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TMI Blog2012 (8) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... d wholly and exclusively in connection with the sale of shares - Assessee also produced Prospectus of IPO which clearly shows that assessee was obliged to meet pro rata share of IPO expenses - disallowance is deleted and assessee's appeal allowed. - IT APPEAL NOs. 493 to 495 (MDS.) OF 2012 - - - Dated:- 10-5-2012 - ABRAHAM P. GEORGE, VIKAS AWASTHY, JJ. ORDER Abraham P. George, Accountant Member These are appeals filed by different assessees for impugned assessment year. Since the fact situation giving raise to the appeals are similar, the appeals are disposed of through a consolidated order. All these appeals have been filed with a delay of 38 days. Condonation petitions were on record. Reasonable cause has been shown. Delay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses as a part of expenditure incurred wholly and exclusively in connection with transfer of shares. Relying on Section 48 of the Act, assessees argued that such expenditure had to be deducted while calculating capital gains. A.O. sought explanation from the assessees as to whether there was any agreement between M/s Raj Television Network Limited and assessees for apportionment of the expenses. A.O. also sought details of IPO expenses. The break-up of the expenses were submitted by the assessees as under:- S. No. Particulars Amount Rs. A Total issue expenses (including actual amount incurred and provision created pre post issue) and accounted in the AY 2007-08 10,44,09,778 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding between the lead merchant banker for the IPO M/s Vivro Financial Services P. Ltd. and Raj Television Network Limited for justifying the claim of expenditure. CIT (Appeals) sought a remand report from the A.O. The A.O. once again relied on the fact that there were no agreements between the company and the assessees for sharing of expenses. CIT (Appeals) made an analysis of the expenses claimed by the assessees and M/s Raj Television Network Limited. Based on such analysis, he came to following conclusion:- " Vivro Financial Services P. Ltd. - merchant banker of IPO. Service rendered include preparation of draft prospectus obtaining compliance from respective authorities completion of formalities with NSDL/CDSL and filing of draft p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utable to company. Global business - expenses relating to trademark registration, directly attributable to the company. Add Factors Advertising - advertisement expenses for the IPO for publicity to be given for IPO as mandated by the Companies Act and hence legal obligation to incur the expenditure. TDS - as expenses as analysed above relate to the company, the TDS relating to those expenses also relate to the company. Expenses reimbursed to Raj TV - the company itself incurred certain expenditure relating to IPO which was reimbursed by the lead manager in connection with IPO and hence relate to the company." Further, as per the CIT (Appeals), the expenditure incurred for IPO was statutory in nature and the company was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue, A.R. stated that only the balance amount after deducting the proportionate share expenses were transferred to the account of the respective shareholders after the IPO. According to him, Escrow Account was started for crediting the realizations from the IPO and such realizations were transferred to M/s Raj Television Network Limited and other stake holders in accordance with the terms of the prospectus. As per the A.R., assessees were obliged to bear the pro rata expenses for share issue, since, but for the IPO, it would not have been possible for the assessees to sell their holding in one go. Therefore, according to him, lower authorities fell in error in not allowing deduction claimed by the assessees. 5. Per contra , learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it might be necessary to incur more expenditure than an ordinary shareholder effecting a sale of his/her shares. But, in our opinion, assessees here had an opportunity to sell their holdings in one block through the IPO. This convenience received by the assessees if weighed against the extra expenditure incurred for IPO gets more or less balanced. There is no dispute that pro rata expenditure alone was claimed by the assessees under Section 48 of the Act. There is also no dispute that such expenditure was wholly incurred for the purpose of IPO. A look at the Escrow Account, clearly shows that concerned assessees were transferred funds only to the extent of net amounts after meeting expenses. CIT (Appeals) analysed the expenses incurred an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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