M/s Kaushalya Infrastructure Development Co Ltd, Kolkata V. D.C.I.T CC - XVIII,kolkata, Kolkata

ITA 955/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9256 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2013
• Court: TRIBUNAL
• Department Lawyers: R S BISWAS CIT LD
• Assessee Lawyers: SUBASH AGARWAL LD
• Keywords: Capital asset; Depreciation; Search and seizure; Revenue expenditure
• Section: 142(1); 133A; 153A; 37

Judgement Text

I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL,ABENCH, KOLKATA BEFORE: SHRI J. SUDHARKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER IT(SS)A NO. 53/KOL/2013 A.Y: 2008-09 ITA NO. 955/KOL/2013 A.Y: 2009-10 M/S. KAUSHALYA INFRASTRUCTURE VS. DY. COMMISSIONER OF DEVELOPMENT CORPORATION INCOME-TAX ,CC-XVIII, LIMITED. PAN: AACCK1581F KOLKATA (APPELLANT) (RESPONDENT) APPEARANCES BY : SHRI SUBASH AGARWAL, ADVOCATE, LD.AR FOR THE AS SESSEE SHRI R.S.BISWAS, CIT, LD.DR FOR THE REVENUE DATE OF HEARING : 08-02-2017 DATE OF PRONOUNCEMENT : 28-02-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- BOTH THE APPEALS BY THE ASSESSEE ARE AGAINST THE SE PARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL- II, KOLKATA BOTH DATED 13-09-2012 FOR THE ASSESSME NT YEARS 2008-09 AND 2009-10 RESPECTIVELY. 2. IT IS NOTICED THAT BOTH THE APPEALS WERE FILED W ITH THE DELAY OF 135 DAYS AND TO THAT EFFECT A PETITION DAT ED 25-03- 2013 WAS FILED PRAYING TO CONDONE SUCH DELAY STATIN G THAT SRI SIDH NATH MEHRA, ONE OF THE DIRECTORS, WHO WAS SOLE IN CHARGE TO INCOME-TAX CASES DIED ON 01-07-2012 AND IN HIS P LACE SRI I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 2 PRASANT MEHRA, DIRECTOR OF THE COMPANY ASSUMED CHAR GE OF INCOME-TAX CASES AND FILED THESE APPEALS BY CONSULT ING THE ADVOCATE ON 25-04-2013. ON PERUSAL OF THE CONTENTS THEREIN AND UPON HEARING THE BOTH PARTIES, WE FIND THAT THE DELAY CAUSED IN FILING THE APPEAL WAS NOT WILFUL AND INTE NTIONAL. ACCORDINGLY, WE CONDONE THE SAID DELAY AND PROCEED TO HEAR THE CASE ON MERITS. 3. THE ONLY EFFECTIVE ISSUE THAT IS TO BE DECIDED IS WHETHER THE CIT-A JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS.91,03,353/- FOR THE A.YS 2008-09 AND 2009-10 MAD E U/S. 35D OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF T HE CASE. FOR CONVENIENCE, THE FACTS ARRAYED IN IT(SS)A NO.53/KOL /2013 FOR THE A.Y 2008-09 ARE READ AND DISCUSSED HEREIN BELOW . 4. NOW, WE SHALL TAKE UP THE APPEAL IN IT(SS)A NO.53/KOL/2013 FOR THE A.Y 2008-09 ( BY THE ASSESSE E). 