Case Law Details
1. The present appeal arises out of the judgement and order dated 14.06.2005 passed by the High Court of Gujarat at Ahmedabad in Tax Appeal No.333/2004.
2. The respondent-assessee is a public limited company and for the assessment year 1994-95, it had filed its return wherein it had claimed revenue expenditure of Rs.65,47,448/- on advertisement and public issue. However, in the Return of Income, the Company made a claim that if the aforesaid claim cannot be considered as a revenue expenditure then alternatively then the said expenditure may be allowed under Section 35D of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by way of capitalizing in the plant and machinery obtained.
3. The Assessing Officer issued an intimation under Section 143(1) (a) of the Act on 23.02.1995 disallowing a sum of Rs.58,92,700/- out of the preliminary expenditure incurred on public issue. He, however, allowed 1/10th of the total expenses and raised demand on the balance amount.
4. The intimation was challenged before the First Appellate Authority which vide order dated 01.10.1996, allowed the appeal by holding that the concept of ‘prima facie adjustment’ under Section 143(1) (a) of the Act cannot be invoked as there could be more than one opinion on whether public issue expenses were covered by Section 35D or Section 37 of the Act.
5. Feeling aggrieved by the order passed by the First Appellate Authority, the Revenue preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal vide order dated 04.09.2003 upheld the order of the Income Tax Commissioner (Appeals) and dismissed the Appeal filed by the Revenue.
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