TMI Blog2011 (4) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down in section 40A(9). In fact, section 40A reads as "the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession". Therefore, it cannot be said that section 40A(9) has no relevance after the insertion of section 43B w.e.f.1.4.1984. - Decided against the assessee. - 1415 OF 2007 - - - Dated:- 25-4-2011 - ELIPE DHARMA RAO, M. VENUGOPAL, JJ. COMMON JUDGMENT Elipe Dharma Rao, J. ‑ Both these appeals were preferred by the Revenue against the two separate orders passed by the Income-tax Appellate Tribunal Madras 'C' Bench, dated 4.4.2007 in ITA. No. 954/Mds/2005 for the assessment year 1999-2000 and 15.6.2007 in ITA. No. 969/Mds/2006 for the assessment year 2001-2002 respectively. 2. While admitting the T.C.A. No. 1415 of 2007, the following substantial question of law has been formulated for consideration :- "Whether in the facts and circumstances of the case, the Tribunal was right in holding that the expenditure incurred on issue of shares is eligible to be authorised under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue with regard to share issue expenses. Aggrieved by the aforesaid order of the Tribunal, the Revenue has filed T.C.A. No. 1415 of 2007. 4.1. So far as the assessment year 2001-2002 is concerned, which relates to TCA. No. 48 of 2008, the assessee filed its return of income on 31.10.2001 admitting total income of Rs. 1,00,75,050 and after processing the return under section 143(1), the case was taken up for scrutiny and after calling for various details and clarifications, the Assessing Officer completed his assessment under section 143(3) on a total income of Rs. 8,86,99,440. While computing the total income, the Assessing Officer has disallowed the claim made by the Assessee under the heads Share issue expenses, bonus and partly allowed the claim made under section 80HHC. Against the aforesaid order, the Assessee preferred appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) by order dated 22.12.2005, allowed the claim of the assessee made under section 35D towards share issue expenses as similar orders were passed in favour of the assessee and the claim made towards payment of bonus was allowed. However, the deduction claimed under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the company was incorporated on 19.4.1976, whereas the public issue was made in the financial year 31-03-1995 relating to the assessment year 1995-96 and the public issue expenses claimed is not as per section 35D, which deals only with preliminary expenses. For coming to such a conclusion, the assessing authority has placed reliance on the decision of the Supreme Court reported in 225 ITR 798 SC = [1997] 10 SCC 362 (Brooke Bond India Ltd., v. Commissioner of Income-tax, W.B.III, Calcutta). In appeal, the finding of the Assessing Authority was reversed by the Commissioner of Income-tax (Appeals) by holding that the issue has already been decided in favour of the assessee by the Commissioner of Income-tax (Appeals) in ITA. No. 14/99-00 dated 30.9.1999 for the assessment year 1996-97. In further appeal by the Revenue, the Income-tax Appellate Tribunal confirmed the finding of the Appellate authority by observing that the issue had already become final and no appeal has been preferred by the Revenue. The deduction claimed by the Assessee under section 35D for the assessment year 2001-2002, which is the subject matter of TCA. No. 48 of 2008, was allowed by the Appellate Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred by the assessee in issuing shares with a view to increase its capital could not amount to revenue expenditure and would fall under capital expenditure. The Apex Court by referring its earlier decisions has concluded that in any event, the observations of this Court in Punjab State Industrial Development Corpn. Ltd. [(1997) 10 SCC 184] clearly indicate that though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit making, the expenses incurred in that connection still retain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. 10. The assessee sought to distinguish the aforesaid decision by stating that in the said case the assessment year was 1969-70 and at that time section 35D was not in existence as it was introduced by the Taxation Laws (Amendment) Act, 1970 with effect from 1.4.1971 and, therefore, the said decision is not applicable to the facts of the present case. 11. It is true that in the Brooke Bond's case the assessment year was prior to the comin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/10th of the total expenditure as a deduction under section 35(D)(1)(ii) of the Act. That was disallowed by the Income-tax Officer on the ground that it was allowable only in connection with the extension of the industrial undertaking, which was confirmed by the Appellate Assistant Commissioner in appeal. On further appeal, the Appellate Tribunal confirmed the finding of the authorities. This Court on the further appeal confirmed the finding of the Tribunal by holding that there was no material on record to show that the assessee had furnished any particulars with regard to the expenditure incurred so as to enable the assessee to say that the expenditure would fall under sub-section (2) of section 35D. It was further observed that unless the assessee furnishes particulars to show that the expenditure would fall under sub-section (2) of section 35D, it would not be possible for the department to advert to that aspect. 15. By applying the principle laid down in the aforesaid decisions, particularly in Agro Cargo Transport Ltd case, one has to come to a conclusion that there is no particulars with regard to the expenditure incurred by the assessee to claim deduction and further th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect of decision is revenue neutral, there may not be any need for preferring the appeal. All these certainly provide the foundation for making a departure. 13. In answering the reference, we hold that merely because in some cases the Revenue has not preferred appeal that does not operate as a bar for the Revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher court when divergent views are expressed by the Tribunals or the High Courts." 19. The aforesaid decision is the answer to the contention raised on behalf of the assessee and the contention raised by the assessee is therefore liable to be rejected. 20. For the reasons stated above, the substantial question of law raised in T.C.A. No. 1415 of 2008 and the first substantial question of law raised in T.C.A. No. 48 of 2008, whether in the facts and circumstances of the case, the Tribunal was right in holding that the expenditure incurred on issue of shares is eligible to be authorised under section 35D of the Income-tax Act? is answered in affirmative and against the Assessee. 21. Since the 2nd and 3rd substantial ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent provided by or under clause (iv) or clause (v) of sub-section (1) of section 36. Section 36 deals with the other deductions to be dealt with while computing the income referred to in section 28 and clause (iv) of section 36 provides for deduction towards the sum paid by the assessee as an employer by way of contribution towards a recognised provided fund or an approved superannuation fund. Clause (v) provides for deduction towards the sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust. 24. In the present case, the assessee has claimed deduction under clause (v) of section 36 of the Act by stating that as the workers had raised dispute on quantum of bonus and consequent labour unrest, the assessee was forced to make the payment to the trust to comply with the requirements of section 43B. Section 43B relates to certain deductions to be only on actual payment. Section 43B(b) provides that any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer. Aggrieved by that order, the Revenue filed an appeal before the Income-tax Appellate Tribunal. The Tribunal dismissed the appeal filed by the revenue. Aggrieved by the order of the Tribunal, the Revenue preferred appeal before this Court. This Court while admitting the appeal had formulated the following questions of law : "1. Whether the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the transfer of the amount payable as bonus to the workers to a trust before the due date for filing of the return was sufficient compliance with section 43B(c) of the Income-tax Act, 1961 and therefore, the amount could not be disallowed ? 2. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the amount transferred to the trust was allowable as a deduction even though no such deduction was allowable as clearly laid down by section 40A(9)?" 27. The Division Bench of this Court by judgment dated 16.3.2009, dismissed the appeal. Since much reliance has been placed by the assessee on this decision, the entire judgment is quoted hereunder :- "4. From the finding record ..... X X X X Extracts X X X X X X X X Extracts X X X X
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