CPT V24P7-Art1 (Content).pmd - Taxmann

Landmark Rulings
688
‘Share issue expenses’ though not
deductible from business income, yet
can be claimed from ‘capital gains’
In Usharani Raghunathan v. CIT [2012] 23
taxmann.com 123 (Chennai - Trib.), the assessee
was a director-shareholder in a company. During
the relevant previous year, the company brought
IPO including shares held by the assessee. The
IPO expenses, as incurred in the course of
IPO, were apportioned by the company to the
assessee on pro rata basis. The assessee claimed
such expenses as deduction under section 48(1)
while computing capital gains from sale of his
shares. The AO disallowed deduction on the
ground that entire IPO expenses were liable
to be borne by the company only.
The Tribunal held in favour of assessee - The
Tribunal thoroughly analyzed the provisions
of section 53 of Transfer of Property Act, 1882
and held in favour of revenue. The relevant
extracts of the judgment are as follows:
(a) There is no dispute that the expenditure
claimed by the assessee was for effecting
the sale of his shares;
(b) Assessees had an opportunity to sell his
holdings in one block through the IPO,
therefore, the extra expenditure incurred
by assessee was sustainable;
(c) This convenience received by the assessees
if weighed against the extra expenditure
incurred for IPO, it would get more or
less balanced; and
(d) Assessee also produced prospectus of IPO
which clearly showed that assessee was
obliged to meet pro-rated share of IPO
expenses.
Therefore, in view of the above facts, the expense
shared by assessee should be allowed to be
deducted while computing capital gains on
sale of shares.
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 68
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Charitable objects and application of
income, both should be in India for
section 11 exemption
In India Brand Equity Foundation v. Asstt.
CIT [2012] 23 taxmann.com 323 (Delhi - Trib.),
the assessee-trust was formed to promote Indian
brand overseas. During the year, the assessee
received a sum of ` 3 crores for participation
in Hannover Fair in Germany, which was
partially incurred. AO disallowed the amount
spent by invoking the provisions of section 11.
On appeal, the assessee contended that the
grant was received for specific purpose and
hence, it should not be taxed by treating it as
application outside India. Further, it was
submitted that section 11 only requires that
the charitable purposes should be confined to
India, however, the application of income and
the execution of such purposes can be outside
India.
The Tribunal held in favour of revenue - It was
held that the charitable purpose as well as
application of income should be confined to
India only. Therefore, the plea of assessee was
rejected and order of AO was upheld.
Virtual ownership vests in lessee in longterm
lease; lease premium amortization
not deductible
In Krishak Bharati Cooperative v. DCIT [2012]
23 taxmann.com 265 (Delhi), assessee entered
into an agreement with the lessor to take a
land on lease for a period of 90 years, in
consideration of lease premium of ` 2.53 crore.
The rights of the assessee under lease agreement
were as under:
(a) Assessee was entitled to construct a office
complex on the land;
(b) Without permission of lessor, assessee can’t
transfer the land before erection of building;
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