By Ajay R. Singh, Advocate
CIT vs. Yes Bank Ltd. [ Income tax Appeal
no. 599 of 2015 dated : 01/08/2017 (Bombay High Court)].
[Yes Bank Ltd. vs. CIT [A.Y-2007-08 Mum. ITAT ]
During the FY:2005-06, the assessee had
incurred an aggregate expenditure of Rs.16,39,10,000/- on Initial Public
Offering (“IPO”) of equity shares made. The Issue closed on June 12, 2005. It
has claimed a deduction u/s. 35D for Rs.3,27,82,000/- being one-fifth of the
total expenses incurred. This is the second year of claim for deduction.
The assessee submits that section 35D grants
a deduction / amortisation 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, one fifth of
the total amount thereof is eligible for deduction u/s. 35D.
The A.O had made an inquiry while passing
the assessment order. In return of income, the assessee had made the following
note. Deduction of Rs.3,27,82,000/- claimed u/s. 35D of the Act.
The Assessee submits that the A.O had before
passing the assessment order, called for explanation from the assessee. The
explanation was given for claiming deduction u/s. 35D of the Act, in respect of
expenses incurred by the company in connection with the issue of public
subscription of the shares and debentures of the company for a period of 5
years.
According to the Revenue, the order passed
by the A.O granting benefit u/s. 35D of the Act was erroneous and the same was
prejudicial to the interest of the Revenue. As such, ingredients of section 263
of the Act were attracted.
The assessee submitted that it is an
industrial undertaking for the purpose of section 35D of the Act and relied
upon the judgement of this Court in a case of the CIT vs. Emirates
Commercial Bank Ltd. 262 ITR 55, wherein this Court has held that the
banks are industrial undertakings and eligible for deductions u/s. 32A.
Also in HSBC Securities and Capital
Markets (India) Pvt. Ltd. (1384/M/2000), where the Hon’ble Mumbai ITAT has
held that even a share broking entity is an “industrial undertaking” for the
purpose of section 35D.
Therefore, the claim of assessee for
deduction u/s. 35D is in accordance with law and is allowable. The Tribunal set
aside the order of the Commissioner passed u/s. 263 of the Act.
The Hon. High Court find that the Tribunal
has considered the decision of the Apex Court in the case of Malabar
Industrial Co. Ltd. (supra) and held that when two possible views are
available and the issue is debatable, then, initiation of revision is not
permissible u/s. 263 of the Act.
It appears that the A.O sought clarification
from the assessee about the correctness of the amount of one fifth of the total
expenses incurred u/s. 35D of the Act. The assessee under letter dated
26.10.2004, gave specific explanation on the issue raised by the A.O and
thereafter, the assessment order was passed. Only because the Commissioner
thought that other view is a better view, would not enable CIT to exercise
power u/s. 263 of the Act. In the light of the above, the appeal was dismissed.
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