TMI Blog2013 (7) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... raghavan, JM:- This appeal by the assessee is directed against the order of the CIT(A)-V, Hyderabad dated 22.11.2012 2. The assessee raised the following ground: The learned CIT(A) erred in confirming the addition made by the Assessing Officer at Rs. 2,07,00,112 being the expenses for issue of shares to Qualified Institutional Buyers claimed in accordance with the provisions of sec. 35D of the Income-tax Act. The learned CIT(A) ought to have accepted the plea of the appellant that the said expenses represent the amounts allowable in accordance with the provisions of sec. 35D and are eligible for deduction under the said section. 3. After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in assessee's own case in ITA Nos. 1844/Hyd/2011, 1845/Hyd/2011 and 1847/Hyd/2011. The Tribunal vide order dated 29.4.2013 held as follows: "14. We have heard both the parties and perused the material on record. Admittedly, the assessee's claim u/s. 35D was in the A.Y. 2006-07. In the A.Y. 2006-07 the CIT(A) allowed the claim of the assessee by observing as follows: "5.2 I have carefully considered the facts and evidence. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtizing the same over the expected time period over which the benefits are likely to accrue there from. Accordingly only a proportion of the same is amortized in the Profit and Loss Account but an appropriate adjustment is made in the Computation of Income whereby the entire expenditure is claimed as allowable revenue expenditure. 5.2.3 However, coming to the Income Tax Act, fundamentally, only two kinds of expenses are explicitly recognized i.e., capital and revenue. The former is not debited to the P L A/c and is inexplicably linked to an asset, for which depreciation is allowed every year. On the other hand, revenue expenditure is allowed in one financial year. 5.2.4 The Supreme Court in the case of Alembic Chemical Works Co. Ltd. vs. CIT (1989) 177 ITR 377 has itself observed that the idea of 'once for all' payment and 'enduring benefit' are not to be treated as something akin to statutory conditions; nor are the notions of 'Capital' or 'Revenue' a judicial fetish. What is capital expenditure and what is revenue are not eternal verities but must need to be flexible so as to respond to the changing economic realities of business. The expression 'asset or advantage of an endu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 9.80 Crore. There is no doubt about the fact that the brand as well as the past editorial contest will have benefits pertaining to the appellant for more than one financial year. 5.3 In view of the aforementioned judgements of the various courts, it would not be proper to debit the entire amount in one year as it would violate the matching principle. On the other hand, it is clear that the benefits of the expense will accrue to the appellant over many financial years. But. it cannot be quantified accurately as to how much would be the benefit in a particular financial year. unlike in bonds, where quantifications are simple and accurate, in this case, it is ultimately the judgement of the business head based on realities of the industry and economy which will determine the amount by which or the percentage of benefit available in a particular year. In the present case, the management has decided that the benefits of the expense will accrue to the company over a period of 12 years. The Assessing Officer does not have any contrary information to indicate a shorter or longer period. 5.3.1 In view of the above facts and circumstances, I hold that the expense in question is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c issue in the instant case has also been made only to four shareholders on preferential basis. Even as per S. 67(3) of the Companies Act, no offer or invitation shall be treated as made to the public, if the offer or invitation can properly be recorded as not being calculated to result, directly or indirectly in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation. That being so, either in terms of the SEBI guidelines noted above or in terms of the provisions of the Companies Act, it cannot be said that the issue of share capital in the present case is for public subscription. 7. Another condition precedent to claim deduction under section 35D of the Act is that expenditure incurred should be in connection with the extension of its undertaking or in connection with the setting up of a new unit in case the shares were issued after the commencement of the business. It is an undisputed fact that the share capital in question, was issued by the assessee in the instant case after the commencement of business, and it is meant for complying with the SEBI guidelines with regard to proportion of promoters' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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