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TMI Blog1986 (8) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ] for coming to the said finding. He accordingly deleted Rs. 10,806. 4. We have already noted above that the ITO has treated reimbursement of medical expenses as part of salary which was in conformity with paragraph 19 of the Tribunal Bombay, Special Bench decision in Blackie Sons (India) Ltd. v. ITO [1983] 3 SOT 72. We accordingly vacate the Commissioner (Appeals)'s order on this point and restore that of the ITO. Ground No. 2 : 5. The ITO had treated as perquisite club subscriptions paid by the assessee-company in respect of membership of its employees of different clubs. The Commissioner (Appeals) accepted the assessee's contention that the said subscriptions were not perquisites. He accordingly deleted Rs. 3,226. Clause (b) of Explanation 2 to section 40A(5) defines perquisites to include, inter alia, as per sub-clause (iv) payment by the assessee of any sum in respect of any obligation which but for such payment would have been payable by the employee. Normally, when an employee is a member of a club, it is the employee's obligation to pay the club subscription and, therefore, when the employer has paid the club subscription, the payment thus falls under the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2,000. Ground No. 4 : 10. Rs. 8,07,624 were disallowed by the ITO as share issue expenses, after noting that the business of erstwhile (Indian) Branch of Kodak Ltd. was taken over by the assessee-company under a scheme of amalgamation approved by the Bombay High Court and the said expenditure was incurred to issue shares of the company and to bring down the non-residential holding to 40 per cent as per Reserve Bank's directive. He disallowed (as per page 4 of assessment order) the claim on the ground that it is not of current nature and is not an expenditure incurred to earn the income and, therefore, cannot be set off against (current) receipts. The Commissioner (Appeals) however, allowed the said expenses following order of the Tribunal Bombay Bench ' D ' in the case of ITO v. Godfrey Philips (I) Ltd. [IT Appeal No. 1410 (Bom.) of 1991 dated 24-7-1981] for the assessment year 1976-77 (PB 8) which had followed CIT v. Kisenchand Chellaram (India) (P.) Ltd. [1981] 130 ITR 395 (Mad.). 11. The assessee-company was incorporated on 23-8-1973 for acquiring the business and undertaking in India of Kodak Ltd. which was a nonresident company. The assessee-company applied to the Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Companies. The Bombay High Court noticed that the Madras High Court in Kisenchand Chellaram (India) (P.) Ltd.'s case had taken the view that fees paid to the Registrar of Companies for enhancement of capital were spent only for the purpose of business and, therefore, there was no capital element in this expenditure, The Bombay High Court, however, observed that the said Madras High Court decision runs counter to a series of decisions of other High Courts which held to the contrary. The Bombay High Court referred to India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC) where the expenditure incurred on stamp duty, registration fees, etc., in connection with loan obtained from the Industrial Finance Corpn. was held as an admissible expenditure. The Bombay High Court noted that the Supreme Court in India Cements Ltd.'s case had highlighted the difference between obtaining of capital by issue of shares and of obtaining of loan by debentures and that the Supreme Court had referred to the Bombay High Court's earlier decision in Tata Iron Steel Co. Ltd., In re [1921] 1 ITC 125 where underwriting commission had been paid on issue of preference shares and Macleod, CJ., had held that if cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and urged that the aforesaid expenditure of Rs. 8,07,624 was incurred for continuing the assessee's business and to comply with the Reserve Bank's directions for diluting the foreign equity to 40 per cent. As we pointed out to the assessee's counsel, this could be done by offering 60 per cent of the holding of the foreign shareholders to the public as was done by many FERA companies. The fact remains that the assessee-company was raising its initial share capital from the public and the said expenditure was incurred for raising the said share capital. 19. In Upper Doab Sugar Mills Ltd.'s case additional equity shares were issued and the Allahabad High Court held that equity shares constitute the capital of the company and they are an integral part of 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 day-to-day operations of the business and, therefore, the expenses incurred in connection with the issue of additional equity shares was capital expenditure. 20. In Mohan Meakin Breweries Ltd.'s case, the Himachal Pradesh High Court held that obtaining capital by issue of shares is dif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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