9911796707
TMI Blog1996 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in holding that the fee paid to the Registrar of Companies for increasing the authorised share capital is allowable as deduction under section 37 of the Income-tax Act and as revenue expenditure ? " The brief facts giving rise to this petition are thus : The assessee is a financial institution registered and incorporated under the Companies Act, 1956. A sum of Rs. 75,120 was incurred as expenditure towards the payment of fee for increasing the authorised share capital of the company. This amount was paid to the Registrar of Companies. The Income-tax Officer treated the expenditure as capital in nature and thereby assessed the liability of the tax. The assessee approached the Commissioner of Income-tax (Appeals) and the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Courts which has emerged, is that such expenditure should be treated to be a capital expenditure. In this connection, we may first refer to the decision of the Rajasthan High Court given in CIT v. Aditya Mills [1990] 181 ITR 195. In this case, the memorandum of association of a company was amended in order to increase its capital and additional capital was made available for carrying on the business of the company and as such the expenditure incurred for the purpose of amending the memorandum and articles of association was considered to be of capital nature and not a revenue nature. In Shree Digvijay Cement Co. Ltd. v. CIT [1982] 138 ITR 45, the Gujarat High Court has taken a similar view. In this case, their Lordships took the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. CIT [1986] 160 ITR 743, the Punjab and Haryana High Court, agreeing with the decision of the Calcutta High Court, took the view that the fee paid under the Companies Act for increasing the share capital was an expenditure of capital nature. In Upper Doab Sugar Mills Ltd. v. CIT [1979] 116 ITR 928, the Allahabad High Court also took the same view that equity shares constitute the capital of the company and they are an integral part of the permanent structure of the company, and are not in any manner connected with the working capital of the company which is utilised to carry on the day-to-day operations of the business. Therefore, the expenses incurred in connection with the issue of additional equity shares is not revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons that the increase of the capital is for the larger benefit of the company and it is with a view to increase its capital hoarding. Therefore, such expenditure in our opinion cannot be treated to be an expenditure of revenue nature. In Warner Hindustan Ltd. v. CIT [1988] 171 ITR 224 (AP), their Lordships dissenting from the view expressed by the Bombay High Court, the Himachal Pradesh High Court and the Delhi High Court, agreed with the view of the Madras High Court and made a reference to the decision o the Supreme Court given in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1. Their Lordships agreed that it is true that the increase in the authorised share capital is obtained from raising the share capital of the company but that is a s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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