5. THE BRIEF FACTS RELATING TO THE SAID APPEAL ARE THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN PURSU ANCE TO SECTION 132A OF THE ACT IN M/S. KAUSHALYA INFRASTRU CTURE GROUP OF CASES ON 26/27-03-2009 AND ON SUBSEQUENT DATES A T CERTAIN PLACES. ACCORDING TO AO, M/S KIDCO IS THE FLAGSHIP COMPANY OF THE GROUP AND A SURVEY U/S. 133A WAS ALSO CONDUCTED AT HOTEL, M/S. KAUSHALYA HERITAGE BELONGING TO SUCH GROUP. AC CORDINGLY, A NOTICE U/S. 153A OF THE ACT WAS ISSUED AND IN RES PONSE TO WHICH, THE ASSESSEE FILED ITS RETURN ON 28-07-2010 SHOWING TOTAL INCOME AT RS.2,74,29,165/- AND AGRICULTURAL I NCOME AT RS. 4,56,540/-. I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 3 6. DURING SUCH PROCEEDINGS THE AO FOUND THAT THE AS SESSEE MADE A CLAIM OF DEDUCTION U/S. 35D OF THE ACT OF RS.91,03,353/- FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION, BUT, DID NOT CLAIM THE SAME IN ITS O RIGINAL RETURN FILED U/S. 139(1) OF THE ACT. NOTICES U/S. 143(2) A ND 142(1) DATED 27-07-2010 WERE ISSUED. IN RESPONSE TO WHICH, THE ASSESSEE SUBMITTED THAT IT INCURRED PRELIMINARY EXP ENSES TO AN EXTENT OF RS.4,55,16,764/- FOR ISSUANCE OF INITIAL PUBLIC OFFER (IPO) AND CLAIMED RS.91,03,353/- I.E. (1/5 TH OF RS.4,55,16,764/-) AS DEDUCTION U/S. 35D OF THE ACT TOWARDS AMORTIZATION OF PRELIMINARY EXPENSES. ACCORDING TO AO, THE BUSINESS OF M/S. KIDCO [M/S. KAUSHALYA INFRASTRUCTU RE DEVELOPMENT CORPORATION LIMITED] HAD COMMENCED WELL BEFORE FY 2007-08 AND IN RESPONSE TO SUCH QUERY THE ASSESS EE SUBMITTED THAT THE SAID PUBLIC ISSUE/OFFER WAS FOR THE PURPOSE OF EXTENSION AND EXPANSION OF ITS EXISTING UNDERTAK INGS AS WELL AS FOR THE PURPOSE OF SETTING UP NEW INDUSTRIAL UNI TS. THE AO DENIED GRANTING THE SAID DEDUCTION U/S. 35D OF THE ACT BY OBSERVING FIRSTLY THAT AS THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE THAT THE SAID PROJECTS STARTED GENERATING POWER AND SECONDLY , THAT THERE WAS NO EXTENSION OF INDUSTRIAL UNDERTA KING OR SETTING UP OF A NEW INDUSTRIAL UNIT. THE RELEVAN T FINDING OF THE AO IS REPRODUCED HEREIN BELOW:- I HAVE CONSIDERED THE REPLY OF THE ASSESSEE AND THE FACTS OF THE CASE. THE ASSESSEE MAY BE SETTING UP POWER PROJ ECTS AT DIFFERENT PLACES BUT FOR THAT IT CANNOT CLAIM DEDUCTION U/S.3 5D FOR EITHER ASSESSMENT YEAR 2008-09 OR 2009-10 BECAUSE AS PER THE PROVISION OF SEC.35D(1), THE FIRST YEAR OF CLAIM UNDER THIS SECT ION CAN BE DONE ONLY WHEN THE NEWLY SET UP INDUSTRIAL UNIT COMMENCES PRO DUCTION OR OPERATION. BUT, THE POWER PROJECTS ARE IN THE PROCE SS OF BEING SET UP, AS STATED IN THE LETTER, AND THE ASSESSEE COMPANY C OULD NOT FURNISH ANY EVIDENCE THAT THOSE PROJECTS HAD STARTED GENERA TING POWER. THEN, WE ARE LEFT WITH THE LAST CONDITION WHETHER THE ASS ESSEE HAD MADE EXTENSION OF HIS INDUSTRIAL UNDERTAKING. IN THIS MA TTER THE ASSESSEE I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 4 ARGUED DURING HEARING THAT THE COMPANY HAD INVESTED A PART OF THE IPO FUND IN PURCHASE OF NEW MACHINERIES AND ALSO HAS UN DERTAKEN NEW CONSTRUCTION JOBS [AS IS ITS NATURE OF BUSINESS] OF ROAD, BRIDGES