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TMI Blog1990 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... as revenue expenditure ? and 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the fees paid to the Registrar of Companies for raising the authorised capital of the assessee-company was covered by sub-clause (2)(c)(iv) of section 35D of the Income-tax Act, 1961 The assessee is a limited company which paid Rs. 60,000 as fee for registration to the Registrar of Companies as required under the Companies Act, 1956, for amendment of the memorandum of association for raising the authorised capital from Rs. one crore to Rs. five crores. The assessee claimed that the fee paid to the Registrar of Companies was revenue expenditure and as such it was entitled to get a deduction for the same. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for reference was thereafter filed by the Revenue under section 256(1) of the Incometax Act. Being of the opinion that there was a conflict of opinion among the various High Courts about the entitlement of the assessee to get deduction of the expenditure incurred in obtaining registration as revenue expenditure or capital expenditure, the Tribunal referred the questions mentioned in the beginning of this judgment for the opinion of the High Court. Sri V. K. Singhal, learned counsel for the Revenue, submitted that the fees paid to the Registrar in connection with the amendment of the memorandum and articles of association to increase the capital is a capital expenditure and that the Tribunal erred in holding it to be a revenue expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 37(1) of the Income-tax Act. It is, no doubt, true that the distinction between "revenue" and "capital" expenditure is a fine one. Dealing with all those cases which took the view that expenses incurred in obtaining registration of the memorandum of association and articles for enhancing capital, the Kerala High Court held that the fee paid under the Companies Act, 1956, to the Registrar was revenue expenditure. To the same effect was the view taken by the Madras High Court in CIT v. Kisenchand Chellaram (India) P. Ltd. [1981] 130 ITR 385. In coming to the conclusion, the Madras High Court had applied the ratio enunciated by the Hon'ble Supreme Court in India Cements Ltd. v. CIT [1966] 60 ITR 52. The decision of the Madras Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee argued that the language of section 35D is wide enough to cover a case of payment of fee to the Registrar for raising capital of the assessee-company and the provision should be so interpreted that the same be not against the assessee, particularly when its object was to benefit him. Learned counsel contended that the settled principle is that a provision of law capable of two interpretations should be interpreted in a manner so as to give benefit to the assessee. Sub-section (2)(c)(iii) of section 35D is as under "35D(2)(c) ... (iii) by way of fees for registering the company under the provisions of the Companies Act, 1956 (1 of 1956)." The provision contained in subsection (2)(c)(iii) of section 35D was resorted to by learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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