Public issue share expenditure treated as capital cost where the purpose was to increase share capital

Expenditure incurred for a public issue of shares was treated as capital expenditure because the assessee's object was to increase share capital. Compliance with a Reserve Bank direction to meet regulatory requirements did not change the character of the spend. The matter was said to be covered by the earlier decision on expenditure for increasing share capital, and the question was answered in the negative in favour of the Revenue.

---

---

Issues: Whether the expenditure incurred for the public issue of shares was capital expenditure or revenue expenditure.

Analysis: The object of the assessee was to increase its share capital. The fact that the issue was made pursuant to a Reserve Bank direction to comply with regulatory requirements did not alter the character of the expenditure. The matter was held to be covered by the earlier decision concerning expenditure incurred for increasing share capital.

Conclusion: The expenditure on the public issue of shares was capital expenditure and the question was answered in the negative, in favour of the Revenue.

---