TMI Blog2015 (5) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... ture incurred by the assessee has not given any enduring benefit to the assessee. The case law relied upon by the assessee squarely applies to the instant case and therefore we hold that the expenditure incurred by the assessee is allowable as deduction and consequently there is no question of allowing depreciation on the same. - Decided partly in favour of assessee. - ITA No. 974/Mum/2014 - - - Dated:- 15-4-2015 - Shri D. Manmohan And Shri R.C. Sharma JJ. For the Appellant : Shri P.J. Pardiwala Shri Nishant Thakkar For the Respondent : Shri N.K. Chand ORDER Per D. Manmohan, V.P. This appeal by the assessee-company is directed against the order passed by the DRP-I, Mumbai and it pertains to A.Y. 2009-10. 2. As could be noticed from the grounds of appeal annexed to Form No. 36, assessee raised several grounds in the alphabetical order, i.e. from (A) to (P). At the time of hearing the learned counsel for the assessee submitted that Ground Nos. (A) to (N) are referable to determination of ALP on account of issue of equity shares of ₹ 10/- each @ ₹ 100/- per share. 3. Brief facts of the issue in dispute are stated as under. Assesseecompan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty risk and country specific risks. Therefore charging interest at a rate derived at the mark up of 3% for the risk factors on the cost of funds is the right approach. As per the directions of the DRP, adjusted arm s length interest is computed as under: - Sr.No. Particulars Date of issue Benefit passed to the SE (Rs.) Number of days upto 31.03.2009 Arm s length interest adjusted @ 15.09% (12.09% + 3% mark up) 1 Equity shares 07.05.2008 (4,55,00,000) 3113,29,20,000 329 423,45,97,424 2 Equity shares 13.05.2008 (1,00,00,000) 684,24,00,000 323 91,37,07,851 Total 514,83,05,275 6. Accordingly the adjustments under section 92CA of the Act are worked out as under: - Sr.No. Adjustment Amounts 1 Arm s Length Price of the shares and debentures issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd section 56(2)(vii-b) of the Act to indicate that the intention of the Parliament was to tax issue of shares to a resident when the issue price is above its fair market value and not when it is below the fair market value; Parliament has consciously not brought to tax the amounts received from a non-resident for issue of shares, as it would discourage capital inflow from abroad. In the absence of a charging section in Chapter X of the Act, it is not possible to read a charging provision into Chapter X of the Act. It thus, concluded that in the absence of charging provision to tax issue of shares at premium to a non-resident, the occasion to invoke computation provision does not arise. The learned counsel for the assessee also relied upon another decision of the Hon'ble Bombay High Court (M/s. Shell India Markets Pvt. Ltd., WP No. 1205 of 2013) wherein the view taken in the case of Vodafone India Services Pvt. Ltd. was reiterated and also observed that the AO could not have brought to tax the deemed interest on the ground of non receipt of the consideration equivalent to the ALP on issue of equity shares by the assessee. He has also referred to the view taken by the Board wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel submitted that the assessee is in the business of arranging site infrastructure services to cellular mobile operators, i.e. building towers on the premises taken on lease and antenna provided therein to facilitate the mobile operators to get connected to the mobile services. During the previous year relevant to the assessment year under consideration assessee incurred an expenditure of ₹ 34,91,418/- on account of site survey. The AO was of the opinion that it gives enduring benefit to the assessee - therefore it is capital in nature. On the other hand, the assessee submitted before the AO that in the process of carrying on its business it has to survey various sites at a location identified to erect towers. The process involves evaluation of multiple sites and at each site a detailed site survey has to be conducted and only on the sites which were finalised towers are erected. In this process it incurs site survey expenses. Assessee has also incurred legal and professional charges of ₹ 1,26,500/- on account of site acquisition. In order to take sites on lease and erect towers, with the objective of earning revenue, it has to conduct site survey, apart from legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure has to be treated as incurred for the purpose of business. In the case of CIT vs. Anjani Kumar Co. Ltd. 259 ITR 114 the court observed that the advance paid for acquisition of land to set up a factory but abandoned later should be treated as revenue expenditure since no benefit of enduring nature has come into existence because no capital asset has come into existence. If the expenditure is treated as revenue in nature there is no question of allowing depreciation on such asset. He has also relied upon the decision of the ITAT I Bench, Mumbai in the case of Idea Cellular Ltd. vs. Addl.CIT 65 SOT 15 wherein the Tribunal observed that the Revenue has not made out a case that the towers were used for assessee s own business and it was a new source of income and also observed that cellular towers can be a new independent source of income if erected exclusively for leasing to other operators, and finally concluded that when the project of erecting towers were abandoned by the assessee, there was no question of any new asset coming into existence in which event the expenditure incurred thereon is allowable as revenue expenditure. The learned counsel also submitted that simil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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