1982 (12) TMI 68

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....required by the Foreign Exchange Regulation Act, 1973 and it was incurred for the purpose of transfer of equity funds of the foreign holdings to Indian shareholders and, therefore, the expenditure was capital in nature. 11. The Commissioner (Appeals) stated the expenditure related to reducing the foreign shareholdings and directly related to the capital structure and upheld the disallowance. 12. Before us, the assessee submitted that the expenditure was incurred for preserving the capital asset and, therefore, should be allowed as a revenue deduction. The learned departmental representative, on the other hand, stated that the expenditure clearly related to the capital structure and was rightly disallowed as representing capital expend....

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....e the whole or any part of any undertaking in India of any person or company carrying on any trade, commerce or industry or purchase the shares in India of any such company. (2)(a) Where any person or company (including its branch) referred to in sub-section (1) carries on any activity referred to in clause (a) of that sub-section at the commencement of this Act or has established a branch, office or other place of business for the carrying on of such activity at such commencement, then, such person or company (including its branch) may make an application to the Reserve Bank within a period of six months from such commencement or such further period as the Reserve Bank may allow in this behalf for permission to continue to carry on such....

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....arrying on the business, but springs from the transfer of the business, it is not, in our judgment, a properly debitable item in its profit and loss account as a revenue outgoing . . . ." Further, there are the observations of the Supreme Court relating to legal expenses in the case of Dalmia Jain & Co. Ltd. v. CIT [1971] 81 ITR 754 as under : "The question for decision is whether the litigation expenses incurred by the assessee were for the purpose of creating, curing or completing the assessee's title to capital or whether it was for the purpose of protecting its business. If it is the former then the expenses incurred must be considered as capital expenditure. But, on the other hand, if it is held that the expenses were incurred to....