The Income Tax Appellate Tribunal (ITAT) Delhi Bench held that the issue of share capital through qualified institutional placement (QIP) with Qualified Institutional buyers is public subscription. Therefore the bench directs readjudication.
The assessee, Yes Bank Ltd return was revised and declared total income of Rs 22,75,02,02,660/- Thereafter assessee case was selected for scrutiny. Finally the AO passed an assessment order by disallowing deduction claimed under section 35D of Income Tax Act on the expense related to qualified institutional placement.
During the year, the assessee had raised 103 crore rupees by way of issue of share capital through QIP, in which it placed its share capital with qualified institutional buyers (QIB).
Accordingly in connection with issue of shares to QIB , the assessee incurred expenses on account of payments to lead managers of the issue and payments to legal consultants and auditors for the finalization of placement document for the purpose of QIP.
The assessee claimed 1/5 of those expenses amounting to Rs.2,82,80,290/- u/s 35D of the Act for the captioned year.
It is noted that Section 35D of the Income Tax Act allows deduction of 1/5th of the expenses incurred in connection with the issue for public subscription of shares in or debentures of the company
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) {CIT(A)}, who upheld the order .Thus assessee filed a second appeal before the tribunal.
During the proceedings, Yogesh Thar, the counsel for the assessee submitted that the QIB falls in the category of offer made to the public.
Further, the counsel argued that QIB are a class of investors which forms a part of the larger investor community and accordingly would be considered as public for the purpose of section 35D.
Kishor Dhule, Counsel for Revenue, supported the decision of lower authorities .
The issue of shares made by assessee to QIB is “Public subscription of shares. Thus , if the issue of shares is through “ public Subscription” assessee is eligible for deduction under Section 35D of Income Tax Act .Moreover the issue is decided in favour of the assessee in assessee”s own case for Assessment Year 2010-11
After reviewing the facts and submissions of the both parties, the two member bench of Om Prakash Kant (Accountant Member) and Kavitha Rajagopal (Judicial Member) restored the matter to the file of AO to decide whether QIP is public or not.
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