M/s Karnataka State Financial Corporation Limited , Bangalore V. Assistant Commissioner of Income Tax Circle-4(1)(1), Bangalore

ITA 427/BANG/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9724 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A C RAJU
• Keywords: Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI A.K. GARODIA , ACCOUNTANT MEMBER I TA NO. 427/BANG/2017 ASSESSMENT YEAR : 2011 - 12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(1), BANGALORE. VS. M/S. KARNATAKA STATE FINANCIAL CORPORATION LTD., KSFC BHAVAN, NO.1/1, THIMMAIAH ROAD, NEAR CANTONMENT RAILWAYS SECTION, BANGALORE 560 052. PAN: AAACK 9480H APPELLANT RESPONDENT APPELLANT BY : SHRI C.H. SUNDAR RAO, CIT(DR - I )(ITAT), BENGALURU. RE SPONDENT BY : SHRI A.C. RAJU, CA DATE OF HEARING : 06 .0 9 .201 8 DATE OF PRONOUNCEMENT : 24 .09.2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORD ER DATED 19.12.2016 OF THE CIT(APPEALS)-12, BENGALURU RELATI NG TO ASSESSMENT YEAR 2011-12. 2. GR.NO.1, 6 & 7 RAISED BY THE REVENUE ARE GENERAL IN NATURE AND DOES NOT CALL FOR ANY SPECIFIC ADJUDICATION. 3. GR.NO.2 & 3 RAISED BY THE REVENUE READS AS FOLLO WS:- ITA NO. 427/BANG/2017 PAGE 2 OF 11 2. ON FACTS OF THE CASE, WHETHER THE LD.CIT (A) IS RIGHT IN CONCLUDING THAT THE PROVISION OF SECTION 14A R.W.R. 8D IS NOT APPLICABLE IN THIS CASE WHEN THE AO HAS CLEARLY HEL D THAT THE ASSESSEE HAS FAILED TO PROVE THE SOURCE OF INVESTME NT IN THE STATE GOVT. UNDERTAKING. 3. ON FACTS OF THE CASE, THE LD. CIT (A) OUGHT TO H AVE APPRECIATED THAT THE ASSESSEE HAS FAILED TO SHOW TH AT THE FUND RECEIVED FROM THE GOVT. OF KARNATAKA HAS BEEN UTILI ZED IN MAKING THE INVESTMENT IN THE STATE GOVT. UNDERTAKING. 4. THE ASSESSEE IS A CORPORATION ESTABLISHED BY THE STATE OF KARNATAKA UNDER THE STATE FINANCIAL CORPORATION ACT, 1951. A S FAR AS GROUND NO. 2 & 3 RAISED BY THE REVENUE ARE CONCERNED THE FACTS ARE THAT THE ASSESSEE EARNED INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME AND THEREFORE EXPENDITURE INCURRED BY THE ASSESSEE TO EARN SUCH I NCOME HAD TO BE DISALLOWED WHILE COMPUTING INCOME FROM BUSINESS AS REQUIRED UNDER THE PROVISION OF SECTION 14A OF THE INCOME TAX ACT, 196 1 (ACT) READ WITH RULE 8D OF IT RULES 1962 (RULES). 5. THE ASSESSEE HAD COMPUTED THE DISALLOWANCE U/S.1 4A OF THE ACT READ WITH RULE 8D OF THE RULES, WITHOUT CONSIDERING INVESTMENTS MADE BY IT IN THREE PUBIC SECTOR ENTERPRISES VIZ., (I) CAUVERY NEERAVARI NIGAM LTD., OF RS.150,00,00,000/- (II) M/S.KARNATAKA NEERAVARI NIG AM LTD. OF RS.200,00,00,000/- AND (III) KRISHNA BHAGYA JALA NI GAM LTD., OF RS.110,00,00,000/- IN ALL TOTALLING RS.460 CRORES W HILE COMPUTING AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF RULE 8D OF THE RULES. THE ASSESSEE ALSO DID NOT CONSIDER AN INVESTMENTS OF RS .65.33 CRORES WHILE COMPUTING AVERAGE VALUE OF INVESTMENTS FOR THE PURP OSE OF RULE 8D OF THE RULES, BEING INVESTMENTS MADE IN DEBT FUNDS WHILE M AKING DISALLOWANCE U/S 14A OF THE ACT. ITA NO. 427/BANG/2017 PAGE 3 OF 11 6. AS PER