ETC. AT VARIOUS SITES. HERE IT IS NECESSARY TO REPEAT THAT THE ASSESSEE'S NATURE OF BUSINESS IS TO ACQUIRE CONTRACTS OF CONSTRUCTION , WIDENING, STRENGTHENING OF ROADS, BRIDGES AND VARIOUS INFRAST RUCTURE JOBS OF LIKE NATURE. IT ALWAYS WORKS AT SITES ON CONTRACT BASIS AND ONCE THE JOB IS OVER IT VACATES THE SITES. SO, EVEN IF AFTER IT REC EIVED THE IPO FUND, DEPLOYED PART OF THE FUND IN PURCHASE OF NEW MACHIN ERIES, THUS ENHANCED ITS WORKING CAPACITY AND STARTED TO WORK A T NEW SITES - THAT DOES NOT MEAN IT HAD EXTENDED HIS INDUSTRIAL UNDERT AKING. SUCH DEVELOPMENTS CAN BE CALLED EXPANSION OF BUSINESS BU T DEFINITELY IT IS NOT SYNONYMOUS WITH 'EXTENSION OF HIS INDUSTRIAL UN DERTAKING'. THIS IS BECAUSE IF IT HAD DONE STRENGTHENING / WIDENING OF A ROAD, THAT ROAD DOES NOT BECOME A PART OF HIS INDUSTRIAL UNDERTAKIN G (I.E. PART OF HIS BUSINESS ASSET) DURING THE COURSE OF WORK OR EVEN O N THE COMPLETION OF WORK. 7. IN THE FIRST APPELLATE PROCEEDINGS BEFORE THE CI T-A THE ASSESSEE REITERATED THE SAME SUBMISSION MADE BEFORE THE AO AND CONTENDED THAT THE EACH PROJECT UNDERTAKEN BY I T IS A UNIQUE PROJECT AND EQUIPMENT PURCHASED AND WORKING CAPITAL INVESTED ARE IN THE NATURE AND PURPOSE IN TERMS OF NEW INDUSTRIAL UNDERTAKING AND CLAIMED ELIGIBILITY FOR A DEDUCTION. BESIDES, THE ASSESSEE ALSO MADE ALTERNATIVE ARGUMEN TS TO ALLOW THE SAID EXPENDITURE AS REVENUE EXPENDITURE. THE CI T-A FOUND THAT THE ASSESSEE COULD NOT FILE ANY DETAILS SHOWIN G THAT THE NEW UNDERTAKINGS HAS ACTUALLY BEEN SET UP AND COMME NCED THE BUSINESS TO BECOME ELIGIBLE DEDUCTION U/S. 35D OF T HE ACT. THE CIT-A ALSO FOUND THAT THE ASSESSEE COULD NOT PRODUC E ANY DETAILS REGARDING THE NATURE OF EXPENSES INCURRED. ACCORDINGLY, HE UPHELD THE IMPUGNED FINDING OF THE AO IN NOT ALL OWING THE SAME AS DEDUCTION CLAIMED U/S. 35D OF THE ACT 8. REGARDING THE ALTERNATIVE ARGUMENT CLAIMING THE SAME AS REVENUE EXPENDITURE, THE CIT-A FOUND THAT THE ASSES SEE COULD NOT PRODUCE ANY DETAILS OF SUCH EXPENDITURE WAS INC URRED AS I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 5 REVENUE EXPENDITURE. RELEVANT FINDINGS OF THE CIT-A ARE REPRODUCED HEREIN BELOW: 4. DURING THE COURSE OF APPELLATE PROCEEDINGS THE A PPELLANT COMPANY REITERATED THE SUBMISSION MADE BEFORE THE AO THAT I T CAME OUT WITH IPO FOR EXTENSION AND EXPANSION OF BUSINESS OF ITS EXIS TING UNDERTAKING AS WELL AS SETTING UP NEW INDUSTRIAL UNDERTAKING. THER EFORE, 1/5TH OF THE EXPENSES INCURRED ON IPO ARE ALLOWABLE AS DEDUCTION U/S 35D OF THE ACT. IT IS CONTENDED BY THE APPELLANT COMPANY THAT ITS BUSINESS IS SUCH THAT EACH PROJECT UNDERTAKEN IS A UNIQUE PROJECT AN D THUS EFFECTIVELY A NEW INDUSTRIAL UNDERTAKING. THE EQUIPMENT PURCHASED AND WORKING CAPITAL INVESTMENTS FOR GENERAL CORPORATE PURPOSES WAS TO FURTHER