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TMI Blog2004 (4) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... crease in authorized capital and issue of bonus shares. The assessee treated such expenditure as revenue in nature. This claim was allowed by the Assessing Officer. 3. The assessee-company has also claimed deductions under sections 80-I and 80-IA. The deductions under sections 80-I and 80-IA are available to an assessee out of profits and gains derived from the designated Industrial Undertaking. In the present case, the amount of interest of Rs. 27,75,54,000 and a rental income of Rs. 17,81,32,000 have been included by the assessee as forming part of profits and gains of the designated industrial unit. The deductions available under sections 80-I and 80-IA have been claimed by the assessee-company on the about of business profits enhanced by the above said amounts of interest as well as rent. The claims made by the assessee-company under the above sections have been allowed by the Assessing Officer, in completing the impugned assessment. 4. Thereafter, the Commissioner of Income-tax perused the records of the case and found that the deductions mentioned in the above paragraphs have been allowed by the Assessing Officer as deductions in computing the taxable income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court have only considered the fees paid to Registrar of Companies and have not considered the legal expenses like stamp duty etc. 8. With reference to other two deductions under sections 80-I and 80-IA, the assessee stated that the authorized products manufactured by the refinery of the assessee-company are sold to the customers either directly or to the public through retail outlets and distributors. In case of retail outlets the assessee-company has to provide for various infrastructure facilities like land, buildings, pumps and tanks to the dealers appointed by Ministry of Petroleum and Natural Gas. These are to be provided by the assessee-company because of the peculiar nature of the products marketed by the assessee-company which requires handling of those products in a very careful manner. The assessee-company, like other oil companies are compensated by the concerned Ministry. The compensation is determined on the basis of periodical audit of the books of account of the assessee-company by the Oil Co-ordination Committee (OCC). These compensations are called retention margins. According to the assessee-company, no oil company makes any surplus income out of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). He held that the Assessing Officer was not justified in allowing the said expenditure as a revenue deduction. He directed the Assessing Officer to treat the expenditure as capital in nature and to make necessary modifications in the assessment. 12. With reference to computation of deduction under sections 80-I and 80-IA, the learned Commissioner of Income-tax held by the interest of Rs. 3,19,80,820, earned on incorporate deposits arising out of investment made out of surplus funds cannot be considered for the purpose of computing deduction under sections 80-I and 80-IA. Likewise he also held that the rent of Rs. 21,28,190 represented rentals earned on letting out of properties and assets cannot be considered for the purpose of deduction under sections 80-I and 80-IA. 13. Regarding balance interest also, it is the case of the learned Commissioner of Income-tax that it would not form part of assessee's profit derived out of specified industrial undertaking. Therefore, he held that balance interest also cannot be considered for the purpose of sections 80-I and 80-IA. He, therefore, directed the Assessing Officer to ignore the interest income and rental income for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shivsagar Bidi Works Ltd. v. Dy. CIT [IT Appeal No. 1250 (Pune) of 1996, dated 29-8-2003]. The learned counsel submitted that the issue has been decided by the Hon'ble Bombay High Court in the case of CIT v. General Insurance Corpn. of India (No. 1) [2002] 254 ITR 203 and also in the case of Bombay Burmah Trading Corpn. Ltd. (supra) wherein the court has held that the expenditure was revenue in nature. The Bombay Bench of the Tribunal has followed the above decisions in the case of Shivsagar Bidi Works Ltd. (supra) wherein the Tribunal has held that the expenditure incurred for the issue of bonus shares is to be allowed as revenue expenditure. 18. In the light of the above, it is the contention of the learned counsel that the issue cannot be revised by the learned Commissioner of Income-tax at all where the issue has been decided by the Assessing Officer in the light of the direct decisions of the Hon'ble High Court and Tribunal available on the issue and therefore it cannot be held that the order of the Assessing Officer on the subject issue is erroneous. The learned counsel submitted that this legal proposition is declared by the Hon'ble Supreme Court in the case of CIT v. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for the Revenue again added that the Assessing Officer was duty bound to investigate the facts relating to claims of deductions made by the assessee as held by the Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375. She also relied on the decision of the Hon'ble Bombay High Court in the case of Gabrial India Ltd. (supra) which has been equally relied on by the learned counsel for the assessee also. She further stated that even the disclosure of facts by the assessee does not preclude the Commissioner from exercising his revisional jurisdiction as held by the Hon'ble Rajasthan High Court in the case of CIT v. Emery Stone Mfg. Co. [1995] 213 ITR 843 . She also relied on the decision of the Hon'ble Delhi High Court in the case of Duggal & Co. v. CIT [1996] 220 ITR 456 and also the decision of the Hon'ble Madras High Court in the case of K.A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657 . 22. We considered the matter in detail. The scope and extent of section 263 of Income-tax Act, 1961 and the legal propositions relating thereto have been expounded quite a number of times through a series of jurisdictional pronouncements of various High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-1-1998. Therefore, it is very clear that the decisions of the Hon'ble Supreme Court on an analogous subject were very much available while completing the impugned assessment presumably on the basis of the decision of the Hon'ble Bombay High Court and that of the ITAT Pune Bench in the cases cited supra. The Hon'ble Supreme Court has made it clear that the expenditure incurred by the company in connection with the widening of its capital base is capital expenditure. But of course the specific case of bonus shares has not been raised in those matters considered by the Hon'ble Supreme Court. But to attempt a distinction between widening capital base by issue of shares to the public and by issuing bonus shares to the shareholders is very thin. In one case the company is getting cash and in another case the company is not getting any cash but only converting reserve account into capital account. But even the funds collected by issuing shares can be spent for revenue expenditure or capital expenditure. Therefore, whether cash is received or not by widening the capital base of the assessee-company is not that much vital so as to make fundamental distinction between widening share capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot discussed about the issue pin-pointed by the Commissioner of Income-tax. She again pointed out that the elaborate discussion made out by the Assessing Officer is with reference to the LPG bottling plant. The Assessing Officer has not considered anything about the interest amount of Rs. 3,19,80,820 earned by the assessee-company on inter-corporate deposits made out of surplus funds available with it. Like-wise, the Assessing Officer has not considered the rental income of Rs. 21,28,190 earned by the assessee-company by letting out his assets and properties. The Assessing Officer has not considered the treatment to be given to interest received on bank deposits. It is true that the ITAT, 'H' Bench, Mumbai in the case of Mangalore Refinery & Petrochemicals Ltd. (supra) have decided the issue of interest received by the assessee from Oil Co-ordination Committee etc., in favour of the assessee. It may be equally true that licence fees or rentals received by the assessee-company from retail outlets may take the form of business income. But the interest income of Rs. 27,75,54,000 and rental income of Rs. 17,81,32,000 have not been entirely covered by the above Tribunal decision. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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