M/S. INDIAN SEAMLESS STEELS & ALLOYS LTD., v. THE ITO 10(1)(2),

ITA 974/MUM/2004 | 2001-2002
Pronouncement Date: 27-07-2011 | Result: Allowed

Appeal Details

RSA Number 97419914 RSA 2004
Assessee PAN AAACI6599P
Bench Mumbai
Appeal Number ITA 974/MUM/2004
Duration Of Justice 7 year(s) 5 month(s) 14 day(s)
Appellant M/S. INDIAN SEAMLESS STEELS & ALLOYS LTD.,
Respondent THE ITO 10(1)(2),
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 27-07-2011
Date Of Final Hearing 09-05-2011
Next Hearing Date 09-05-2011
Assessment Year 2001-2002
Appeal Filed On 13-02-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G : MUMBAI BEFORE SHRI RAJENDRA SINGH (AM) AND SMT. ASHA VIJA YARAGHAVAN (JM) ITA NO. 974/MUM/2004 ASSESSMENT YEAR : 2001-02 M/S. INDIAN SEAMLESS STEELS & ALLOYS LTD. LUNKAD POWERS VIMAN NAGAR PUNE-411 014. ..( APPELLANT ) P.A. NO. (AAACI 6599 P) VS. INCOME TAX OFFICER WARD 10(1)(3) AAYAKAR BHAVAN 4 TH FLOOR MUMBAI-20. ..( RESPONDENT ) APPELLANT BY : SHRI RAJAN VORA RESPONDENT BY : MS. SH EETAL SHAH O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 30.12.2003 OF CIT PASSED UNDER SECTION 263 OF THE INCOME TAX ACT. THE ONLY DISPUTE RAISED IS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT WAS JUSTIFIED IN MODIFYING TH E ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE FOR THE RELEVANT YEAR HAD CLAIMED DEDUCTION UNDER SECTION 35D O F THE ACT. UNDER THE SAID SECTION THE ASSESSEE IS ENTITLED TO AMORTISE THE PRELIMINARY EXPENSES INCLUDING THE EXPENSES INCURRED IN CO NNECTION WITH ISSUE OF SHARES FOR PUBLIC SUBSCRIPTION AND THE DEDU CTION IS ALLOWABLE @ 1/10 TH OF THESE EXPENSES FOR 10 YEARS. IN ASSESSMENT ITA NO.974/M/04 A.Y:01-02 2 YEAR 1993-94 THE ASSESSEE HAD CLAIMED 1/10 TH OF SUCH EXPENDITURE WHICH HAD BEEN ALLOWED BY THE ASSESSING OFFICER. IN THE A SSESSMENT YEAR 2001-02 WHICH WAS THE EIGHTH YEAR THE ASSESSEE HAD CLAIMED 1/10 TH OF THE EXPENDITURE WHICH HAD BEEN ALLOWED BY THE ASSE SSING OFFICER. SUBSEQUENTLY THE CIT EXAMINED THE RECORDS AND NOTED THAT THE DEDUCTION @ 1/10 TH HAD BEEN ALLOWED IN RESPECT OF EXPENSES INCURRED IN CONNECTION WITH ISSUE OF SHARES FOR PUBLIC SUBSCR IPTION. CIT THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DE DUCTION ALLOWED IN RESPECT OF PUBLIC ISSUE EXPENSES SHOULD NOT BE DISALLOWED FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT IN C ASE OF M/S. BROOKE BOND (I) LTD. (225 ITR 798) AND IN CASE OF M/S . PUNJAB STEEL INDUSTRIAL DEVELOPMENT CORPORATION (225 ITR 792) IN WHICH IT HAS BEEN HELD THAT SUCH EXPENDITURE WHICH IS IN CONNECTION WITH FR ESH SHARE ISSUE IS CAPITAL EXPENDITURE. THE ASSESSEE SUBMITTED THAT SAID JUDGMENTS WERE NOT APPLICABLE IN CASE OF DEDUCTION UNDER SECTION 35D. CIT HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED AND CANCELLED THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WITH DIRECTIO N TO PASS FRESH ORDER TAKING INTO ACCOUNT JUDGMENTS OF HONBLE SUPREME COURT (SUPRA). AGGRIEVED BY THE SAID DECISION THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT T HERE WAS NO ERROR IN THE ORDER OF THE ASSESSMENT AS EXPENSES @ 1/10 TH HAD BEEN ALLOWED IN ASSESSMENT YEAR 1993-94 WHICH WAS THE FIR ST YEAR AND THE SAID ASSESSMENT HAD BECOME FINAL. THE ASSESSING OFFICER A LLOWED 1/10 TH OF SUCH EXPENSES IN THE YEAR