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TMI Blog1987 (1) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... rief are that the ITO added back Rs. 29,332 out of miscellaneous expenses with the narration "Bonus shares issue expenses —— capital expenditure." The CIT(A) by following the Supreme Court decision in the case of India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC) and the Madras High Court decision in the case of CIT vs. Kishenchand Chellaram (India) P.Ltd. (1980) 16 CTR (Mad) 248 : (1981) 130 ITR 385 (Mad) deleted the addition. 2. The departmental representative by referring to the Calcutta High Court decision in the case of Bengal Assam Investors Ltd. vs. CIT (1983) 142 ITR 156 (Cal) and the Punjab Harayana High Court decision in the case of Groz-Beckert Soboo Ltd. vs. CIT (1986) 54 CTR (P H) 221 : (1986) 160 ITR 743 (P H) argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bom) 306 : (1984) 145 ITR 793 (Bom) and the decision relied upon by the CIT(A), namely CIT vs. Kisenchand Chellaram (India) P. Ltd. (1980) 16 CTR (Mad) 248 : (1980) 131 ITR 385 (Mad) wherein it has been held that the fees paid to the Registrar of Companies for increasing the share capital of a company is revenue expenditure. The ld. counsel also brought to our notice the Tribunal's orders in the case of Jay Shree Tea Industries Ltd. ITA No. 1277 (Cal) of 1983) Century Enka Ltd. (ITA No. 52 (Cal) of 1978-79) wherein on similar facts it was held that the expenditure incurred in connection with issue of bonus shares was deductible as a revenue expenditure. 3. We agree with the assessee's ld. counsel that the High Court decisions relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi and each member made certain contribution for that purpose. The assessee, it was explained before the ITO, contributed Rs. 1 lac for construction of the Chamber's building in Delhi. The ITO on these facts held that the expenditure incurred was of capital nature. The ITO further refused to allow depreciation on the amount capitalised by observing that the assessee was not the owner of the building. The CIT(A) held that the expenditure was of a revenue nature as "the building constructed by the Chamber of Commerce will be utilised for the purpose of rendering various services in the constituents including the appellant." 6. The departmental representative stated that the CIT(A) was wrong in relying on the Supreme Court decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with the assessee's business but its legitimacy within the meaning of s. 37(1) was disputed by the ITO. With reference to the Madras High Court in the case of CIT vs. Sundaram Iyengar Sons (P) Ltd. (1974) 95 ITR 428 (Mad) and the Supreme Court decision in the case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 : (1980) 124 ITR 1 (SC) the ld. counsel stated that the assessee did not acquire for itself any capital asset and the amount in question was a permissible deduction as a revenue expenditure incurred wholly and exclusively for the purpose of the assessee's business. 7. The amount paid was not in the nature of fees or annual subscription payable to the Punjab, Haryana and Delhi Chamber of Commerce, of which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not by way of regular subscription or annual fees payable by the assessee as a member of the Punjab, Haryana and Delhi Chamber of Commerce, there is no direct nexus between the expenditure and the business of the assessee and it cannot be said on the facts stated above that the expenditure incurred was incidental to the assessee's business. The contribution as such in our opinion was the nature of a donation which was not necessitated by commercial expediency and therefore, was not a legitimate business expenditure of the assessee. In the circumstances, the ITO was wrong in inferring from the facts stated by him that the expenditure was capital in nature, inasmuch as no asset was created by the assessee by incurring the aforesaid expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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