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40. In ground No. 6 the assessee has challenged the disallowance of professional and legal fees incurred to bring IPO which was subsequently abandoned. Briefly the facts of the case are that the assessee company engaged the services of M/s Luthra and Luthra law firm, M/s S. Bhandari & Co. Chartered Accountants, M/s Amarchand Mangaldas Law firm and M/s Eman Securities Pvt. Ltd. as legal, financial and book running lead manager in connection with IPO and has incurred expenses of Rs. 97,95,083/- which as per the assessee company should be read as Rs. 1,17,42,060/-. During the course of assessment proceedings, the assessee company was asked to justify the allowability of the said expenses. After considering the submissions of the assessee company the Assessing Officer observed that in April, 2008 the Government of Rajasthan had conveyed its approval for the development of the following additional road projects namely Alwar to Bhiwadi, Jhalawar to Jhalawar Road and Amritsar to Pallu. Further, the Government of Rajasthan also conveyed its inability to provide funds for the additional project roads and ITA No. 668 to 670/JP/2019 M/s Road Infrastructure Dev. Com. of Rajasthan Ltd. vs. ACIT had requested the assessee company to explore alternate means of financing and as part of the same, the assessee company had gone ahead with the IPO process and had taken preliminary steps for bringing out the IPO through a book-building process. Referring to the draft red herring prospectus prepared by M/s Amarchand Mangaldas, the Assessing Officer observed that it is an extremely vital document which provides useful piece of guidance/data that the company has acquired. The Assessing Officer further observed that although the IPO has been aborted by the company whenever the company will subsequently bringing the IPO, this information will be extremely crucial for the company. It was accordingly held that the projects report provides an enduring benefit to the company and the assessee company is not correct in writing off this expenditure merely because the IPO was aborted. Similarly, the due diligence expenditure made by the assessee company is a capital expenditure as the same provided an enduring benefit to the assessee is a capital expenditure as the same provided and an enduring benefit to the assessee. It was further held by the Assessing Officer that the assessee itself has treated the expenditure as capital expenditure and therefore, merely because the IPO got aborted, the assessee is changing the nature of expense from capital to revenue nature.

45. The ld DR is heard who has relied on the findings of the lower authorities.

46. We have considered the rival submissions and perused the material available on record. The undisputed facts which are emerging from the records are that pursuant to approval granted by the Government of Rajasthan to develop certain specific additional road stretches/projects, the assessee company had proposed to raise funds through an IPO for such expansion activities and in connection with preparation for the IPO, has engaged the services of M/s Luthra and Luthra law firm (consultant), M/s S. ITA No. 668 to 670/JP/2019 M/s Road Infrastructure Dev. Com. of Rajasthan Ltd. vs. ACIT Bhandari & Company, Chartered Accountants (consultants for preparing the financial information), M/s Amarchand Mangaldas (consultants to the Book running lead manager) and M/s Eman Securities Pvt. Ltd.(book running lead manager) and has incurred certain expenses towards their professional, legal/due diligence and relates services amounting to Rs. 1,17,42,060/- and one of the reports/end products of such an exercise is the red herring prospectus which got prepared which is required to be submitted to SEBI for its approval before the announcement of the IPO. It is also a fact that the IPO got aborted due to unfavourable financial conditions. Therefore, the precise question which arise for consideration is whether the professional and legal expenses incurred in connection with raising of funds through an IPO which got aborted can be allowed as a revenue expenditure or not. The Coordinate Bench in case of Nimbus Communications Ltd vs ACIT (ITA No. 2361(Mum) of 2007 dated 28.01.2010) had examined the matter in similar factual background of aborted IPO expenses and has held as under:

47. The Hon'ble Bombay High Court (in ITA No. 4244/2010 dated 8.12.2011), while affirming the aforesaid findings of the Coordinate Bench, has held as under:

"2. The finding of fact recorded by the Income Tax Appellate Tribunal is that there is (no) dispute that the assessee has in fact incurred the expenditure and that on account of the aborted public issue offer, no new asset has come into existence and consequently there is no question of the assessee getting any enduring benefit. With the approval of SEBI, the assessee was to increase the share capital and thereby promote its business activity. However, the same got aborted due to reasons beyond its control. In these circumstances, in view of the decision of this Court in the case of Commissioner of Income Tax V/s. M/s. Essar Oil Limited, Income Tax Appeal (L) No. 921 of 2006 decided on 16th October 2008, in our opinion, no fault can be found with the decision of the Income Tax Appellate Tribunal in allowing the aborted share issue expenditure under Section 37 of the Income Tax Act, 1961."

48. In the instant case as well, there is no dispute that these expenses have been incurred by the assessee company in connection with the IPO which ultimately got aborted due to unfavourable market conditions which is beyond its control. By incurring such expenditure, no new asset has come into existence or any enduring benefit has accrued to the assessee company.

ITA No. 668 to 670/JP/2019 M/s Road Infrastructure Dev. Com. of Rajasthan Ltd. vs. ACIT As far as red hearing prospectus is concerned, we find that it is a document which is prepared and submitted to SEBI for its approval seeking permission to raise funds through an IPO and is thus a regulatory requirement which would be required to be submitted every time the company wishes to raise the funds in future and requires to contain latest data, statistics and declarations about the company, its promoters, past filings and financials and utilization of the proceeds of the IPO and therefore, it cannot be said that once such a document is prepared, it can be used subsequently for any future IPO. Therefore, the stand of the Assessing officer that such a document will provide an enduring benefit to the assessee company cannot be accepted. In light of aforesaid discussions and respectfully following the decision of the Hon'ble Bombay High Court in case of Nimbus Communication (supra) and in absence of any contrary authority, the expenses incurred in connection with aborted IPO are allowed as revenue expenditure. The alternate contention regarding amortization u/s 35D has thus becomes infructious and is not adjudicated upon. The matter is thus decided in favour of the assessee and against the Revenue.