TaxTMI 
TaxTMI 
2015 (12) TMI 1127
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....he assessment year 2006-07, claiming following substantial question of law:- "Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal is justified in disallowing depreciation at the rate of 15% on fee paid to Registrar of Companies for expansion of capital base which was claimed by the appellant as capital expenditure in the light of judgment of Hon'ble Supreme Court of India in the case of Punjab State Industrial Development Corporation Limited vs. CIT, (1997) 225 ITR 792 (SC) when the expenditure has been accepted as capital in nature? 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant is engaged in the business of manufacturing c....
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....00,000/- paid by the assessee as fees to the Registrar of Companies for the expansion of capital base and capitalized towards plant and machinery. 5. It was not controverted by learned counsel for the assessee that the amount of Rs. 10,00,000/- paid by the assessee as fees to the Registrar of Companies for the expansion of capital base was capital expenditure in view of authoritative pronouncement of the Apex court in Punjab State Industrial Development Corporation Limited vs. CIT, (1997) 225 ITR 792 (SC) and Brooke Bond India Limited vs. CIT (1997) 225 ITR 798 (SC). It was urged that the assessee-company increased its authorized share capital for expansion of existing business and had to deposit Rs. 10 lacs as fees with the Registrar of C....
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.... assessee, the same was paid to generate funds for the expansion of the existing business. In such circumstances, the claim of the assessee cannot be held to be unjustified whereas neither the Assessing Officer nor the Tribunal have recorded any cogent and convincing reasons for holding it otherwise. Once it is held that the amount of fees paid to Registrar of Companies for increasing the authorized share capital is capitalized against plant and machinery as a necessary corollary, the assessee is entitled to depreciation at the rate of 15% on Rs. 10 lacs amounting to Rs. 1,50,000/-. The CIT(A) had rightly accepted the claim of the assessee with the following observations:- "19. After considering rival submissions, I find that the AO has w....
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....l expenditure not attributable to any capital asset and the assessee is not entitled to claim any depreciation, then in that eventuality, the assessee would be entitled to claim an amount equal to one fifth i.e. 20% of such expenditure for each of the five successive previous years as amortization of preliminary expenses under Section 35D(2)(c)(iv) of the Act. Rajasthan High Court in CIT vs. Multi Metals Limited, (1991) 188 ITR 151 discussing the scope of Section 35D(2)(c)(iv) of the Act had held that the fees paid to Registrar of Companies for enhancing the authorized share capital of a company was allowable under section 35D(2)(c)(iv) of the Act in the following terms:- "8. Coming to the second question, arguments were addressed before ....
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....icable, the language of Subsection (2)(c)(iv) of Section 35D is wide in nature and would include the deductibility of fee paid by the assessee to the Registrar for enhancement of capital. Therefore, the said provision was rightly applied to the present case by the Incometax Appellate Tribunal. 10. Under these provisions, deduction of expenditure incurred for registration is to be spread over a period of ten years and is not allowable in the year in which the expenses are incurred. To uphold the submission of the Revenue that expenditure incurred for obtaining registration would not be allowable either under Sub-section (2)(c)(iii) or Sub-section (2)(c)(iv) of Section 35D would defeat the obvious intention of the Legislature and would prod....