2010 (3) TMI 1163 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A) regarding deduction under sec. 35D(2)(c)(iv) for expenditure on brokerage for raising capital.

Summary:
1. Facts of the case: The assessee, a limited company in the business of batteries and power systems, filed return for AY 2006-07. AO completed assessment with various disallowances. Assessee appealed to CIT(A) for relief, which was partially granted leading to the current appeal.

2. Assessee's contentions: Assessee claimed deduction u/s 35D for expenditure of &8377; 54.22 lakhs incurred for issuing share capital to comply with SEBI guidelines. Assessee argued the expenditure was for expansion and thus eligible for deduction under S.35D. Alternatively, claimed the expenditure as revenue expenditure.

3. Revenue's arguments: Revenue contended that the expenditure was for private placement of shares, not public subscription as required by S.35D. Also, argued that the expenditure was in the nature of capital, not revenue.

4. Tribunal's decision: Tribunal analyzed the provisions of S.35D and SEBI guidelines, concluding that the issue of share capital was not for public subscription but preferential basis. Found no evidence of expansion of business due to share issue. Rejected assessee's claim for deduction u/s 35D and as revenue expenditure. Case law cited by assessee deemed inapplicable.

5. Conclusion: Assessee's appeal was dismissed, and the order was pronounced on 03-03-2010.