Expenses on Increase in authorised capital

[Anup Kumar Grover]

Whether expenses on Increase in authorised capital, ie ROC fees etc be allowed as an expenditure u/s 37 or 35 D, or other wise treatment thereof

[DEV KUMAR KOTHARI]

If there is no change in capital base say increasing capital by issue of bonus shares it will be revenue expenditure as per SC judgments. otherwise it will be capital expenditure to be allowed u/s 35D, if applicable otherwise u/s 28 ead with S. 145 according to reasonable method of accounting claim can be made over five or ten years. My view is also that authorised capital stands increased on passing relevant resolutions,ROC's filing fees is a statutory payment required whether you really issue shares or not. Thus, fees payment does not affect capital base, therefore, it should be treated as revenue expenditure and allowed u/s 37 /28 r.w.s. 43B. however, these contentions will have to go through the process of judicial scrutiny because in earlier judgments these contentions were not raised.

AI Summary

Treatment of ROC fees: statutory fees for authorised capital increase may be treated as revenue expenditure rather than capital. Whether Registrar/ROC filing fees for increasing authorised capital are revenue or capital expenditure hinges on whether the corporate capital base is actually changed; where capital base changes the expense is capital (with possible capital-specific allowance or phased recognition), but where there is no change (as with certain bonus-issue situations) such statutory filing fees are viewed as revenue expenditure deductible under general business expense provisions, a position noted as subject to judicial scrutiny and, if capitalised, amenable to amortisation over a reasonable period.