THE BUSINESS OF THE COMPANY BY EXTENDING ITS UNDERTAKIN G. FOR INSTANCE, WITH THE RAISED NET WORTH THE COMPANY WAS ABLE T QU ALIFY FOR NEW PROJECTS WHICH HAVE HIGHER NET WORTH REQUIREMENTS. IT IS SUBMITTED THAT AFTER RAISING OF FUNDS THE COMPANY WAS ABLE TO UNDE RTAKE NEW COMPLEX BRIDGE WORK PROJECTS, NEW INDUSTRIAL INFRASTRUCTURE DEVELOPMENT PROJECTS, ENTER THE NATIONAL HIGHWAY SECTOR IN DOIN G OPERATION AND MANAGEMENT WORKS FOR NHAI WHICH THE COMPANY HAD NEV ER UNDERTAKEN IN PAST. WITH RESPECT OF INVESTMENT IN SUBSIDIARIES AND JOINT VENTURES, THE MONEY WAS DEPLOYED IN ACQUISITION OF LAND FOR U NDERTAKING HEALTHCARE AND EDUCATIONAL PROJECTS ALONG WITH RESI DENTIAL DEVELOPMENTS. THIS WAS EXTENSION OF CIVIL ENGINEERI NG SKILLS IN NEW AREAS AND THUS EXTENSION OF UNDERTAKING. THEREFORE, THE DEDUCTION IS ALLOWABLE U/S 35D OF THE ACT. IT IS ALSO SUBMITTED BY THE APPELLANT THAT OTHERWISE DEDUCTION OF ENTIRE EXPENDITURE SHOULD BE ALLOWED AS REVENUE EXPENDITURE. THE RELIANCE IS PLACED ON THE DECISION OF HYDERABAD ITAT IN THE CASE OF ITW SIGNODE INDIA PVT. LTD. VS. DCIT , ITA NOS. 560 & 566/HYD/2002. IN VIEW OF ABOVE IT IS SUBMITTED BY T HE APPELLANT THAT ITS CLAIM SHOULD BE ALLOWED EITHER U/S 35D OR U/S 3 7 OF THE ACT. 5. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLAN T AND PERUSED THE ASSESSMENT ORDER. THE FACTS OF THE CASE HAVE ALREAD Y BEEN DISCUSSED AS ABOVE. ON CAREFUL CONSIDERATION OF THE FACTS AND IN LAW, I AM OF THE OPINION THAT THE AO HAS RIGHTLY DISALLOWED THE CLAI M U/S 35D OF THE ACT MADE BY THE APPELLANT COMPANY FOR THE FIRST TIME IN THE RETURN OF INCOME FILED U/S L53A OF THE ACT. I AGREE WITH THE VIEW OF THE AO THAT MERELY ACQUISITION OF SOME NEW PLANT AND MACHINERIE S FOR EXECUTING CIVIL CONTRACTS DOES NOT MEAN THAT THERE WAS EXTENS ION OF EXISTING UNDERTAKING. I FIND NO FORCE IN THE SUBMISSION OF T HE APPELLANT THAT EACH CIVIL PROJECT AWARDED TO THE COMPANY IS TO BE TREATED AS NEW UNIT. THE APPELLANT HAS ALSO FAILED TO PROVE THAT NEW VEN TURES BEING SET UP BY HIM, WERE ACTUALLY SET UP AND COMMENCES THE BUSI NESS TO MAKE THE APPELLANT ELIGIBLE FOR DEDUCTION U/S 35D OF THE ACT . FURTHER, IN THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT WAS ASKED TO FURNISH THE DETAILS AND NATURE OF EXPENSES INCURRED AND CLAIMED U/S 35D. BUT, NO SUCH DETAIL OR EXPLANATION WAS SUBMITTED BY THE APP ELLANT COMPANY. THE AO HAS RIGHTLY OBSERVED THAT IN THE YEAR UNDER CONSIDERATION THERE WAS NEITHER EXTENSION OF THE UNIT NOR ANY NEW UNIT WAS SET UP. THEREFORE, THE APPELLANT IS NOT ENTITLED FOR DEDUCT ION U/S 35D OF THE ACT. THE ALTERNATE CLAIM OF THE APPELLANT U/S 37 IS ALSO ALLOWABLE BECAUSE IT HAS FAILED TO PROVE THAT THE EXPENDITURE WAS REVENUE IN NATURE. NO DETAILS OF EXPENDITURE WERE FILED. IN TH E CASE OF CIT