9911796707
TMI Blog2014 (9) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 35D. 2.1. At the outset, it was submitted that the issue was restored to the file of Ld. CIT(A) in earlier years for determining afresh on the basis of the record for A.Y. 2006-07 being the first year of the claim. Since this is a consequential claim and matters are pending before the Ld. CIT(A) in earlier years, we restore the issue to the file of Ld. CIT(A) to consider it afresh in the light of findings given for A.Y. 2006-07. The Ld. CIT(A) is directed to follow the directions given in ITA.No.1844/Hyd/2011 for A.Y. 2008-09 and other appeals vide order dated 29.04.2013 and also in ITA.No.14/Hyd/2013 for A.Y. 2009-2010 dated 30.04.2013. Accordingly, these grounds are considered allowed for statistical purposes. 3. Another groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order the A.O. disallowed share buyback expenses because in his opinion buyback of shares resulted in permanent reduction in share capital. According to A.O. the same considerations should be applied in deciding the character of expenditure in case of increase and reduction in the share capital. In my opinion the A.O.'s proposition is not supported by the decision of the Supreme Court in the case of Punjab State Industrial Development Corporation Ltd (225 ITR 792). In this judgment the Supreme Court admitted that increase of share capital may certainly help the company in increasing its profit earning but because the benefit derived is of long term and enduring nature and there being permanent expansion of the capital base which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for issue of bonus shares. 15. Applying the ratio laid down in this decision I find that existing free reserves and share premium account are used for buyback of shares which does not result in permanent reduction of the share capital and no benefit of enduring nature is derived. In the appellant's case the buyback of shares was effected by utilizing its free reserves. In my considered opinion therefore the expenditure incurred on buyback of shares was not a capital expenditure as there was neither permanent change in the capital structure of the company nor benefit of enduring nature was received by the appellant. The A.O. is therefore directed to deleted the disallowance of Rs. 28,21,321/- " 7.3.1 The Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the functioning of the company and its growth was impeded so much so that the matter was carried to the Court. Therefore, naturally there was diversion of directors from the business of the company to the litigation. Naturally the company's functioning in such circumstances could not be smooth and the management had to pass through a great deal of hardships. After a period of over Six years, good sense prevailed between the two warring groups and a consent term was drawn by the shareholders, which was approved by the Hon'ble Bombay High Court by way of decree dated 2.5.1991, inter alia, giving the direction that the company would purchase the shares of the family members of Shri Maganlal H. Doshi, Shri Hasmukhlal H. Doshi and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue accounts ......." 28. If we go through the facts of the present case, it will be clear that the assessee-company incurred the impugned expenditure in the larger interest of the business necessity or expediency ........ 29. ........The Supreme Court had occasion to consider similar controversy in the case of CIT v. Ashok Leyland Ltd. (1972) 86 ITR 549 (SC) in which the Apex Court has held that the principles which flow from the above cited decisions clearly suggest firstly that the enduring benefit in itself is not a conclusive test. Secondly, it is necessary to consider whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
