TMI Blog2013 (8) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 2515/Ahd/2010 - - - Dated:- 5-7-2013 - Shri D. K. Tyagi And Shri A. K. Garodia,JJ. For the Petitioner : Sri Rahul Kumar, Sr. D.R. For the Respondent : Sri S. N. Soparkar with PM Mehta, A.R. ORDER Per : D. K. Tyagi, Judicial Member:- This is the assessee's appeal against the order of Ld. CIT(A)-XIV Ahmedabad dated 28-06-2010. 2. The assessee has taken following grounds:- "1. On the facts and in the circumstances of the appellant's case, the ld. CIT(A) has erred in rejecting the claim of the appellant company that the entire expenditure of Rs. 1,55,95,204/- incurred in connection with Public Issue for expansion of the existing business as well as for raising funds for the existing business, was allowable during the present assessment year itself u/s. 37(1) or u/s. 28 of the Income-tax Act. 2. Without prejudice to the Ground No. 1, the Ld. CIT(A) erred in confirming disallowance of expenditure of Rs. 31,19,041/- being 1/5th of the above expenditure of Rs. 1,55,95,204/-. 3. The issue involved in this appeal has been dealt by the assessing officer as under:- "5. Expenses relatable to issue of Share Capital On verification of the case records, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 of the income since, the issue could not go through and the amount of expenditure incurred was a business loss to the assessee company. The assessee further submits that the expenditure which was incurred by the assessee pertained to A) Increase in Capital of the company (Rs 5,00,000) B) Towards advertisement publicity C) Towards promotion of the assessee business Accordingly the entire expenditure incurred was not on account of increase in capital base. The assessee had also incurred expenditure towards advertisement 5 publicity, by which the assessee business was benefited. If your good selves is of the opinion that the expenditure towards increase in capital is not allowable, then it is submitted that the expenditure incurred towards advertisement and publicity should be allowed u/s 37(1) of the act since the assessee company was benefited by the amount expenditure incurred for the business which was in existence. Further the issue which was abandoned was on account of the fact the guidelines prescribed by SEBI was not meet owing to some external circumstances. Thus there was no default on the part of the assessee company which had put its best efforts in makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relatable to such expenditure were held to be capital by Hon'ble Supreme Court in the following cases:- I). Brooke Bond India Ltd. (1997) 225 ITR 798 (SC) II). Punjab Stale Industrial Corpn, Ltd- v. CIT (1997) 225 ITR 792(SC) III). C1T vs. Kodak India Ltd. (2002) 120 Taxman 498 (SC) IV). Shree Digvijay Cement Co. Ltd. vs. CIT (1982) ITR 45 (Guj) It is unfortunate that such public issue was abandoned by the appellant allegedly claiming the circumstances beyond its control as per the guidelines of SEBI. The appellant either before A.O. nor before me spelt out such circumstances for the abandonment of such issue. Now the appellant in the return of income claimed 1/5th of such expenditure i.e 20 % of such expenditure. The reason for claiming l/5lh of such expenditure is very clear, i.e. appellant treated it as preliminary expenditure which are allowable u/s. 35 D of the Act. Interestingly there are specified expenditure u/s, 35D of the Act which are permissible. The important fact that appellant want to avoid being projected in the asst. as well as appellate proceedings i.e. "the appellant is a listed company. It's accounts are being audited not only under company act, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted by appellant are as follows:- Date Particulars Amount 01/04/2006 Op. balance under public issue exp. 8,26,500 13-6-06 Stamping fees for increase in share capital 3,35,000 14-6-06 Authorized share capital increase fees 5,00,000 11-8-06 Professional fees and charges towards conducting legal due diligence and preparing report 75,000 8-9-06 Public issue expenses against prospect filing fees paid to Bombay Stock Exchange Ltd 50,000 8-9-06 -do- 1,80,000 27-9-06 Fess on filing of offer document with SEBI 5,61,200 14-8-06 31-10-06 31-10-06 20-11-06 8-1-07 Misc. expenses for traveling related to public issue 18-12-06 Conference expenditure at Mumbai including photography and press coverage 39,570/- 1-1-07 Fees payable on receipt of SEBI card 5,61,200 7-3-07 Digital Printout put on Frontlite Flex 40,903 7-3-07 Cotton Banners for Public issue 19,656 13-3-07 Adv. at Kalupur Rly. Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors of the company due to the under- subscription as per SEBI guidelines on 29th March, 2007. The only issue to be decided by us is whether this expenditure of Rs. 1,47,60,204/- on share issue incurred by the assessee is a revenue expenditure allowable u/s 37 of the Income-tax Act or not. This issue has now been decided by Hon'ble jurisdictional High Court in favour of assessee and against the revenue in the case of M/s Nimbus Communications Ltd in tax appeal no. 4244 of 2010 dated 08th December, 2011 wherein following was held: "2. The finding of fact recorded by the Income Tax Appellate Tribunal is that there is dispute that the assessee has in fact incurred the expenditure and that on account of the aborted public issue offer, no new asset has come into existence and consequently there is no question of the assessee getting any enduring benefit. With the approval of SEBI, the assessee was to increase the share capital and thereby promote its business activity. However, the same got aborted due to reasons beyond its control. In these circumstances, in view of the decision of this Court in the case of Commissioner of Income Tax Vs. M/s. Essar Oil Limited, Income Tax Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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