CIT v. GMR Industries Ltd. - Taxpublishers.in

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The Tax Publishers2020 TaxPub(DT) 1541 (Karn-HC) IN THE KARNATAKA HIGH COURT ALOK ARADHE & RAVI V. HOSMANI, JJ. CIT v. GMR Industries Ltd. I.T.A. No. 390 of 2010 31 January, 2020 Appellant by: R.S.V.S. Pavan Kumar, Advocate and S. Parthasarathi, Advocate JUDGMENT This appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act', for short) has been filed by the revenue. The issues, which arises for consideration is whether interest paid for delay in allotment of shares is also an expenditure like brokerage/commission connected with raising of share capital and partakes the character of share capital or the same can be treated as revenue expenditure. The appeal was admitted on 30-5-2011, on the following substantial questions of law :-- (i) Whether the finding of the appellate Authorities that the payment of interest on share application money is revenue expenditure when share application money was received by the assessee as a capital is perverse and arbitrary and contrary to law? (ii) Whether the Appellate Authorities were correct in dealing the addition made on account of prior period expenditure while computing book profits under section 115JB of the Act, when the Book Profits has to be computed on the basis of net profits is unsustainable? 2. Facts leading to filing of this appeal in a nutshell are that the assessee, had debited interest of Rs. 395.87 lakhs as interest on share application money pending allotment of preference shares for the assessment year 2003-04. The assessee responded to the query of the assessing officer stating that it has received share application money of Rs. 75.60 Crores from one GMR Investments Pvt. Ltd., for allotment of cumulative redeemable preference shares. The company made allotment of preference shares to the tune of Rs. 27.5 Crores on 2-3-2003 and the unallotted amount remained as share application money. As the allotment was not made within specify period, as agreed upon, the assessee paid interest at the rate of 8% from the date of receipt of share capital money and also subsequent period on the balance share capital money. The assessee claimed the aforesaid amount as business expenditure under section 36(1)(iii) of the Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2020 TaxPub(DT) 1541 (Karn-HC)

IN THE KARNATAKA HIGH COURT

ALOK ARADHE & RAVI V. HOSMANI, JJ.

CIT v. GMR Industries Ltd.

I.T.A. No. 390 of 2010

31 January, 2020

Appellant by: R.S.V.S. Pavan Kumar, Advocate and S. Parthasarathi, Advocate

JUDGMENT

This appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act', for short) has been filed by the revenue. The issues, which arises for consideration is whether interest paid for delay in allotment of shares is also an expenditure like brokerage/commission connected with raising of share capital and partakes the character of share capital or the same can be treated as revenue expenditure. The appeal was admitted on 30-5-2011, on the following substantial questions of law :--

(i) Whether the finding of the appellate Authorities that the payment of interest on share application money is revenue expenditure when share application money was received by the assessee as a capital is perverse and arbitrary and contrary to law?

(ii) Whether the Appellate Authorities were correct in dealing the addition made on account of prior period expenditure while computing book profits under section 115JB of the Act, when the Book Profits has to be computed on the basis of net profits is unsustainable?

2. Facts leading to filing of this appeal in a nutshell are that the assessee, had debited interest of Rs. 395.87 lakhs as interest on share application money pending allotment of preference shares for the assessment year 2003-04. The assessee responded to the query of the assessing officer stating that it has received share application money of Rs. 75.60 Crores from one GMR Investments Pvt. Ltd., for allotment of cumulative redeemable preference shares. The company made allotment of preference shares to the tune of Rs. 27.5 Crores on 2-3-2003 and the unallotted amount remained as share application money. As the allotment was not made within specify period, as agreed upon, the assessee paid interest at the rate of 8% from the date of receipt of share capital money and also subsequent period on the balance share capital money. The assessee claimed the aforesaid amount as business expenditure under section 36(1)(iii) of the Act.