9911796707
TMI Blog2016 (9) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... for deciding the aforesaid issues are as under: 4. The assessee went in for public issue of shares in order to raise funds to meet the capital expenditure and other expenditure relating to expansion of its existing units of production both at Pondicherry and Cuddalore and for expansion of its Research and Development Activity. The assessee issued to public 15,10,000 equity shares of Rs. 10/- each for cash at a premium of Rs. 30/- per share aggregating to Rs. 6,04,00,000/-. 5. The aforesaid issue was opened for public subscription during the financial year ending 31.03.1995 relevant to the Assessment Year 1995-96. The assessee has, in the prospectus issued, clearly stated under the column projects that the production capacity of its existing products, more particularly Ibuprofen and Ranitidine, is as follows: "The Company is undertaking the following expansion projects: (1) Ibuprofen: The installed capacity of the ibuprofen plant at Pondicherry is proposed to be increased from the present level 840 tpa to 1200 tpa. The increase in capacity would be primarily due to improvements in the process sdeveloped inhouse, resulting in a significant reduction in the batch processing tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue expenses. While doing so, the Assessing Officer, for the Assessment Year 1996-97, passed a detailed and elaborate order after scrutinizing all the materials made available to him and recorded a positive finding of fact that there was an expansion to the existing units of the industrial undertaking and after being satisfied of the same duly allowed the claim of share issue expenses under Section 35D of the Act. It is relevant to point out at this stage that the Department has not taken on appeal the issue of allowance of share issue expenditure further for the Assessment Year 1996-97 and, hence, finality has been reached with respect to the issue of expansions of the existing industrial undertaking and, consequently, the eligibility of the share issue expenditure in terms of Section 35D of the Act. 9. Thereafter the Assessing Officer has taken a different stand for the Assessment Years 1997-98 to 2004-05 with respect to the claim of share issue expenditure under Section 35D of the Act and has disallowed the said expenditure on the basis that the expenditure is capital in nature relying on Brook Bond India Ltd. case (supra) 10. In the aforesaid backdrop, the assessee again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial unit commences production or operation:" 13. In the Income Tax Return which was filed for the Assessment Year 1995-96 the assessee had claimed that it had incurred a sum of Rs. 45,51,890/- towards the share issue expenses and had claimed 1/10th of the aforesaid share issue expenses under Section 35D of the Act from the Assessment Years 1995-96 to 2004-05. This claim of the assessee was found to be justified and allowable under the aforesaid provisions and on that basis 1/10th share issue expenses was allowed under Section 35D of the Act. When it was again claimed for the Assessment Year 1996-97, though it was disallowed and on directions of the Appellate Authority, the Assessing Officer made physical verification of the factory premises. He was satisfied that there was expansion of the facilities to the industrial undertaking of the assesseee. It is on this satisfaction that f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expiry of due date by which such payment is supposed to be made in order to claim deduction under Section 36 of the Act. However, since the payment was made from the Trust, the Assessing Officer took the view that as the payment is not made by the assessee to the employees directly in cash, it is not allowable in view of the provisions of Section 40A(9) of the Act. As pointed out above, though this view was not accepted by the CIT(A) as well as ITAT, the High Court has found justification in the stand taken by the Assessing Officer. Here also we feel that the High Court has gone wrong in relying upon the provisions of Section 40A(9) of the Act. 15. It is not in dispute that as per Section 36(1)(ii) of the Act expenditure incurred on account of payment in the form of bonus to the employees is allowable as business expenditure. This provision reads as under: "36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (i) .... (ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (iv) or clause (iva) or clause (v) of Sub-section(1) of Section 36. However, we are here concerned with the payment of bonus which is not covered by any of the aforesaid clauses of sub-section (1) of Section 36 but is allowable as deduction under clause (ii) of sub-section (1) of Section 36. Therefore, Section 40A(9) has no application. Insofar as the provisions of Section 43B are concerned, they are also not applicable inasmuch as clause (b) of Section 43B refers to the sum payable by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees. Thus, this provision also does not mention about bonus. With this we come to the provisions of Section 36 which enumerate various kinds of expenses which are allowable as deduction while computing the business income under Section 28 of the Act. The amount paid by way of bonus is one such expenditure which is allowable under clause (ii) of sub-section (1) of Section 36. There is no dispute that this amount was paid by the assessee to its employees within the stipulated time. Embargo specified under Section 43B or 40A(9) of the Act does not come in the way of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
