officer would not have gone into the said question or applied his mind. However, this would depend upon the facts and circumstances of each case." 17. The assessee claims that it has acquired two companies viz., M/s. Azure Solutions Ltd., and M/s. Syndesis Ltd. Learned counsel referring to Circular No.56 dated 19.03.1971 regarding the taxation laws [Amendment] Act, 1970 - Amortisation of certain preliminary expenses, submitted that the circular would indicate that "cost of project" has been defined to mean that the actual cost of the fixed assets namely, land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings [including expenditure on development of land and buildings], which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences. However, in the Act, phrase used is "being" instead of "namely". Thus, in terms o....
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....at the shareholder is not the owner of the fixed asset. The phrase "being" has to be interpreted as exhaustive i.e., which are in the nature of fixed assets namely, land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings including expenditure on development of land and buildings, which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences as specified in Explanation [a][ii] to Section 35D[3] of the Act. As such, no fixed assets were acquired by the assessee. 20. The phrase "being" in collinsdictionary.com reads thus: "Being is used in non-finite clauses where you are giving the reason for something" In merriam-webster.com, it is defined as under: "Usually used with as, as how, or that; Something that actually exists." 21. In the case of Commissioner of Income-tax V/s. Ashok Leyland Ltd., [and vice versa] [(2012) 349 ITR 663], Hon'ble Madras High Court has considered the meaning of the phrase "being" and declared that the expenditure that qualified for consideration under Section 35D is restricted by reason of use of phrase "being". Thus, expenditure incurred in conne....