SUB RULE 2 OF RULE 8D, THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME SHALL BE THE AGGREGATE OF FOLLOWING AMOUNTS : (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATIN G TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME; (II) IN A CASE WHERE THE ASSESSEE HAS INCURRE D EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRE CTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTE D IN ACCORDANCE WITH THE FOLLOWING FORMULA A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST (OTHER THAN THE AMOUNT OF INTEREST DIRECTLY RELATING TO INCOME WHIC H DOES NOT FORM PART OF TOTAL INCOME) INCURRED DURING THE PREVIOUS YEAR. B = THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPE ARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. C = THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. (III) AN AMOUNT EQUAL TO 0.5% OF THE AVERAGE O F THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART O F THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE AS SESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. FU RTHER, THE TERM TOTAL ASSETS HAS BEEN DEFINED TO MEAN TOTAL ASSET S AS APPEARING IN THE BALANCE SHEET EXCLUDING THE INCREASE ON ACCOUNT OF REVALUATION OF ASSETS BUT INCLUDING THE DECREASE ON ACCOUNT OF REVALUATION OF ASSETS. 7. IN THE PRESENT CASE, ADMITTEDLY, THERE WAS NO DI RECT EXPENSES AND THEREFORE THERE WAS NO NECESSITY OF INVOKING RULE 8 D2(I) OF THE RULES. THERE WAS INTEREST EXPENSES AND OTHER EXPENSES AND THEREFORE DISALLOWANCE HAD TO BE MADE IN TERMS OF RULE 8D(2)( II) & (III) OF THE RULES OF INTEREST EXPENSES AND OTHER EXPENSES. IN TERMS OF RULE 8D(2)(II) & (III) OF ITA NO. 427/BANG/2017 PAGE 4 OF 11 THE RULES, THE AVERAGE VALUE OF INVESTMENTS HAD TO BE WORKED OUT. THE QUESTION IS WHILE WORKING OUT AVERAGE VALUE OF INVE STMENTS, SHOULD ONE INCLUDE THE INVESTMENTS WHICH YIELDED DIVIDEND INCO ME DURING THE RELEVANT PREVIOUS YEAR OR ALL INVESTMENTS IRRESPECTIVE OF TH E FACT WHETHER THE INVESTMENTS YIELDED DIVIDEND INCOME OR NOT DURING T HE RELEVANT PREVIOUS YEAR. THE PLEA OF THE ASSESSEE WAS THAT ONLY INVEST MENTS WHICH YIELDED DIVIDEND INCOME SHOULD BE CONSIDERED WHILE WORKING OUT THE AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF APPLYING RULE 8D( 2)(II) & (III) OF THE RULES. 8. THE AO DID NOT AGREE WITH THE AFORESAID COMPUTAT ION OF DISALLOWANCE OF EXPENSES U/S.14A OF THE ACT. HE CO MPUTED THE DISALLOWANCE U/S.14A OF THE ACT AS FOLLOWS:- 4.9 HENCE RULE 8D(2)(II) AND (III) ARE APPLIED HERE AND THE DISALLOWANCE IS CALCULATED AS UNDER: TOTAL DIRECT INTEREST EXPENDITURE NIL ....................... (P) TOTAL INDIRECT INTEREST EXPENDITURE RS. 70,44,20,000 DISALLOWANCE U/R 8D(2)(II) D= AX B , WHERE C A= INDIRECT INTEREST EXPENDITURE, B= AVERAGE OF INVESTMENTS AND C= AVERAGE OF ASSETS A= RS. 70,44,20,000 B= RS. 497,45,42,000 C= RS. 2576,88,62,500 AXB = 13,59,84,539.... (Q) C DISALLOWANCE U/R 8D(2)(III) 0.5% OF AVERAGE OF INVESTMENTS RS. 2,48,72,710 (R) TOTAL DISALLOWANCE U/R 8D (P)+(Q)+(R) RS.16,08,57,249/- HOWEVER, THE ASSESSEE COMPANY HAS ALREADY DISALLOWE D AN AMOUNT OF RS.19,01,760/-. HENCE, RS.15,89,55,489/- IS NOW ITA NO. 427/BANG/2017 PAGE 5 OF 11 DISALLOWED AND ADDED BACK TO TOTAL INCOME U/S. 14A OF THE I.T. ACT R.W.R. 8D OF THE I.T. RULE. 9. ON APPEAL BY THE ASSESSEE, THE CIT(A) ACCEPTED T HE PLEA OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A), TH E REVENUE HAS RAISED GR.NO.2 & 3 BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT WAS BR OUGHT TO OUR NOTICE THAT THE HONBLE ITAT KOLKATA IN THE CASE OF REI AGRO LTD. VS. DCIT 144 ITD 141 (KOL-TRIB) HAS HELD THAT IT IS ONLY THE INVESTMENTS WHICH YIE LDS DIVIDEND DURING THE PREVIOUS YEAR THAT HAS TO BE CO NSIDERED WHILE ADOPTING THE AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF RULE 8D(2)(II) & (III) OF THE RULES. THE RELEVANT OBSERVATIONS OF THE KOLKAT A BENCH OF THE TRIBUNAL ARE AS FOLLOWS:- 7.1 IN ANY CASE, THE WORKING OF THE DISALLOWANCE UNDER SUB- PART (II) OF SUBCLAUSE (2) OF RULE 8D AS MADE BY TH E AO ALSO SUFFERS FROM A SUBSTANTIAL ERROR IN SO FAR AS IN TH E SAID RULE IN REGARD TO THE NUMERATOR B, THE WORDS USED ARE THE A VERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT FORM OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE B ALANCE-SHEET AS ON THE FIRST DAY AND IN THE LAST DAY OF THE PREVIOU S YEAR. HERE THE AO HAS TAKEN INTO CONSIDERATION THE INVESTMENT OF R S.103 CRORES MADE THIS YEAR, WHICH HAS NOT EARNED ANY DIVIDEND O R EXEMPT INCOME. IT IS ONLY THE AVERAGE OF THE VALUE OF THE INVESTMENT FROM WHICH THE INCOME HAS BEEN EARNED WHICH IS NOT FALLI NG WITHIN THE PART OF THE TOTAL INCOME THAT IS TO BE CONSIDERED. THIS IS WHY THE QUESTION OF SATISFACTION IS PROVIDED IN SECTION 14A AND RULE 8D(1), THAT RELATES TO THE ACCOUNTS OF THE ASSESSEE . THUS, IT IS NOT THE TOTAL INVESTMENT AT THE BEGINNING OF THE YEAR A ND AT THE END OF THE YEAR, WHICH IS TO BE CONSIDERED BUT IT IS THE A VERAGE OF THE VALUE OF INVESTMENTS WHICH HAS GIVEN RISE TO THE IN COME WHICH DOES NOT FORM PART OF THE TOTAL INCOME WHICH IS TO BE CONSIDERED. A QUESTION MAY ARISE AS TO WHY THE TERM AVERAGE OF THE VALUE OF ITA NO. 427/BANG/2017 PAGE 6 OF 11 INVESTMENT IS THEN USED. THE TERM AVERAGE OF THE V ALUE OF INVESTMENT WOULD BE TO TAKE CARE OF CASES WHERE THE RE IS THE ISSUE OF DIVIDEND STRIPING. IN ANY CASE, AS WE HAVE ALREA DY HELD THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR, WHICH IS NOT DIRECTLY ATT RIBUTABLE TO ANY PARTICULAR INCOME, THE FINDINGS OF THE LD. CIT(A) O N THE ISSUE STAND CONFIRMED AND CONSEQUENTLY THE APPEAL FILED B Y THE REVENUE STANDS DISMISSED. 