VS. SHASUN CHEMICALS AND DRUGS LTD. 199 TAXMAN 107 (MAD ), IT IS HELD THAT IN THE ABSENCE OF COMPLETE DETAILS THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 35D. IN THE CASE OF MEDREICH LTD. VS. DCIT 15 TAXMANN.COM 371 (BANGALORE), IT IS HELD THAT EXPENS ES INCURRED BY ASSESSEE COMPANY ON ISSUE OF SHARES SO AS TO INCREA SE ITS CAPITAL BASE TO BE USED FOR VARIOUS PURPOSES DID NOT QUALIFY TO BE AMORTISED U/S 35D OF THE ACT. IN THE CASE OF ANSAL HOUSING & CONSTRUC TION LTD. VS. CIT, 185 TAXMAN 74 (DELHI), IT IS HELD THAT THE ASSESSEE ENGAGED IN THE I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 6 BUSINESS OF CONSTRUCTION WOULD NOT BE HELD AS 'INDU STRIAL UNDERTAKING' WITHIN THE MEANING OF SECTION 35D FOR THE PURPOSE O F ALLOWING DEDUCTION UNDER SAID SECTION. IN THE CASE OF APPELL ANT COMPANY THE SHARES WERE ISSUED FOR THE PURPOSE OF INCREASING CA PITAL BASE AND THE FUND WAS UTILIZED FOR PURCHASE OF CAPITAL ASSETS ET C. AND FOR WORKING CAPITAL. THE COMPANY IS ALSO ENGAGED IN THE BUSINES S OF CIVIL CONSTRUCTION. THEREFORE, IN VIEW OF ABOVE JUDICIAL PRONOUNCEMENTS, NO DEDUCTION U/S 35D OR 37 IS ALLOWABLE TO THE APPELLA NT. THERE IS ONE MORE ASPECT IN THE YEAR UNDER CONSIDERATION DUE TO WHICH CLAIM U/S 35D IS NOT ALLOWABLE TO THE APPELLANT COMPANY. THIS ASPECT IS THAT THE COMPANY HAD NOT CLAIMED DEDUCTION U/S 35D IN ITS OR IGINAL RETURN. THE CLAIM WAS MADE FOR THE FIRST TIME IN THE RETURN FIL ED U/S 153A. HOWEVER, IT HAS JUDICIALLY BEEN HELD THAT ALL ASSES SEE CANNOT MAKE A NEW CLAIM U/S 153A IF NOT MADE ORIGINALLY IN THE RE TURN FILED U/S 139(1) OF THE ACT. THE RELIANCE IS PLACED ON THE DECISION IN THE CASE OF CHARCHIT AGARWAL VS. DCIT, 129 TTJ 438 (DELHI) AND SUN CITY ALLOYS P. LTD VS. ACIT, 124 TTJ 674 (JODHPUR). IN THE CASE O F SUN CITY ALLOYS, IT IS HELD THAT THE PROCEEDINGS U/S. 153A DO NOT CONST ITUTE DE-NOVO ASSESSMENT. THE ASSESSEE IS PRECLUDED FROM RAISING ANY FRESH CLAIM AFTER EXPIRATION OF TIME ALLOWED TO FILE REVISED RE TURN U/S. 139(5). THEREFORE, NO FRESH OR REVISED CLAIM CAN BE RAISED IN THE ASSESSMENT MADE U/S. 153A. SIMILAR FINDING HAS BEEN RENDERED I N THE CASE OF CHARCHIT AGGARWAL WHERE THE ASSESSEE NOT ALLOWED TO CHANGE THE METHOD OF VALUATION OF CLOSING STOCK IN THE COURSE OF PROCEEDINGS U/S. 153A. IN THE CASE OF APPELLANT, IN THE YEAR UNDER C ONSIDERATION, THE CLAIM WAS MADE U/S. 153A AND HENCE NOT ALLOWABLE. I N VIEW OF ABOVE, DISALLOWANCE OF RS.91,03,353/- U/S. 35D MADE BY THE AO IS CONFIRMED. THE GROUND NO.2 IS DISMISSED. 9. BEFORE US, THE LD.AR REITERATED THE SUBMISSIONS AS MADE BEFORE THE BOTH THE LOWER AUTHORITIES BELOW. THE LD .DR RELIED ON THE ORDERS OF CIT-A AND AO AND URGED TO DISMISS THE GROUNDS RAISED IN THE APPEAL. 10. