Tax Effect less than Prescribed Threshold: Delhi HC directs Income Tax Dept to file for Revival of Appeal [Read Order]

The Delhi High Court directed the Income Tax Department to file for revival of appeal as the tax effect was less than prescribed threshold.

The issue that arose for consideration before the Tribunal was whether the expenditure amounting to Rs. 9,46,22,358/- incurred in connection with the issue of equity shares to Qualified Institutional Buyers (QIBs), qualifies for a deduction under Section 35D(2)(c)(iv) of the Income Tax Act, 1961.

The respondent/assessee had amortized the expenditure over five (5) years, by taking recourse to the provisions of Section 35D(2)(c)(iv) of the Income-tax Act, 1961. In the period in issue, 1/5th of the aforementioned amount i.e., 9,46,22,358/- was claimed as an expense. In absolute terms, the amount claimed as deduction in AY 2011-12 by the respondent/assessee was Rs. 1,89,24,471/-.

The appellant/revenue also sought to deny the deduction to the respondent/assessee on the ground that the issue of shares to QIB was not a “public subscription”.

A Division Bench of Justices Rajiv Shakdher and Girish Kathpalia observed that “Given the fact that in the period in issue i.e., AY 2011-12, the expense claimed was only Rs.1,89,24,472/-, in our opinion, the tax effect would be less than the prescribed threshold i.e., Rs. 1 crore. Given this position, the appeal is closed with liberty to the appellant/revenue to approach the court, for revival of the appeal, if they receive instructions to the contrary.”

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