Document Fragment View

Matching Fragments

IT( SS) A No. 53/Kol/13 & M/s. Kaushalya Infrstructure Dev. Corprn Ltd

6. During such proceedings the AO found that the assessee 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 original return filed u/s. 139(1) of the Act. Notices u/s. 143(2) and 142(1) dated 27-07-2010 were issued. In response to which, the assessee submitted that it incurred preliminary expenses 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 t h 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 Infrastructure Development Corporation Limited] had commenced well before FY 2007-08 and in response to such query the Assessee submitted that the said public issue/offer was for the purpose of extension and expansion of its existing undertakings as well as for the purpose of setting up new industrial units. 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 undertaking or setting up of a new industrial unit. The relevant finding of the AO is reproduced herein below:-

4. During the course of appellate proceedings the appellant company reiterated the submission made before the AO that it came out with IPO for extension and expansion of business of its existing undertaking as well as setting up new industrial undertaking. Therefore, 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 under taken is a unique project and 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 undertaking . For instance , with the raised net worth the company was able t qualify for new projects which have higher net worth requirements. It is submitted that after raising of funds the company was able to undertake new complex bridge work projects, new industrial infrastructure development projects, enter the National Highway sector in doing operation and management works for NHAI which the company had never undertaken in past. With respect of investment in subsidiaries and joint ventures, the money was deployed in acquisition of land for undertaking healthcare and educational projects along with residential developments. This was extension of civil engineering 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 the appellant that its claim should be allowed either u/s 35D or u/s 37 of the Act.

16. This appeal of assessee is dismissed.

17. In the result, the appeals of the Assessee are dismissed.

      ORDER PRONOUNCED IN OPEN COURT ON 28-02-2017

          Sd/-                                                    Sd/-


  J. Sudhakar Reddy                              S.S. Viswanethra Ravi
  Accountant Member                                     Judicial Member
                                Dated   28-02-2017

  *PP/SPS: Copy of the order forwarded to:

1. The Appellant/Assessee: M/s. Kaushalya Infrastructure Development Corporation Limited HB-170 Sector III, Salt Lake City, Kolkata-106.