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2020 (8) TMI 86 - AT - Income TaxDeduction u/s. 35D - Addition on the assumption that the shares may have been allotted only to selected Qualified Institutional Buyers ("QIBs") - disallowing deduction claimed u/s 35D in respect 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 - whether 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) ? - HELD THAT:- As can be seen from the list of QIBs to whom shares are issued, the shares are not issued to any of the aforesaid category. Thus QIBs, not being promoters, promoter group, subsidiaries and associates of the company would qualify as "public". As specified in clause 40A(ii) of the listing agreement, public shareholding can be increased by any of the modes specified therein to comply with Rule 19(2) and 19A of SCRR. One such note 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 Ltd. [2016 (10) TMI 406 - KERALA HIGH COURT] and Andhra Chamber of Commerce [1964 (10) TMI 19 - SUPREME COURT]. Facts being identical, we follow the order of the Tribunal in the case of Deccan Chronicle Holdings Ltd [2015 (8) TMI 914 - ITAT HYDERABAD and in view of the discussion hereinabove hold that the appellant is eligible for deduction u/s 35D - Decided in favour of assessee.
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