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TMI Blog2012 (8) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the company - as in case of sub-division of the shares also, there is no increase in the share capital of the company and , the company gains enduring benefit is without any support from the record - in favour of assessee. - Tax Appeal No. 202 of 2000 - - - Dated:- 14-8-2012 - Akil Kureshi And Harsha Devani, JJ. For Appellant : Mr Manish J Shah For Mr J P Shah For Respondent : Mr K M Parikh JUDGEMENT Per : Akil Kureshi, J : 1. The appellant Gujarat State Fertilizers Co. Ltd., the assessee has preferred this appeal under section 260A of the Income Tax Act, 1961 ( the Act for short) calling in question a judgement of the Income Tax Appellate Tribunal ( the Tribunal for short) dated 4.5.2000. At the time of adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of subdivision of its shares, the Tribunal noted that the same was for the purpose of easy trading of such shares in the market and was essentially for the benefits of the shareholders. The Tribunal was of the opinion that such expenditure incurred was connected with the capital structure of the company and gave the company an advantage of enduring nature. The Tribunal, therefore, held that the revenue authorities rightly disallowed such expenditure treating the same as capital in nature. The Tribunal referred to and relied upon the decision of this Court in case of Ahmedabad Manufacturing and Calico Pvt. Ltd. v. Commissioner of Income Tax, reported in (1986) 162 ITR 800 (Guj.) . 4. It is this issue which the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, would result into enduring benefit to the company. He, therefore, submitted that despite the decision of the Apex Court in case of General Insurance Corporation (supra), expenditure in the present case should still be treated as capital in nature. 7. Having thus heard the learned counsel for the parties, we notice that in the present case, the expenditure admittedly was made for the purpose of sub-division of the shares. It is not even the case of the Department that by such arrangement, share capital of the assessee company in any manner increased. Such sub-division was made only for the purpose of easy trading of the shares in the market. Such arrangement, therefore, may result into some benefit for the shareholders of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of bonus shares would result into enduring benefits of the company. Any expenditure incurred for such purpose should, therefore, be treated as capital in nature. 9. Such issue was examined by the Apex Court in case of General Insurance Corporation (supra). The Supreme Court was examining the question whether the expenditure incurred in connection with the issuance of bonus shares is a capital expenditure or a revenue expenditure. The Supreme Court noted that there was a conflict of opinion between different High Courts. The Gujarat High Court in case of Ahmedabad Manufacturing and Calico Pvt. Ltd. (supra) and certain other High Courts had taken a view that such expenditure would be capital in nature. On the other hand, the Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the respondent. In that case as well there was increase of authorized share capital by the issue of fresh shares and a separate issue of bonus shares. The Calcutta High Court drew a distinction between the raising of fresh capital and the issue of bonus shares and held that expenditure on the former was capital in nature as it changed the capital base. On the other hand, in the case of bonus shares, was held to be revenue expenditure following the decision of the Supreme Court in Dalmia Investment Co. Ltd., (supra) on the ground that there was no change in the capital structure at all. In our considered opinion, the view taken by the Bombay and Calcutta High Courts is correct to the effect that the expenditure on issuance of bonus s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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