UNDER CONSIDERATION FOLLOWI NG THE EARLIER ORDER AND THEREFORE THERE WAS NO MISTAKE. IT WAS ALSO SUBMITTED THAT THE JUDGMENTS OF HONBLE SUPREME COURT IN CASE OF M/S. BROOKE BOND (I) LTD. (SUPRA) AND IN CASE OF M/S. P UNJAB STEEL ITA NO.974/M/04 A.Y:01-02 3 INDUSTRIAL DEVELOPMENT CORPORATION (SUPRA) WERE ON T HE ISSUE WHETHER EXPENDITURE INCURRED IN CONNECTION WITH ISSUE O F PUBLIC SHARES WAS REVENUE IN NATURE OR CAPITAL IN NATURE AND NOT IN RELATION TO ALLOWABILITY OF EXPENDITURE UNDER SECTION 35D. IT WA S ACCORDINGLY URGED THAT THE ORDER OF CIT SHOULD BE SET ASIDE. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDER OF CIT AND ARGUED THA T THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND THE SAME WAS CONTRARY TO THE JUDGMENTS OF HONBLE SUPREME COURT (SUPRA). 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEGAL V ALIDITY OF THE ORDER PASSED BY CIT UNDER SECTION 263 OF THE ACT. UNDE R THE SAID SECTION CIT IS EMPOWERED TO MODIFY THE ASSESSMENT ORDER P ASSED BY THE ASSESSING OFFICER IN CASE HE FINDS THE ORDER TO BE ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THI S CASE THE ASSESSEE WAS BEING ALLOWED 1/10 TH OF PRELIMINARY EXPENSES INCLUDING EXPENSES INCURRED FOR ISSUE OF SHARES FOR PUBLIC SUBSCRIPTION UNDER THE PROVISIONS OF SECTION 35D SINCE ASSESSMENT YEAR 1993-94. CIT HAS HELD THAT DEDUCTION ALLOWED IN RELATION TO EXPENSES INCURRED IN CO NNECTION WITH ISSUE OF SHARES FOR PUBLIC SUBSCRIPTION IS NOT CORRECT IN VIE W OF JUDGMENT OF HONBLE SUPREME COURT IN CASE OF M/S. BROOK E BOND (I) LTD. (SUPRA) AND IN CASE OF M/S. PUNJAB STEEL INDUSTRIA L DEVELOPMENT CORPORATION (225 ITR 792)(SUPRA) IN WHICH IT HAS BEEN HELD THAT SUCH EXPENDITURE IS CAPITAL IN NATURE. IN OUR VIEW THE O RDER PASSED BY THE CIT CANNOT BE LEGALLY JUSTIFIED. THE ASSESSING OFFICER HAD NOT ALLOWED EXPENSES AS REVENUE EXPENDITURE. THE ASSESSING OFFICER HAD ALLOWED THE EXPENDITURE UNDER THE PROVISIONS OF SECTION 35D WER E SPECIFICALLY PROVIDED FOR ALLOWANCE OF SUCH EXPENSES @ 1/10 TH OF SUCH EXPENDITURE IN THE INITIAL YEAR AND IN THE NINE SUBSEQUENT YEARS. THE JUDGMENTS OF ITA NO.974/M/04 A.Y:01-02 4 HONBLE SUPREME COURT IN THE CASE OF M/S. BROOKE BOND ( I) LTD. (SUPRA) AND IN CASE OF M/S. PUNJAB STEEL INDUSTRIAL DEVE LOPMENT CORPORATION (SUPRA) WERE NOT RELATED TO SECTION 35D. THE SAID SECTION ALLOWS EXPENDITURE IRRESPECTIVE OF THE FACT WHETHER THE EXPENDITURE IS CAPITAL OR REVENUE IN NATURE. THERE IS NO DISPUTE RA ISED BY CIT THAT EXPENSES CONSIDERED FOR ALLOWANCE WERE COVERED BY THE PRO VISIONS OF SECTION 35D. HE HAD DIRECTED TO DISALLOW THE EXPENDITUR E ON THE GROUND THAT SUCH EXPENSES WERE CAPITAL IN NATURE WHICH IS NOT RELEVANT IN THE CONTEXT OF SECTION 35D. THE ISSUE OF REVENUE OR CAPITAL EXPENDITURE WILL BE RELEVANT WHEN THE CLAIM IS CONSIDE RED UNDER SECTION 37 AND NOT UNDER SECTION 35D WHICH HAD SPECIFIED CE RTAIN EXPENSES WHICH CAN BE ALLOWED IN A PHASED MANNER IRRESPE CTIVE OF THE FACT WHETHER EXPENDITURE IS CAPITAL OR REVENUE. WE TH EREFORE SET ASIDE THE ORDER OF CIT AND UPHOLD THE ORDER OF ASSESSING OFFICER. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.7.2011. SD/- SD/- (ASHA VIJAYARAGHAVAN) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 27.7.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.