M/s. Prime Registry Services P. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 92/CHNY/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96571 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Revenue expenditure
• Section: 147; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.92/MDS/2011 ( )( / ASSESSMENT YEAR : 2003-04 M/S PRIME REGISTRY SERVICES PVT. LTD., ( MERGED WITH M/S VISWAPRIYA FINANCIAL SERVICES AND SECURITIES LTD. ) NOW KNOWN AS M/S VISWAPRIYA INDIA LIMITED, 75-C, II MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI - 600 020. PAN : AABCP 9577 P V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(4), CHENNAI. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE -.+, / 0 / RESPONDENT BY : DR. B. NISCHAL, JCIT 1 / 2% / DATE OF HEARING : 06.10.2015 3') / 2% / DATE OF PRONOUNCEMENT : 18.12.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX, CHENNAI-I, CHENNAI, DATED 30.12.2010 AND PERTAINS TO ASSESSMENT YEAR 2003-04. 2 I.T.A. NO.92/MDS/11 2. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY AN ORDER DATED 31.12.2008. THE ASSESSEE CLAIMED A SUM OF ` 6,39,51,000/- AS AN EXPENDITURE UNDER THE HEAD DISCOUNTING CHARG ES ON ZERO COUPON OPTIONALLY CONVERTIBLE DEBENTURES UNDER SERI AL NO.1 AND SERIAL NO.3 AT 15.21% AND 14.21% RESPECTIVELY. IN FACT, THE ASSESSING OFFICER REOPENED THE ASSESSMENT UNDER SEC TION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') ON TH E GROUND THAT DISCOUNT CLAIMED BY THE ASSESSEE WAS EXCESSIVE. AC CORDINGLY, THE INCOME WAS ASSESSED AT ` 2,17,29,702/- AS AGAINST THE LOSS RETURNED BY THE ASSESSEE. HOWEVER, THE ADMINISTRATIVE COMMI SSIONER FOUND THAT THE ZERO COUPON OPTIONALLY CONVERTIBLE DEBENTU RE WAS TO BE REDEEMED AFTER ONE YEAR AND CONVERSION IS TO BE EXE RCISED WITHIN 24 MONTHS FROM THE DATE OF ISSUE. THEREFORE, THE D ISCOUNTING CHARGES OUGHT TO HAVE BEEN SPREAD OVER FOR TWO YEAR S AND THE ASSESSEE IS ENTITLED ONLY FOR 50% OF THE AMOUNT INC URRED TOWARDS DISCOUNT ON THE ISSUE OF DEBENTURES. ACCORDINGLY, THE ADMINISTRATIVE COMMISSIONER FOUND THAT AN EXCESS RE LIEF WAS ALLOWED BY THE ASSESSING OFFICER IN THE ORDER DATED 31.12.2008. 3 I.T.A. NO.92/MDS/11 3. REFERRING TO THE JUDGMENT OF APEX COURT IN CIVIL APPEAL NOS. 6366 TO 6368 OF 2003 IN TAPARIA TOOLS LIMITED V. JC IT, A COPY OF WHICH HAS BEEN FILED BY THE ASSESSEE, THE LD.COUNSE L FOR THE ASSESSEE SUBMITTED THAT THERE IS NO CONCEPT OF DEFE RRED REVENUE EXPENDITURE IN THE INCOME-TAX ACT EXCEPT THE AMORTI ZATION OF EXPENDITURE WHICH IS SPECIFICALLY PROVIDED IN SECTI ON 35D OF THE ACT. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN HOL DING THAT THE ASSESSEE IS ENTITLED ONLY FOR 50% OF THE DISCOUNT. 4. ON THE CONTRARY, DR. B. NISCHAL, THE LD. DEPARTM ENTAL REPRESENTATIVE, SUBMITTED THAT THE ZERO COUPON OPTI ONALLY CONVERTIBLE DEBENTURES WAS ISSUED WITH A CONDITION THAT THE SAME HAS TO BE REDEEMED AFTER ONE YEAR AND CONVERSION HA S TO BE EXERCISED WITHIN 24 MONTHS FROM THE DATE OF ISSUE. THEREFORE, THE DISCOUNT ON SUCH DEBENTURES HAS TO BE SPREAD OVER F OR TWO YEARS AND THE ASSESSEE IS ENTITLED ONLY FOR 50% OF THE DI SCOUNT ON THE ISSUE OF DEBENTURES FOR THE YEAR UNDER CONSIDERATIO N. AT THE BEST, ACCORDING TO THE LD. D.R., THE REMAINING 50% CAN BE CLAIMED ONLY FOR NEXT ASSESSMENT YEAR, NAMELY, 2004-05. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE 4 I.T.A. NO.92/MDS/11 CLAIMED THE EXPENDITURE OF ` 6,39,51,000/- FOR ISSUING ZERO COUPON OPTIONALLY CONVERTIBLE DEBENTURES UNDER THE HEAD D ISCOUNTING CHARGES. IT IS NOT THE CASE OF THE REVENUE THAT T HE DISCOUNTING CHARGES CLAIMED BY THE ASSESSEE FOR ISSUE OF ZERO C OUPON OPTIONALLY CONVERTIBLE DEBENTURES CANNOT BE ALLOWED . THE ONLY OBJECTION OF THE ADMINISTRATIVE COMMISSIONER IS THA T THE REDEMPTION PERIOD IS AFTER ONE YEAR AND THE CONVERSION HAD TO BE EXERCISED WITHIN 24 MONTHS, THEREFORE, THE DISCOUNTING CHARGE S HAVE TO BE SPREAD OVER FOR TWO ASSESSMENT YEARS. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE DISCOUNTING CHARGES OT HERWISE INCURRED BY THE ASSESSEE CAN BE SPREAD OVER FOR TWO YEARS OR IT HAS TO BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. AS RI GHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE APEX COURT IN TAPARIA TOOLS LIMITED (SUPRA) EXAMINED THE ISSUE AND FOUND THAT T HERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE UNDER THE S CHEME OF INCOME-TAX ACT. THE APEX COURT FURTHER FOUND THAT EXCEPT FOR AMORTIZATION OF THE EXPENDITURE, WHICH IS SPECIFICA LLY PROVIDED IN SECTION 35-D OF THE ACT, THERE IS NO CONCEPT OF DEF ERRED REVENUE EXPENDITURE UNDER THE SCHEME OF INCOME-TAX ACT. IN VIEW OF THE ABOVE JUDGMENT OF APEX COURT, THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT THERE IS NO QUESTION OF SPREADING OVER THE EXPENDITURE 5 I.T.A. NO.92/MDS/11 FOR TWO ASSESSMENT YEARS WHEN THE ASSESSEE INCURRED THE DISCOUNTING CHARGES DURING THE YEAR UNDER CONSIDERA TION. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE OR DER OF THE ADMINISTRATIVE COMMISSIONER IN EXERCISE OF SECTION 263 OF THE ACT. ACCORDINGLY, THE ORDER OF THE LOWER AUTHORITY IS SE T ASIDE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 18 TH DECEMBER, 2015 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 18 TH DECEMBER, 2015. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 /CIT, CHENNAI-I, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.