8. IN RESPECT OF PROVISIONS OF RULE 8D(2)(III), WH ICH IS THE SUBJECT-MATTER OF THE APPEAL IN THE ASSESSEES HAND , A PERUSAL OF THE SAID PROVISION SHOWS THAT WHAT IS DISALLOWABLE UNDER RULE 8D(2)(III) IS THE AMOUNT EQUAL TO PERCENTAGE OF T HE AVERAGE VALUE OF INVESTMENT THE INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. THUS, UNDER SUB-CLAU SE (III), WHAT IS DISALLOWED IS PERCENTAGE OF THE NUMERATOR B IN RU LE 8D(2)(II). AGAIN THIS IS TO BE CALCULATED IN THE SAME LINE AS MENTIONED EARLIER IN RESPECT OF NUMERATOR B IN RULE 8D(2)(II) OF THE ACT. 8.1 THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT-M ATTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SEC TION 14A READ WITH RULE 8D. THE DISALLOWANCE UNDER SECTION 1 4A READ WITH RULE 8D IS TO BE IN RELATION TO THE INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME AND THIS CAN BE DONE ONLY BY TAKING INTO CONSIDERATION THE INVESTMENT WHICH HAS GIVEN RISE T O THIS INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. UNDER THE CIRCUMSTANCES, THE COMPUTATION OF THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(III), WHICH IS ISSUE IN TH E ASSESSEES APPEAL, IS RESTORED TO THE FILE OF THE AO FOR RECOM PUTATION IN LINE WITH THE DIRECTION GIVEN ABOVE. NO DISALLOWANCE UND ER SECTION 14A READ WITH RULE 8D(2)(I) AND (II) CAN BE MADE IN THIS CASE. 11. THE AFORESAID VIEW OF THE TRIBUNAL HAS SINCE BEEN A FFIRMED AS CORRECT BY THE HONBLE CALCUTTA HIGH COURT IN G.A.NO.3581 OF 2013 IN THE APPEAL AGAINST THE ORDER OF THE TRIBUNAL IN THE CAS E OF REI AGRO LTD. (SUPRA) . 12. RECENTLY THE SPECIAL BENCH OF THE DELHI TRIBUNA L IN THE CASE OF ACIT V. VIREET INVESTMENTS PRIVATE LIMITED [82 TAXMAN.COM 415] HELD THAT ONLY ITA NO. 427/BANG/2017 PAGE 7 OF 11 THOSE INVESTMENTS WHICH YIELDED DIVIDEND INCOME ARE TO BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENTS FOR THE PURP OSE OF RULE 8D(2) OF THE RULES. 13. IN VIEW OF THE AFORESAID LEGAL POSITION, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN GR.NO.2 & 3 RAISED BY THE REVENUE. 14. GROUND NOS. 4 & 5 RAISED BY THE REVENUE READS T HUS:- 4. ON FACTS OF THE CASE, THE LD. CIT (A) HAS NOT C ONSIDERED THE FINDINGS GIVEN BY THE AO IN THE ASSESSMENT ORDE R THAT THERE IS ENHANCEMENT OF EQUITY SHARES AND ISSUE OF BONDS RES ULTING IN THE EXPANSION OF CAPITAL BASE OF THE COMPANY WHICH MAKE S THE EXPENDITURE AS CAPITAL EXPENDITURE BY RELYING ON TH E DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PSIDC VS. CIT (1997) (225 ITR 792) (SC) & IN THE CASE OF M/S BROOK BOND INDIA LTD VS. CIT (1997)(225 ITR 798)(SC). 5. ON FACTS OF THE CASE, THE LD. CIT (A) OUGHT TO H AVE APPRECIATED THAT THE AO HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PSIDC VS. CIT (1997) ( 225 ITR 792) (SC) & IN THE CASE OF M/S BROOK BOND INDIA LTD VS. CIT (1997)(225 ITR 798)(SC) IN GIVING THE ABOVE FINDING . 15. THE AO NOTICED FROM THE SCHEDULE-L OF THE PROFI T AND LOSS ACCOUNT OF THE ASSESSEE THAT AN AMOUNT OF RS.61,00,000/- HAD B EEN CLAIMED AS EXPENSE ON ACCOUNT OF 'STAMP DUTY TO GOK'. THE ASSE SSEE FURNISHED THE BREAKUP OF THE SAME VIDE ITS REPLY DATED 19.12.2013 WHICH IS AS UNDER:- ITA NO. 427/BANG/2017 PAGE 8 OF 11 DATE PARTICULARS AMOUNT 31/03/2011 TO STAMP DUTY-SHARE CAP - 110 CRORES - 3 0-03-2011 PROVISION DURING THE YEAR 11,00,000 31/03/2011 TO STAMP DUTY- BONDS - 110 CRORES - 25-0 1-2011 PROVISION DURING THE YEAR 25,00,000 19/11/2010 TO SBM TREASURY WING - ON BONDS RS.123 C RORES PAID DURING THE YEAR 25,00,000 TOTAL 61,00,000 16. THE ASSESSEE CLAIMED THAT STAMP DUTY PAYABLE ON ISSUE OF BONDS IS ALSO A PART OF THE EXPENDITURE INCURRED FOR MOBILIZ ATION OF FUNDS THROUGH ISSUE ON BONDS. THIS IS ALSO IN NATURE OF REVENUE EXPENDITURE AND THEREFORE IS TO BE ALLOWED AS DEDUCTION. 