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Issues involved: Deduction of expenses incurred for shares and debentures by a public financial institution.
Summary: The assessee, a public financial institution, claimed deduction of expenses incurred for shares and debentures, including convertible debentures. The Assessing Officer disallowed the deduction, considering the expenses as capital expenditure rather than revenue expenditure, citing a previous court decision. However, the Supreme Court in Brooke Bond India Vs. Commercial Tax Officer held that investments by banks in securities constitute trading assets, with income from them being business income. Banks operate under RBI guidelines, requiring investment in government securities and shares. Share capital for financial institutions serves as working capital, with amounts utilized for issuance of share capital being deductible expenditure. The High Court set aside the Appellate court's order and remanded the matter to the Assessing Officer for fresh consideration. The Assessing Officer is directed to determine if the share capital amounts were used for public lending, allowing deductions accordingly. The appeal was disposed of in accordance with these findings.
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