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2015 (11) TMI 1277 - ITAT MUMBAI

2015 (11) TMI 1277 - ITAT MUMBAI - [2016] 46 ITR (Trib) 88 - Disallowance of deduction under section 35D - amortization of expenditure incurred on Initial Public Offer of Equity Shares - revision u/s 263 - Held that:- Tibunal has already held, on merits as well, that the assessee is not eligible to claim deduction u/s 35D. After this order from the Tribunal in assessee’s own case, for this very assessment year, the issue under consideration i.e. allowability of claim u/s 35D, has attained ‘fait .....

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order, without even going deep into merits. Even before us, in our considered opinion, this issue is no more open for our adjudication, especially after it has been sealed by the Tribunal in its order. The assessee may have had some legal grievances against the order passed u/s 263, but, once the same was confirmed by the Tribunal, the right forum for hearing of these grievances would be before Hon’ble High Court. The law does not permit us to go into this issue, at this stage. - Decided agains .....

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sed by the Assessing Officer u/s 143(3) of the Act. The assessee has raised following grounds of appeal: GROUND NO. I: DISALLOWANCE OF DEDUCTION UNDER SECTION 35D OF THE ACT AMOUNTING TO ₹ 3,27,82,000/- IN RESPECT OF AMORTIZATION OF EXPENDITURE INCURRED ON THE INITIAL PUBLIC OFFER OF EQUITY SHARES: 1. On the facts and circumstances of the case and in law, the Learned CIT (A) erred in confirming the disallowance of deduction, claimed under section 35D of the Act in respect of amortization o .....

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0/- (being 1/5th of total expenditure of ₹ 16,39,10,000/-), being amortization of expenditure incurred on the Initial Public Offer of equity shares. The Assessee's return of income was scrutinized and order u/s 143(3) of the Act was passed by A.O. u/s 143(3) of the Act dated 31.12.2008. In the said assessment order, the A.O. allowed Assessee s claim of deduction u/s. 35D of the Act at ₹ 3,27,82,000/-. Thereafter the CIT-7, Mumbai passed revision order u/s 263 of the Act dated 02- .....

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fore, the company was required to be an Industrial Undertaking for claiming deduction u/s. 35D of the Act. Since the Assessee Bank was not an "Industrial Undertaking", therefore, the Ld CIT, by passing order u/s 263, cancelled the assessment order, directing the A. O. to re- frame the same by disallowing the Assessee s claim for the deduction u/s 35D of the Act. In pursuance of CIT s, order u/s 263 of the Act, the A.O. passed fresh assessment order u/s 143(3) r.w.s. 263 dated 03.11.201 .....

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e said order, the ITAT also held that the Assessee being a bank was not an "Industrial Undertaking". During the appellate proceedings before the Ld CIT(A), the Assessee had filed detailed submissions. 2.2 Ld CIT(A) considered the submissions of the Assessee and facts of the case, but confirmed the order of the AO on the ground that since the ITAT in Assessee's own case has held that the Assessee was not an "Industrial Undertaking", therefore, the Assessee was not entitled .....

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and disallowance made by the AO in pursuance to direction given by Ld CIT in the order passed u/s 263, should be confirmed. 2.5. On the other hand, Ld counsel of the assesse has argued the matter in detail. He has assailed the order of lower authorities and argued that assessee was eligible to claim deduction u/s 35D. Various reasons given by the Ld Counsel in support of his arguments are as under : (i) Though the decision of Hon'ble Bombay High Court in the case of CIT vs. Emirates Commerci .....

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Budharaja & Co. (204 ITR 412) and there can be no dispute on that. However, this decision cannot apply to a Banking Company as it is not engaged in the business of building, etc., (iii) Present case is covered by the decision of the Hon'ble Supreme Court in the case of CIT v. Peerless Consultancy & Service (P.) Ltd. (248 ITR 178), (iv) Hon ble ITAT s Order in A.Y. 2006-07 in ITA No.4002/Mum/2011 in Assessee's own case is per incuriam, as it is without considering the decision of .....

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decided after considering the case of N.C Budharaja & Co, supra , (vi) It was submitted that between Delhi High Court and Bombay High Court, the Hon'ble ITAT ought to follow Bombay High Court, being the Jurisdictional High Court and in his support, Ld counsel relied upon the judgment of CIT v. Thane Electricity Supply Ltd. (Bom HC) (206 ITR 727) and (vii) In case of difference in views of Delhi High Court and Madras High Court, the one which is more favourable to the Assessee should be f .....

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ar 2006-07 dated 25.01.2012, passed against the order u/s 263 are reproduced below: 10. We have heard both the sides, perused the records and gone through the orders of the authorities below. The assessee is a company carrying on banking business in India. During the relevant year an expenditure of ₹ 16.39 crore was incurred on IPO of equity shares and a deduction of 1/5 amounting to ₹ 3.27 crore was claimed u/s 35D. The claim of the assessee was allowed by the Assessing Officer. Sub .....

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on, he relied upon the decision of Emirate Commercial Bank Ltd. (supra) & HSBC Securities and Capital Markets (India) Pvt. Ltd. (supra) and submitted that the claim of the assessee for deduction u/s 5D is in accordance with law and is eligible. The learned Commissioner after considering the explanation given by the assessee and also considering the case laws relied upon by the assessee has held that the Assessing Officer has not at all examined the issue and passed the assessment order witho .....

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It was not the issue before the Hon ble High Court in the aforesaid case that whether the bank is an industrial undertaking or not ?. The Hon ble Court has only considered the facts of the case in the context of section 32A(2)(b)(iii). 12. The Hon ble Delhi High Court in the case of Ansal Housing & Construction Ltd. (supra) has considered the meaning of the industrial undertaking for the purpose of section 35D elaborately while deciding the meaning of the industrial undertaking, the Hon ble .....

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uction of an article or a thing. The assessee s submission in that case was that as long as the assessee used these computers for production of articles and things it could be regarded as an industrial undertaking and this submission of the assessee was accepted by the Court. From the discussion up to now, it follows that:- a)Industrial undertaking is to be given the meaning which is understood in common parlance, and b)Which should be interpreted widely, At the same, we have to bear in mind tha .....

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activity . 14. In the present case, the assessee is a bank, incurred expense on issue of IPO equity shares, claimed deduction u/s 35D. It is a fact that the asssesee has not carried any manufacturing activity. We, therefore, respectfully following the decision of the Hon ble Delhi High Court in the case of Ansal Housing & Construction Ltd. (supra), hold that the assessee is a bank and not an industrial undertaking for the purpose of section 35D and accordingly, we uphold the order of the CI .....

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and prejudicial to the interests of the Revenue. In this context, the Hon ble Delhi High Court in the case of GEE VEE Enterprises Vs. ACIT, 99 ITR 375 wherein the Hon ble Delhi High Court has observed as under:- It is not necessary for the Commissioner to take further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inqu .....

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nvestigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such .....

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