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L EVIDENCE AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESS EE CLAIMED DEDUCTION OF RS.91,03,353/- THE WHICH AMOUNT BEING 1/5 TH OF PRELIMINARY EXPENDITURE SAID TO HAVE BEEN INCURRED FOR ISSUANCE OF INITIAL PUBLIC OFFER(IPO). THE AO FOUND THE SAID AMOUNT IS BEING REFLECTED IN THE BALANCE SHEET PREPARED AS ON 31-03-2008 AND THEREFORE, REJECTED THE CLAIM UNDER (I) SUBSECT ION 1 OF SECTION 35D OF THE ACT BY OBSERVING THAT THE BUSINE SS OF THE ASSESSEE HAD STARTED WELL BEFORE THE FY 2007-08 REL EVANT TO THE YEAR CONSIDERATION. WE FIND NO INFIRMITY IN DENYING THE BENEFIT I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 7 OF DEDUCTION (I)(1)35D OF THE ACT BY THE AO AND CIT -A. IT IS ALSO OBSERVED FROM THE RECORD THE ASSESSEE SUBMITTE D A REPLY FOR THE BOTH THE AYS 2008-09 AND 09-10 BY STATING THAT IT ISSUED AN IPO FOR THE PURPOSE OF EXTENSION AND EXPA NSION OF EXISTING UNDERTAKINGS. ACCORDING TO ASSESSEE, EACH PROJECT IS A UNIQUE AND SEPARATE AND THE FUNDS REALISED FROM THE IPO WERE DEPLOYED AS WORKING CAPITAL AND TO PURCHASE EQUIPME NT TO THE SAID PROJECTS AND CLAIMED ENTITLEMENT UNDER (II)(1) OF SECTION 35D OF THE ACT. THE AO OPINED THAT THE DEPLOYMENT O F FUNDS FROM IPO IS ONLY ENHANCED THE WORKING CAPACITY AND IT IS NOT AN EXTENSION OF EXISTING INDUSTRIAL UNDERTAKING. THE C IT-A CONFIRMED THE DISALLOWANCE AS MADE BY THE AO BY OBS ERVING THAT MERE ACQUISITION OF SOME NEW PLANT AND MACHINE RY FOR EXECUTING CIVIL CONTRACTS CAN NOT BE TERMED AS AN E XTENSION OF EXISTING UNDERTAKING. FOR USEFUL READING WE MAY REF ER TO THE PROVISION AS CONTEMPLATED U/SEC 35D OF THE ACT OF F INANCE ACT 2007 RELEVANT TO THE YEAR UNDER CONSIDERATION. SECTION - 35D, INCOME-TAX ACT, 1961-2007 AMORTISATION OF CERTAIN PRELIMINARY EXPENSES. 35D. (1) WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) WHO IS RESIDENT IN INDIA, INCURS, AFTER THE 31ST DA Y OF MARCH, 1970, ANY EXPENDITURE SPECIFIED IN SUB-SECTION (2), (I ) BEFORE THE COMMENCEMENT OF HIS BUSI NESS, OR (II ) AFTER THE COMMENCEMENT OF HIS BUSIN ESS, IN CONNECTION WITH THE EXTENSION OF HIS INDUSTRIAL UNDERTAKING OR IN CONNECTION WITH HIS SE TTING UP A NEW INDUSTRIAL UNIT, THE ASSESSEE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED A DEDUCTION OF AN AMOUNT EQUAL TO ONE-TENTH OF SUCH EXPENDITURE FOR EACH OF THE TEN SUCCESSIVE PREVIOUS YEARS BEGINNING WITH THE PREVIO US 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 INDU STRIAL UNIT COMMENCES PRODUCTION OR OPERATION: 11. A PLAIN READING OF THE ABOVE PROVISION EXPLAINS THAT AN ASSESSEE IS ENTITLED TO CLAIM THE EXPENDITURE AS IN CURRED BEFORE THE COMMENCEMENT OF THE BUSINESS AS A DEDUCTION UND ER (I) I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 8 SUBSECTION 1 OF SECTION 35D OF THE ACT. IN THE PRES ENT CASE THE AO