TaxTMI 
TaxTMI 
2025 (11) TMI 917
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....owances. The AO subsequently initiated penalty proceedings u/s. 271(1)(c) with respect to the claim of expense u/s. 35D on the ground that the assessee has furnished inaccurate particulars of income. Against the penalty order the assessee preferred further appeal before the ld. CIT(A). The ld. CIT(A) deleted the penalty by holding that- 9. I have gone through the submission of the appellant. 9.1 The appellant claimed expenses incurred at the time of the issue of QIP as deduction u/s 35D. The same was disallowed by the A.O. holding that the same was not public issue and not entitled to deduction u/s 35D of the I. T. Act 1961. Consequently, the A.O. held that the impugned claim amounted to furnishing inaccurate particulars of income. Accordingly, the A.O. levied penalty u/s 271(1)(c) of the I. T. Act 1961. The present appeal is against this penalty. 9.2 It is seen that in A.Y. 2010-11, the Hon'ble ITAT allowed the claim u/s 35D vide order number ITA No. 3497/MUM/2018 dated 14.07.2020. The relevant portion of the order is as under: - 2. The grounds of appeal filed by the assessee read as under: 1st ground On the facts and circu....
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....regarding the income of the assessee. If the contention of the revenue is accepted then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intention of the Legislature. 9.5 Respectfully following the ratio of the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petro products Pvt. Ltd. (2010) (322 ITR 158) and the fact that similar disallowance u/s 35D had been deleted by the Hon'ble ITAT in A.Y. 2010-11, similar disallowance in A.Y. 2011-12 does not amount to furnishing inaccurate particulars of income and the penalty u/s 271(1)(c) so levied stands deleted. 3. The revenue is in appeal before the Tribunal against the order of the ld. CIT(A). 4. The ld. AR submitted that AY 2010-11 is the first year in which the deduction u/s. 35D was claimed by the assessee towards the expenses incurred for issue of shares to Qualified Institutional Buyers (QIB). The ld AR further submitted that the revenue disallowed the said claim for AY 2010-11 that the issue when travelled to the Tribunal, the coordinate bench held that the a....
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....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 argument that the deduction was claimed under section 1512 read with section 37 Le section 35D is so plain and unambiguous that the only condition laid down in that section under sections 35D and 37. I agree with me argument of the appellant that the language that the issue should be offered for public subscription and the mode of placement immaterial. Thus, the only issue for consideration is whether OIB can be called 'public or not relevant provisions of the Law, Securities Contract Regulation) Rules, SEBI Guidelines/Instruction made by the considered opinion that QIBs constitute 'public' and accordingly, the subscription made by the amount to public subscription. In this view of the matter and also considering the facts with regard to the utility of funds raised through QIB issue, I hold that the ....
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....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 charged 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 ie Rs. 207 lakhs was written off. Qualified Institutional Buyers (QIBs) are a class of investors as a part of the large investor community and the companies sought for QIB issues because the funds can be raised within a short span. This is an extremely important investment for larger investors and since the buyers are only a class of investors, the issue of shares to QIB have been considered as public issue. The expenses in connection with public issue of shares or debentures of the company are allowable. Reliance is placed on CIT v. Shree Synthetics Ltd. [1986] 162 ITR 819 (MP). Hence on the merits of the issue, the QIB expenditure can be treated....
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....e is the issue of IIP in accordance with Chapter VIIIA of the SEBI-ICDR. Chapter VIIIA has been included to provide for fresh issue of shares to comply with minimum shareholding requirement in Rule 19(2) and 19A of SCRR. Reg. 91B defines IPP as a further public offer made only to QIBs. These regulations provide that when a company has a public shareholding lower than the requirements specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. It thus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions for QIP, provides that the same must be in compliance with the requirements of public. shareholding. That "a section of public qualifies as public" has been clarified in Nitta Gelatine India Lid. (supra) and Andhra Chamber of Commerce (supra). 7. Facts being identical, we follow the order of the Tribunal in the case of Deccan Chronicle Holdings Ltd. (supra) and in view of the discussion hereinabove at para 6.2, hold that the appellant is eligible for deduction u/s 35D of the Act. Thus we set aside the order of the Ld. CTT(A) and allow the 1st, 2nd and 3rd ground filed by the asse....