Capital expenditure on authorised capital enhancement is not deductible as revenue expenditure, following binding Supreme Court authority.

Fees paid to the Registrar of Companies for increasing a company's authorised capital were held to be capital expenditure, not deductible as revenue expenditure. The Madras High Court followed the later binding Supreme Court ruling that expenditure incurred in connection with enhancement of authorised capital is capital in nature, which displaced the earlier contrary view. On that basis, the question was answered in the negative and the issue was decided in favour of the Revenue.

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Issues: Whether the fees paid to the Registrar of Companies for increasing the authorised capital of the company is allowable as revenue expenditure.

Analysis: The question was referred under section 256(2) of the Income-tax Act, 1961 for the assessment year 1984-85. The Court followed the later binding Supreme Court ruling that expenditure incurred in connection with enhancement of authorised capital is capital in nature and not deductible as revenue expenditure, thereby displacing the earlier contrary view.

Conclusion: The question was answered in the negative, holding that the expenditure is not allowable as revenue expenditure and the issue is decided in favour of the Revenue.

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