FOUND AN AMOUNT OF RS.91,03,353/- THAT AS REFLEC TED IN THE BALANCE SHEET AS ON 31-03-2008 AND ADMITTEDLY IT IS NOT THE FIRST FY I.E 2007-08 I.E RELEVANT TO THE AY UNDER C ONSIDERATION THE ASSESSEE COMMENCED ITS BUSINESS AND THEREFORE, THE AO RIGHTLY DENIED THE BENEFIT UNDER CLAUSE (I) SUBSECT ION 1 OF SECTION 35D OF THE ACT AS CONFIRMED BY THE CIT-A. T HUS, THE IN OUR OPINION, THE ASSESSEE DOES NOT FALL UNDER CLAUS E (I) SUBSECTION 1 OF SECTION 35D OF THE ACT TO CLAIM DED UCTION. 12. CLAUSE (II) SUBSECTION 1 OF SECTION 35D OF THE ACT EXPLAINS THAT AN ASSESSEE IS ENTITLED TO CLAIM BENEFIT IN RE LATION TO THE EXPENDITURE INCURRED IN CONNECTION WITH THE EXTENSI ON OF ITS INDUSTRIAL UNDERTAKING OR IN CONNECTION WITH HIS SETTING UP A NEW INDUSTRIAL UNIT AFTER THE COMMENCEMENT OF ITS BUSINESS. WHEREAS WE FIND F ROM THE RECORD THAT AN IPO WAS ISSUED FOR THE PURPOSE OF EXTENSION AND EXPANSION OF EXISTING UNDERTAKINGS AND THE FUNDS RE ALISED FROM THE IPO WERE DEPLOYED AS WORKING CAPITAL AND TO PUR CHASE EQUIPMENT TO THE SAID PROJECTS. THEREFORE, WE ARE O F THE VIEW THAT THE ASSESSEE COULD NOT PUT UP ANY EVIDENCE TO SHOW THAT THE FUNDS REALISED UNDER IPO WERE UTILISED FOR THE EXTENSION OF EXISTING UNDERTAKING OR IN CONNECTION WITH HIS SETT ING UP A NEW INDUSTRIAL UNIT. THUS, WE DO NOT SEE ANY REASON TO INTERFERE W ITH THE ORDERS OF AO AND CIT-A AND THEY ARE JUSTIFIED AND ACCORDINGLY, E FFECTIVE GROUND AS RAISED BY THE ASSESSEE FAILS AND DISMISSED. 13. THIS APPEAL OF ASSESSEE (ITA NO. 53/KOL/2013) I S DISMISSED AS STATED ABOVE. I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 9 14. NOW, WE SHALL TAKE UP THE APPEAL IN ITA NO.955/KOL/2013 FOR THE A.Y 2009-10 (BY THE ASSESSEE). 15. WE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS SIMILAR AND THE FACTS THEREIN ARE IDENTICAL TO THE FACTS ALREADY DISCUSSE D IN THE AFOREMENTIONED PARAS IN THIS ORDER, EXCEPT TO THE VARIATIONS IN CA LCULATIONS. THEREFORE, IN VIEW OF THE DISCUSSION AND DECISION AS RENDERED THE REIN, WE UPHOLD THE ORDERS OF AO AND CIT-A AND ACCORDINGLY, EFFECTIVE G ROUND AS RAISED BY THE ASSESSEE FAILS AND DISMISSED. 16. THIS APPEAL OF ASSESSEE IS DISMISSED. 17. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28-02-201 7 J. SUDHAKAR REDDY S. S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 28-02-2017 SD/- SD/- *PP/SPS: COPY OF THE ORDER FORWARDED TO: 1 . THE APPELLANT/ASSESSEE: M/S. KAUSHALYA INFRASTRUCT URE DEVELOPMENT CORPORATION LIMITED HB-170 SECTOR III, SALT LAKE CITY, KOLKATA-106. 2 THE RESPONDENT/DEPARTMENT: THE DCIT, CC-XVIII, 110 SHANTI PALLI, KOLKATA-107. 3 THE CIT(A) I T( SS) A NO. 53/KOL/13 & ITA NO. 955/KOL/13 M/S. KAUSHALYA INFRSTRUCTURE DEV. CORPRN LTD 10 4. THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . BY ORDER, ASSTT. REGISTRAR