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TMI Blog2012 (12) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... JAGTAP AND SHRI V. DURGA RAO, JJ. Appellant by : Mr. Yogesh Thar Respondent by : Mr. Pavan Ved ORDER PER V. DURGA RAO, J.M.: This appeal filed by the Assessee is directed against the order of CIT-7, Mumbai, passed u/s 263 of the Act, on 2nd March, 2011 for the assessment year 2006-07 wherein the assessee has raised the following grounds of appeal:- Ground No. I 1. On the facts and circumstances of the case and in law, the learned CIT erred in invoking the provisions of section 263 of the Act, and directing revision of the assessment order passed u/s 143(3) of the Act by the DCIT on the alleged ground that the said assessment order was erroneous and prejudicial to the interests of the revenue. 2. The appellant prays that order passed u/s 263 of the Act to be struck down as null and void ab-initio. Without prejudice to Ground I Ground No. II 1. On the facts and circumstances of the case and in law, the CIT erred in directing the AO to disallow the claim for deduction u/s 35 in respect of amortization of expenditure incurred on initial public offer of Equity shares amounting to Rs. 3.27 crore (being one-f if th of the total expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed u/s 35D of the IT Act, 1961. * During the year under consideration, the assessee had incurred an aggregate expenditure of Rs. 16,39,10,000/- on Initial Public Offer (IPO) of equity shares. The issue closed on June 21, 2005. It has claimed a deduction u/s 35D for Rs.3,27,82,000/- being one-fifth of the total expenses incurred. * The assessee submitted that section 35D grants a deduction/amortization in respect of expenses incurred by a company in connection with the issue, for public subscription, of shares or debentures of a company over a period of five years. Since the foregoing expenses on IPO are in connection with the issue of shares for public subscription, of shares or debentures of a company over a period of five years. Since the foregoing expenses on IPO are in connection with the issue of shares for public subscription, one-fifth of the total amount thereof is eligible for deduction u/s 35D. * The assessee further submits that it is an industrial undertaking for the purpose of section 35D based on the following legal cases: i) CIT Vs. Emirates Commercial Bank ltd., [262 ITR 55] where the Bombay High Court, which is also the jurisdictional High Court, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Ltd., [262 ITR 55] the Hon ble Bombay High Court, being the Industrial Court is our case, has held that a banking company can be regarded as an industrial undertaking. Since our business too, is banking, the ratio of 262 ITR 55 squarely applied to us. 3) Without prejudice to 1) and 2) above, the Finance Act, 2008 has omitted the word industrial from the original term industrial undertaking appearing in section 35D. It is respectfully submitted that the said amendment is clarificatory in nature having been made to provide the benefit of deduction to all the sectors of the company. As per settled legal position, an amendment which is clarificatory in nature is to apply retrospectively. See for e.g. i) Lohia Machine Tools Vs. Union of India, 152 ITR 308 (SC) ii) Jamshedpur Motor Accessories Stores Vs. Union of India, 189 ITR 70[Patna] [Department s SLP dismissed, 191 ITR (St)8] iii) CIT Vs. Sri Jagannath Steel Corporation, 191 ITR 676(Cal.) iv) Gangadharappa Vs. Chandrashekar, 196 ITR 277 (Kar.) v) CIT Vs. Mohanlal Bhagwati Prasad, 204 ITR 234 (Cal.), etc. 4. The CIT has considered the explanation of the assessee and rejected the same for the reasons that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the CIT and submitted that the Assessing Officer without considering the issue involved in the appeal passed the order without applying the mind. Therefore, the order passed by the AO is erroneous and prejudicial to the interests of the Revenue and, therefore, the learned CIT has rightly passed the order invoking the provisions of section 263 of the Act. He further submitted that the assessee is a bank and by no stretch of imagination it cannot be considered as industrial undertaking for the purpose of sec. 35D. The learned DR has relied on the following decisions: 1. Commissioner of Income Tax vs. Escorts Business Pvt. Ltd. 2. Angal Housing Construction Ltd. vs. Commissioner of Income Tax 3. JM Shares and Stock Brokers Pvt. Ltd. vs. DCIT, ITAT Mumbai, D Bench, 4 SOT 710 4. MEFCOM Capital Market Ltd. vs. JCIT 8. The learned DR further submitted that the decision of the Hon ble Bombay High Court in the case of Emirates Commercial Bank(supra) decided in the context of section 32A(2)(b)(iii) and not in the context of section 35D and, therefore, the aforesaid decision of the Hon ble Bombay High Court is not applicable to the facts of the case of the assessee. 9. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(iii) of the Act, and allowed the claim of the assessee. It was not the issue before the Hon ble High Court in the aforesaid case that whether the bank is an industrial undertaking or not ?. The Hon ble Court has only considered the facts of the case in the context of section 32A(2)(b)(iii). 12. The Hon ble Delhi High Court in the case of Ansal Housing Construction Ltd. (supra) has considered the meaning of the industrial undertaking for the purpose of section 35D elaborately while deciding the meaning of the industrial undertaking, the Hon ble Court has also considered the decision of the Hon ble Bombay High Court in the case of CIT Vs. Emirates Commercial Bank Ltd. (supra) wherein it was observed as under:- In that case, the Bombay High Court held that the branch of a foreign bank existing in India was entitled to investment allowance under section 32A of the Act with respect to computers installed in the bank. The deduction under the said section is available to an industrial undertaking engaged in manufacture or production of an article or a thing. The assessee s submission in that case was that as long as the assessee used these computers for production of articles a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 16. In so far as the ano ..... X X X X Extracts X X X X X X X X Extracts X X X X
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