TMI Blog2012 (7) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that the expenditure that qualified for consideration under Section 35D is restricted by reason of use of the phrase "being".Other than what is contemplated under Sub Clause D, if there are still other expenditure in connection with the commencement of business or in connection with the expansion of the industrial undertaking after the commencement of the business or in connection with the set up of a new industrial unit, the same would also qualify for amortization u/s 35D - TAX CASE (APPEAL) NOS. 1253, 1254 AND 1256 OF 2005 - - - Dated:- 20-6-2012 - CHITRA VENKATARAMAN AND K. RAVICHANDRA BAABU, JJ. JUDGMENT Chitra Venkataraman, J. The Revenue has preferred in T.C.(A) No.1253 and 1254 of 2005, raising the following substantial questions of law, with regard to the assessment year 1995-96: 1. Whether, in the facts and circumstances of the case, the Tribunal was right in equating a proposal to expand the capacity of production with extension of industrial undertaking under Section 35D of the Income Tax Act? 2. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the expenses related to the 'Euro issue' by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no discussions in the Assessing Officer's order as regards the treatment of a particular expenditure, the Tribunal set aside the order of the authorities below and once again remanded the matter back to the file of the Assessing Officer to pass fresh orders in terms of the directions of the Tribunal in its order dated 4.2.2005. 5. Thus, learned Standing Counsel appearing for the Revenue as well as the learned counsel appearing for the assessee pointed out that in I.T.A.No.1192 of 2006, under order dated 21st November 2008, the assessment was once again restored to the Officer for considering the issue of deduction under Section 35D of the Income Tax Act. 6. The present appeals arise out of the order of the Tribunal dated 04.02.2005 in the first round of litigation. It is seen from the narration of facts that the assessee derives income from the manufacture and sale of commercial vehicles, engines and parts thereof. In the return filed, the assessee claimed a sum of Rs. 14,21,52,904/- being the Euro issue expenditure as revenue expenditure. The assessee furnished the particulars in respect of its expenses, which amounted to a sum of Rs. 14,21,52,402/-. It is seen from the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in terms of the directions contained in the Commissioner's order. In other words, other than the listing fees of Rs. 1,000/-, management fee of Rs. 12,29,523/- and the legal fee of Rs. 9,55,000/-, the other expenses qualified for deduction under Section 35D of the Income Tax Act. The Commissioner of Income Tax (Appeals) also agreed with the assessee that it was entitled to deduction on the expansion undertaken by it. Aggrieved by this, the Revenue went on appeal before the Tribunal. 7. As far as the eligibility of the assessee for claiming deduction under Section 35D of the Income Tax Act was concerned, the Tribunal held that the expenditure were incurred for expansion of the industrial undertaking and hence, the same qualified for deduction. As far as the qualifying amount to be considered under Section 35D(2) was concerned, the Tribunal referred to the decision of this Court reported in [2003] 261 ITR 347 ( CIT v. Ennar Steel and Alloy (P) Ltd.) (MAD), which also held that the word "being", as is used in the said Section, is not illustrative, that only those expenses which are specified in the statute could be allowed and nothing further. In this context, the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by this Court to mean as "like" or "including". Learned counsel submits that having regard to the legal issue raised, the question has to be considered by this Court. 12. Heard learned counsel appearing for either side and considered the material placed on record. 13. As far as the question raised by the Revenue as to the eligibility of the assessee company is concerned, there is no denial of the fact that the object of issuing shares was for raising the assessee's expansion activities, particularly in the field of capacity expansion. The company had also proposed to invest for expansion of its plants at Hosur, Bhandara and Ennore, for materials and modernisation of the existing facilities and developments. Thus all the Units of the assessee were to go for expansion programme as well as for modernisation programme, which was in the form of capital expansion. 14. A perusal of Section 35D of the Income Tax Act shows that the amortisation relief is granted in respect of certain preliminary expenses incurred by an assessee company, being an Indian company or a person other than a company resident in India, after 31st March 1970 as specified in sub section (2). The expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mortisation is concerned, Section 35D(2)(c)(iv) reads as under: " Section 35D. AMORTISATION OF CERTAIN PRELIMINARY EXPENSES. (1) .... Where an assessee, being an Indian company or a person (other than a company) who is resident in India, incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2), - (i) Before the commencement of his business, or (2) The expenditure referred to in sub-section (1) shall be the expenditure specified in any one or more of the following clauses, namely : ( a ) ... ( b ) ... ( c ) Where the assessee is a company, also expenditure - ( i ) ... ( ii ) ... ( iii ) ... ( iv ) In connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus;" 19. The said phrase "being" came up for consideration in the decision reported in [2009] 314 ITR 38 ( CIT v. Adar Tea Products Company (MAD)). The said decision related to the claim of 100% depreciation on energy saving devices being fluidised bed boilers, furnaces etc. Referring to the list of items enumera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred in connection with the issue of shares and debentures of the company to public subscription, which qualify for consideration under Section 35D, are underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus and nothing more. There is a residual clause to sub clause D, which shows such other items of expenditure not being expenditure eligible for any allowance or deduction under any other provisions of the Act as may be prescribed. Thus, other than what is contemplated under Sub Clause D, if there are still other expenditure in connection with the commencement of business or in connection with the expansion of the industrial undertaking after the commencement of the business or in connection with the set up of a new industrial unit, the same would also qualify for amortisation under Section 35D. In the light of the above discussion, we hold that the rates of expenditure which would go for amortisation under Section 35D, particularly with reference to sub clause (c)(iv) of sub section (2) of Section 35D, would be only those expenditure which are specifically mentioned therein and nothing beyond. In the light of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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