- (1.) In this appeal, by certificate granted by the High Court under S. 261 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). the following question referred to the Calcutta High Court by the Income-tax Tribunal (hereinafter referred to as 'the Tribunal') was answered in favour of Revenue and against the assessee :- "Whether on the facts and in the circumstances of the case, the Tribunal was right in sustaining the disallowance of Rs. 13,99,305/- being expenses incurred in connection with the issue of fresh lot of shares in 1967 -
(2.) The question relates to the assessment year 1969-70 and the relevant account year ended on June 30, 1968. The assessee is a public limited company. It issued ordinary shares of Rs. 16,75,000/- of Rs. 10/- each at a premium with a view of increase its share capital and, in that connection, it incurred an expenditure of Rs. 13,99,305/- which amount was claimed by it as deductible expenses. The said deduction was disallowed by the Income-tax Officer on the view that the expenditure incurred by the assessee was on the capital account. The said view of the Income-tax Officer was affirmed by the Appellate Assistant Commissioner and the Tribunal. The High Court, while upholding the view of the Tribunal, has held that the expenditure incurred by the assessee in issuing shares with a view to increase its capital could not amount to revenue expenditure and would fall under capital expenditure. The High Court has placed reliance on the observation of this Court in India Cements Ltd. v. Commr. of Income-tax, Madras, 60 ITR 52 : (AIR 1966 SC 1053), and it did not agree with the view taken by the Madras High Court in Commr. of Income tax, Tamil Nadu-1 v. Kisenchand Chellaram (India) P. Ltd. (1981) 130 ITR 385.
(3.) Dr. Debi Pal, the learned senior counsel appearing for the appellant-assessee, has submitted that the High Court was in error in holding that the expenses incurred by the assessee in issuing the shares with a view to increase its capital did not constitute revenue expenditure. According to the learned counsel, the said view of the High Court is not in consonance with the law laid by this Court in Empire Jute Company Ltd. v. Commr. of Income-tax, 124 ITR 1 : (AIR 1980 SC 1946); Commr. of Income-tax Bombay-II v. Associated Cements Co. Ltd. (1988) 172 ITR 257 and Alembic Chemical Works Co. Ltd. v. Commr. of Income-tax, Gujarat, 177 ITR 377 : (AIR 1989 SC 1913). The learned counsel has also invited our attention to the decisions of the High Courts of Andhra Pradesh, Kerala and Karnataka which have taken the same view as that taken by the Madras High Court in Kisenchand Chellaram (India) P. Ltd. (1981 (130) ITR 385) (supra). (See Warner Hindustan Ltd. v. Commr. of Income-tax (AP), 171 ITR 224 : (1988 Tax LR 447) : Hindustan Machine Tools Ltd. (No. 3) v. Commr. of Income-tax, Karnataka-II, 175 ITR 220 : (1988 Tax LR 1150) and Federal Bank Ltd. v. Commr. of Income-tax, Kerala, 180 ITR 241 : (1990 Tax LR 44)).;