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TMI Blog1987 (8) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... l first refer to these questions and also point out in what manner they are concluded. The first question is: " Whether the Tribunal was right in holding that the words 'regular assessment' occurring in section 214 refer only to the original assessment or the first assessment made by the Income-tax Officer and not to any order which may be passed pursuant to an appellate order ? " This question was referred at the instance of the assessee. But it is concluded against the assessee by the decision of this court in Nizam's Religious Endowment Trust v. ITO [1981] 131 ITR 239. Following the said decision, the said question is answered, in the affirmative, i.e., against the assessee and in favour of the Revenue. The second question, also referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted assets for the purpose of calculating the capital under rule 19A ? " This question has to be answered in favour of the assessee, following the decision of this court in CIT v. Warner Hindustan Ltd. [1986] 160 ITR 217, 228. Accordingly, this question is answered in the affirmative, i.e., in favour of the assessee. The fifth question, referred at the instance of the Revenue, is: " Whether the asseseee is entitled to depreciation under section 32(1) on scientific research assets relating to the business carried on by it the cost of which has been allowed as deduction in full under section 35 in an earlier year, in the facts and circumstances of the case ? " This question has to be answered in favour of the Revenue and against the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall first take up the 6th question for consideration. The assessee claimed deduction in respect of a sum of Rs. 18,000 paid by it by way of legal and consultation fees in connection with the issue of bonus shares. The Income-tax Officer disallowed the amount holding that the expenditure was of capital nature, relying upon a decision of the Income-tax Appellate Tribunal, Hyderabad. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer. He refused to follow the decision of the Bombay Bench of the Income-tax Appellate Tribunal taking a contrary view. When the matter came up before the Income-tax Appellate Tribunal, it too preferred to follow the view taken by the Hyderabad Bench in preference to the view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where, by incurring a certain expenditure no new asset was created and there was no addition to, or expansion of the profit-making apparatus of the assessee, nor was the expenditure laid out to acquire a source of profit or income, the expenditure cannot be treated as on capital account. What is material, it was observed, was to consider the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable. In the case before us, the expenditure in question was not laid out in connection with the issuance of bonus shares. The expenditure was in connection with the legal advice and consultation services preliminary to such issue. It cannot be said that this exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, therefore, petitioned for a supplementary charter as a result of which the company's affairs were reorganised and its commercial performance improved. The question was whether the expenditure incurred by the company in obtaining the charter and in defending, the action, and certain payments made to two dissenting shareholders in that behalf, constituted revenue expenditure or not. It was held that inasmuch as the object of obtaining the new charter was to remove the obstacles to profitable trading and inasmuch as the removal of the said restrictions facilitated the day to day operations of the company, the expenditure was on revenue account. Apply in the said principle to the facts of this case, it must be held that the said expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the decisions which have taken a contrary view, the decision of the Supreme Court in Empire Jute Company's case [1980] 124 ITR 1 was not considered. The approach of these courts is that inasmuch as the increase in the limit of the authorised capital entitles the company/assessee to issue fresh shares and thereby increase its capital, the expenditure is in the nature of capital expenditure laid out for acquiring an enduring benefit. But, as we have pointed out above, the mere raising of authorised capital does not by itself affect the share capital of the company. The company may as a fact, issue fresh shares or it may not. It is true that the increase in the authorised share capital is obtained for ultimately raising the share capita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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