17. THE AO DISALLOWED THE CLAIM FOR DEDUCTION OBSER VING AS FOLLOWS:- 5.1 THE ASSESSEE'S CONTENTION IS NOT ACCEPTABLE. IT CAN BE SEEN FROM THE BREAKUP OF THE STAMP 'DUTY EXPENSE CLAIMED TOWARDS INCREASE IN SHARE CAPITAL AND ISSUE OF BONDS TOTALI NG TO RS.36,00,000/- (RS.11,00,000 + RS.25,00,000) IS A P ROVISION CREATED AND NOT ACTUALLY INCURRED. THUS, SUCH EXPEN SE IS CONTINGENT IN NATURE WHICH IS NOT ALLOWABLE U/S.37 OF THE I.T.ACT. 5.2 FURTHER, IT IS SEEN FROM THE SCHEDULE-A OF THE BALANCE SHEET THAT THERE IS INCREASE IN SHARE CAPITAL BY RS .110 CRORES IN THE F.Y.2010-11. AS PER THE BREAKUP OF STAMP DUTY EXPEN SE MENTIONED ABOVE, THE ASSESSEE HAS CLAIMED EXPENSE O F RS.11,00,000/- TOWARDS INCREASE IN ITS EQUITY SHARE S. SUCH EXPENDITURE CLAIM FOR THE ENHANCEMENT OF CAPITAL BY WAY OF EQUITY SHARES IS NOT ALLOWABLE AS REVENUE EXPENDITU RE. ITA NO. 427/BANG/2017 PAGE 9 OF 11 5.3 AS REGARDS THE STAMP DUTY EXPENSE TOTALING TO RS.50,00,000/-RS 25,00,000 + RS.25,00,000) TOWARDS ISSUE OF BONDS OF RS.233 CRORES (RS.110 RS.123 CRORE) IS CON CERNED, THE ASSESSEE HAS SUBMITTED THAT THE STAMP ON BONDS IS A LSO A PART OF THE EXPENDITURE INCURRED FOR MOBILIZATION OF FUNDS THROUGH ISSUE OF BONDS. FROM THIS, IT IS CLEAR THAT EXPENDITURE C LAIM FOR ENHANCEMENT OF FUNDS BY WAY OF ISSUE OF BONDS IS NO T ALLOWABLE AS REVENUE EXPENDITURE. 5.4 ANY EXPENDITURE INCURRED BY ASSESSEE FOR ENHANC EMENT OF CAPITAL BY WAY OF EQUITY SHARES AND BY MOBILIZATION OF FUNDS BY ISSUE OF BONDS WILL BE CONSIDERED AS A CAPITAL EXPE NDITURE AS IT IS RELATED TO THE CAPITAL ACCOUNT OF THE ASSESSEE. HEN CE, THE TOTAL STAMP DUTY EXPENSE OF RS.61,00,000/- CLAIMED BY THE ASSESSEE IS DISALLOWED U/S 37 OF THE I.T.ACT AS A CAPITAL EXPEN DITURE 18. ON APPEAL BY THE ASSESSEE THE CIT(A) ALLOWED EX PENSES TO THE EXTENT OF RS.50 LACS IN CONNECTION WITH ISSUE OF BO NDS, FOR THE FOLLOWING REASONS:- 14. IT IS NOTED FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAD DISALLOWED THE EXPENDITURE OF RS. 61 LA KH UNDER SECTION 37 CONSIDERING IT AS CAPITAL EXPENDITURE. B ONDS ARE DEBT INSTRUMENTS ISSUED AT INTEREST. BONDS ARE DIFFERENT FROM SHARE CAPITAL AS BONDS HAVE THE NATURE OF LIABILITY INCUR RED FOR RAISING FUNDS FOR A COMPANY AT INTEREST AND DO NOT ENHANCE THE CAPITAL STRUCTURE OF THE ASSESSEE IN THE SAME MANNER AS EQU ITY SHARE CAPITAL. THERE IS NO LEGAL AUTHORITY TO CONSIDER EX PENDITURE MADE FOR RAISING FUNDS THROUGH BONDS AS CAPITAL EXPENDIT URE. THE EXPENDITURE OF RS. 50 LAKHS MADE FOR STAMP DUTY IN RELATION TO BONDS IS DELETED. 19. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS RAISED GR.NO.4 & 5 BEFORE THE TRIBUNAL. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT WAS BR OUGHT TO OUR NOTICE THAT IDENTICAL ISSUE WAS CONSIDERED IN ASSESSEES O WN CASE BY THIS TRIBUNAL ITA NO. 427/BANG/2017 PAGE 10 OF 11 FOR AY 2010-11 IN ITA NO.888 & 889/BANG/2017 VIDE O RDER DATED 28.6.2017 AND THE TRIBUNAL HELD AS FOLLOWS:- 07. THE NEXT GROUND RAISED BY THE REVENUE IS WITH RESPECT TO THE EXPENDITURE ON ISSUANCE OF BONDS FOR RS.25,00,0 00/-. THE ASSESSEE CLAIMED STAMP DUTY EXPENSES AMOUNTING TO RS.2500000/- UNDER THE HEAD CONTINGENCIES. IT WAS C LARIFIED TO THE AO THAT THESE ARE ONE-TIME STATUTORY EXPENSES PAYAB LE AT FIXED PERCENTAGE OF THE VALUE OF THE BOND ISSUED TO THE P UBLIC. THE EXPENDITURE WAS MEAGRE COMPARED TO THE CAPITAL RAIS ED BY THE BANK AND THE EXPENDITURE WAS DEBITED TO THE P & L A CCOUNT. IT WAS ALSO MENTIONED THAT THE EXPENDITURE WAS NOT CAP ITAL IN NATURE AND IS THEREFORE REQUIRED TO BE ALLOWED AS REVENUE. FOR THIS PURPOSE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE MATTER OF INDIA CEMENTS V. CIT [60 ITR 52] AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. ITC HOTELS 334ITR 109. 08. THE LD. DR RELIES UPON THE JUDGMENT OF THE HON BLE SUPREME COURT IN BROOKE BOND INDIA LTD V. CIT [(199 7) 225 ITR 798]. 09. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. IN OUR VIEW, THE ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE HONBLE SUPREME COURT IN THE MATTER OF INDIA CEMENTS (SUPRA) HAD HELD THAT THE D EBENTURE WHEN ISSUED IS A LOAN AND THEREFORE THE EXPENDITURE INCU RRED FOR ISSUANCE OF DEBENTURE WOULD BE ADMISSIBLE AS REVENU E EXPENDITURE. SIMILARLY IN THE PRESENT CASE, THE BON DS ISSUED BY THE ASSESSEE WERE IN THE NATURE OF A DEBT INSTRUMENT AN D THE STAMP DUTY PAID TO GOVERNMENT OF KARNATAKA BY THE ASSESSE E WOULD BE ELIGIBLE AS REVENUE EXPENDITURE AS IT WILL NOT ENHA NCE THE CAPITAL BASE OF THE ASSESSEE. THERE IS A DISTINCTION BETWEE N THE EXPENDITURE INCURRED FOR RAISING THE LOAN AND THE I NSTRUMENT WHICH HAD AN EFFECT OF INCREASING THE SHARE CAPITAL . IN THE MATTER OF BROOKE BOND INDIA LTD (SUPRA), THE CASE BEFORE T HE HONBLE SC WAS OF INCREASING THE SHARE CAPITAL, BUT WHEREAS IN INDIA CEMENTS (SUPRA), CIT V. INSTRUMENTATION LTD [(2013) 37 TAXMANN.COM 271], AS WELL AS IN SECURED METERS LTD 321 ITR611 THE CASE WAS OF ALLOWING THE EXPENDITURE FOR OBTAIN ING THE LOAN. ITA NO. 427/BANG/2017 PAGE 11 OF 11 IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN T HE APPEAL OF THE REVENUE AND THEREFORE THE SAME IS DISMISSED. 21. THE FACTS WITH REGARD TO EXPENSES ON ISSUE OF B ONDS ARE IDENTICAL IN THE PRESENT AY ALSO. FOLLOWING THE ORDER OF THE TR IBUNAL FOR AY 2010-11, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS GR.NO .4 & 5 RAISED BY THE REVENUE. 22. IN THE RESULT, APPEAL BY THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF SEPTEMBER, 2018. SD/- SD/- ( A.K. GARODIA ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 24 TH SEPTEMBER, 2018. / D ESAI S MURTHY / COPY TO: 1. THE APP ELL ANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.