9911796707
TMI Blog2017 (6) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation against the same in succeeding years and the assessee, in turn, is also directed to demonstrate the same before Ld. AO. Addition of certain income accrued on preference share capital - Held that:- The preference shares being held as Long Term Investments as capital assets were assessable to tax under the head ‘capital gains’ u/s 45. The revenue could not bring any material to establish the fact that any dividend was actually declared by these companies during the impugned AY. Further, the capital gains offered by assessee upon sale of preference shares has been accepted by the revenue in succeeding years in Section 143(3) proceedings and therefore, we find no reason to interfere with those assessments. Certain additional evidences in the form of paper-book dated 24/10/2013 has been produced before us in support of calculations of accrual of income on preference shares/ maturity value etc., which require, appreciation at the level of Ld. AO since the Ld. AR has asserted that whatever dividend / income has been accrued / received on these instruments, the same has been inbuilt into the maturity value and there is no revenue leakage. Therefore, in principal, while upholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue expenditure. The AO noted that the same were incurred in connection with starting of new consumer business by the assessee which was altogether a new line of business and hence the same were capital in nature. The depreciation on these expenses was disallowed by the Ld. AO on the premises that the assessee failed to substantiate that leasehold assets were put to use during the impugned AY. 3. Aggrieved, the assessee assailed the same successfully before Ld. CIT(A) vide impugned order dated 21/01/2011 where the Ld. CIT(A) noted that the assessee, being a NBFC, was already engaged in corporate financing and incurred the expenditure in the course of venturing into retail financing business and therefore, both business being related business only and since expenditure was incurred to refurbish the leasehold premises which were not owned by the assessee, the same being revenue expenditure, was allowable to the assessee. Aggrieved, revenue is in appeal before us. 4. The Ld. Departmental representative [DR] contended that the assessee incurred the said expenditure in the course of entering into new line of business and incurred heavy expenditure towards the establishment thereof and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expenses have been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the High Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure." Therefore, we find that the assessee may have received benefit of enduring nature but the same was not sole and decisive factor of determining the nature of impugned expenditure. The impugned expenses were only to conduct the business more profitably and therefore, allowable to the assessee as revenue expenditure. Therefore, after considering all the factors as discussed above and noting that the impugned expenditure did not bring into existence any capital asset, we see no reason to interfere with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was confirmed upon noting that the identical matter in assessee's own case for AY 2004-05 was remitted back to the file of Ld. AO by the Tribunal and the same was pending. The third addition u/s 43B for ₹ 40,505/- was also confirmed on the premises that the same was deposited late. Aggrieved, the assessee is in appeal before us. 10. The Ld. Counsel for assessee, first of all drew our attention to the fact that identical issue of debt issue expenses arose in assessee's own case for AY 2004-05 & 2005-06 and the Tribunal, in both the years, restored the matter back to the file of Ld. AO for some verification and re-adjudication and hence following the same, the matter may be remitted back on similar lines. The Ld. DR fairly conceded the same. 11. Upon perusal of records, we note that the issue of debt issue expenses arose in assessee's own case for AY 2004-05 & 2005-06 and the Tribunal in ITA No. 6978/Mum/2007 order dated 22/09/2009 for AY 2004-05 and ITA No. 1474/Mum/2009 order dated 25/03/2011 for AY 2005-06 restored the matter back to the file of AO with the following directions:- "6.We have heard the learned representatives of the parties and perused the record. The al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant details of particulars of total commercial papers pertaining to the year under consideration are also not on record, which are necessary for deciding the issue under consideration. Under these circumstances, since the above facts are required to be brought on record after verification, we remit the matter back to the file of the AO to decide the issue in accordance with law after considering the discussion made as above and after providing the opportunity of hearing to the assessee." Since Ld. AR has contended that the matter is identical and similar in all respect, following the decision of this Tribunal in assessee's own case, we remit the issue back to Ld. AO with similar directions of verification and adjudication as per law after providing due opportunity of being heard to the assessee. This ground of assessee's appeal stands allowed for statistical purposes. 12. Regarding disallowance of ₹ 40,505/- u/s 43B, being late deposit of employees' contribution to provident fund, reliance has been placed on the judgment of Hon'ble Bombay High Court in CIT Vs. Ghatge Patil Transports Ltd. [2015 53 taxmann.com 141]. The Ld. DR contended that the same was required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n preference shares, the Ld. AR, drawing our attention to the documents placed in the paper book, contended that the assessee held preference shares of several companies as long term investments as capital assets on heldto- Maturity basis and reflected as such in the Balance Sheet. The assessee could earn fixed pre-determined return in the form of dividend on these shares and the assessee, following consistent accounting policy, recognized the accrued dividend income on these shares over the tenure of the shares. But nevertheless, the shares constituted capital assets in the hands of the assessee, being taxable under the head capital gains u/s 45 upon their maturity / sale. Even otherwise, the final redemption / maturity amount was nothing but sum of principal and predetermined fixed dividend thereupon which has been recognized as income in the books of the assessee over the tenure of the shares and taxing the same as interest would amount to double taxation in view of the fact that these shares matured in succeeding years and offered to tax as capital gains in AY 2007-08 & 2008-09 which has been accepted in 143(3) assessments. 15. It was further contended that the revenue could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emium as per the attached annexure. 19. Further, a perusal of copies of financial statements of issuer companies and relevant shares certificates placed in the paper-book reveals that these instruments have been classified as preference shares in the books of issuer as part of share capital. 20. As per Note No. 3 forming part of Computation and Return of income for impugned AY, it is stated that the assessee, following applicable accounting guidelines, hold preference shares on Held to maturity basis / Long Term Capital Assets and accordingly, income credited to Profit & Loss account on these shares has been deducted from computation of income and would be offered to tax in accordance with Section 45. The amount so accrued and deducted in AY 2006-07, 2007-08 & 2008-09 is ₹ 8.56 crores, ₹ 18.76 crores & ₹ 5.54 crores respectively. The assessee has reflected 'Short term capital gains' on sale of Idea Cellular Preference shares in AY 2007-08 for ₹ 8.44 crores & ₹ 8.47 crores as 'Long Term Capital Gains' on sale of preference shares in AY 08-09 which has been accepted by the revenue in 143(3) assessments. The same reveals consistency in the arguments of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
