9911796707
TMI Blog2014 (3) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenses relating to Initial Public Offer-29,57,136/-. (b) Correctness of computation of interest u/s. 234C of the Act. 2. The facts relating to the issues are stated in brief. The assessee-company is engaged in the business of stock broking. During the course of assessment proceedings, the Assessing officer noticed that the assessee has claimed a sum of Rs. 29,57,136/-, being expenses relating to Initial Public Offer, as revenue expenditure. The Assessing officer took the view that the said expenses have been incurred for increasing the share capital and hence they are directly related to the expansion of the Capital base of the company, in which case they fall in the category of Capital Expenditure. Accordingly, he disallowed the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/-, listed above, the Ld. A.R. submitted that the above said expenses would have been incurred by the assessee irrespective of the fact whether the assessee went for Initial Public Offer of its shares or note. The Ld. A.R. further submitted that these expenses were not contingent upon completion of the Initial Public Offer process and hence, they should be allowed as revenue expenditure. The Ld. Counsel placed reliance on the following case law in this connection. (a) DCIT Vs. Core Health Care Ltd. (308 ITR 263)(Guj) (b) CIT Vs. Kreon Financial Services Ltd. (2013)(38 taxmann.com 46)(Mad) (c) CIT Vs. Indo Nissin Foods Ltd. (2013)(35 Taxmann.com 637)(Kar) (d) CIT Vs. Berger Paints India Ltd. (126 Taxman 435)(Cal) (e) Bombay Burmah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. does not relate to expenses incurred on Initial Public Offer. The decision rendered in the case of Nimbus Communication Ltd. relate to the expenses incurred on the proposed public issue, which was aborted later. Thus, in our view, all the case law relied upon by the assessee are not applicable to the facts of the instant case. 5. On the contrary, in our view, the decision rendered by Hon'ble Supreme Court in the case of Brooke Bond (India) Ltd. (supra) is squarely applicable to the facts of the instant case. We have already noticed that the Ld. CIT(A) has rendered his decision by following the same. For the sake of convenience, we extract below the relevant observations made by Ld. CIT(A):- 15. In Ground No. 4, the appellant cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in the assessment order disallowed the entire claim of expenses on IPO (Initial Public Offer) treating the same as capital expenditure. The Assessing officer placed reliance on the judgment of the Hon'ble Supreme Court in the case of Brooke Bond (India) Ltd. v. CIT reported 225 ITR 798 (SC). On the other hand it was argued on behalf of the appellant that only direct expenses such as payment to Registrar of Companies, etc. are to be treated as capital expenditure. It has been further stated that expenses such as advertisement for public issue, traveling expenses for the purpose of IPO and other related expenses such as market research and postage expenses cannot be held to be capital in nature. The appellant also place reliance on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o public issue of shares. The Hon'ble court has only said that expenses which are relatable to public issue of shares are to be treated as capital in nature. The argument of the appellant that expenditure on advertisement for IPO, market research expenses related to IPO, traveling expenses and postal expenses etc. are indirect expenses and therefore the same is to be treated revenue in nature is not acceptable. Advertisement has to be carried on for the purpose of drawing interest of the general public for the subscription to the shares. Similarly market research expenses, as well as postal expenses for dispatch of various documents related to IPO are also directly linked to the public issue of shares. Similarly, journeys undertaken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, of shares of the Company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of prospectus are covered under sec. 35D(2) of the Act. He further submitted that the preliminary expenses are allowed as deduction in five annual instalments u/s. 35D of the Act. Accordingly he submitted that the deduction claimed by the assessee is in terms of sec. 35D of the Act. 7. However, we notice that the alternative contention of the assessee for deduction u/s. 35D of the Act was not examined by the AO. Accordingly, in our view, the same requires to be considered at the end of the assessing officer. Accordingly, we restore this alternative contention to the file of the AO with the direction to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
