TaxTMI 
TaxTMI 
2016 (10) TMI 406
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....essment years 1999-2000 and 2003-2004. 2. The assessee is a Public Limited Company. In terms of the provisions contained in Section 81 of the Companies Act, in July 1998, the assessee announced a rights issue of shares and accordingly shares were offered to its existing share holders. Many of them accepted the shares offered and the shares which were not accepted by the existing shareholders were subscribed by the promoters of the Company themselves. In terms of the provisions contained in Section 35D(2)(c)(iv) of the Income Tax Act, the assessee claimed amortization of the preliminary expenses incurred for the rights issue. On the ground that only shares issued for public subscription qualified for the benefit of Section 35D(2)(c)(iv) o....
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....ts issue of shares qualified for the benefit of Section 35D(2) (c)(iv) of the Income Tax Act . 6. Relevant part of Section 35D(2)(c)(iv), reads as follows: "35D. Amortisation of certain preliminary expenses:- (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2),- (i) before the commencement of his business, or (ii)...................................................................... the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten suc....
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....erage and charges for drafting, typing, printing and advertisement of prospectus, qualify for amortization as provided in the Section. Companies incorporated in India are permitted to issue shares to its existing shareholders and such issue of shares is governed by Section 81 of the Companies Act. This Section provides that such shares shall be offered to the persons who, at the date of the offer, are holders of equity shares of the company, in proportion to the capital paid up on those shares at that date. It is also provided that after the expiry of the time specified for accepting the offer thus made by the company, if the offer is declined, the Board of Directors may dispose of the shares in such a manner as they think most beneficial t....
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....ion of the public, whether selected as members or debenture- holders of the company concerned or as clients of the person issuing the prospectus or in any other manner." 11. A reading of this provision shows that any reference in the Companies Act or in the Articles of a Company offering shares to the public shall, subject to the provisions of the Companies Act, be construed as including a reference to offering the shares to any section of the public also. In other words, insofar as the Companies Act is concerned, the section of the public holding shares in a company would be treated as public, for the purposes mentioned in Section 67. It is also clear from Section 67, that the purposes of the Section would include rights issue of shares....
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....aritable purpose, it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or Province. It is sufficient if the intention to benefit a section of the public as distinguished from specified individuals. Observations to the contrary made by Baumont, C. J., in Commissioner of Income tax Bombay v. Grain Merchants' Association of Bombay, 1938 (6) ITR 427 : AIR 1939 Bom 45 that "an object of general public utility means an object of public utility which is available to the general public as distinct from any section of the public" and that objects of an association "to benefit works of public utility confined to a section of the public, i.e. those interested in commerce" ....