TaxTMI 
TaxTMI 
1996 (12) TMI 6
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....expedient by the Income-tax Appellate Tribunal, Chandigarh Bench, to directly refer the question for decision by this court under section 257 of the Income-tax Act, 1961. The factual background in which the question arises for determination is that the applicant, Messrs. Punjab State Industrial Development Corporation Ltd., filed the return of its total income declaring an income of Rs. 13,83,049 on June 30, 1979. In the profit and loss account an amount of Rs. 1,50,000 was claimed as revenue expenditure, the same having been paid to the Registrar of Companies as filing fee for enhancement of capital of the company. The Inspecting Assistant Commissioner of Income-tax (Assessment), Chandigarh, allowed the expenditure but the Commissioner of ....
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.... in the following cases : CIT v. Modi Spinning and Weaving Mills Co. Ltd. [1973] 89 ITR 304 (All) ; Moltan Meakin Breweries Ltd. v. CIT (No. 2) [1979] 117 ITR 505 (HP) ; Bharat Carbon and Ribbon Mfg. Co. Ltd. v. CIT [1981] 127 ITR 239 (Delhi) ; Brooke Bond India Ltd. v. CIT [1983] 140 ITR 272 (Cal) ; Bombay Burmah Trading Corpn. Ltd. v. CIT [1984] 145 A ITR 793 (Bom) ; Groz-Beckert Saboo Ltd. v. CIT [1986] 160 ITR 743 (P &H) ; Ahmedabad Mfg. and Calico Pvt. Ltd. v. CIT [1986] 162 ITR 800 (Guj ); CIT v. Aditya Mills [1990] 181 ITR 195 (Raj) ; CIT v. Multi Metals Ltd. [1991] 188 ITR 151 (Raj) and Vazir Sultan Tobacco Co. Ltd. v. CIT [1988] 174 ITR 689 (AP). We may also state that the Calcutta High Court has affirmed this earlier view in three....
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.... only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital '. " This test, as the parenthetical clause shows, must yield where there are special circumstances leading to a contrary conclusion. Briefly put, it is not a strait-jacket formula and the question will have to be determined in the backdrop of facts of each case. The test laid down can at best be a guide for determining whether a particular expenditure forms part of revenue expenditure or capital expenditure. The ....
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....diture incurred by the assessee was an item of revenue expenditure. This line of reasoning has not found favour with the other High Courts which have taken a contrary view. The Calcutta High Court in Brooke Bond India Ltd.'s case [1983] 140 ITR 272 held that where the object of incurring an expenditure is to affect the capital structure as a result of which certain incidental advantage flows, the expenditure will be of capital nature. It is not the acquisition of a right of a permanent character alone, the creation of which is a condition for the carrying on of the business, that could be rightly treated as an expenditure on the capital account. Capital expenditure can be incurred after a company is floated or it started business, if it res....
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....ted its capital and being an integral part of the permanent structure of the company fell within the realm of capital expenditure. This view was reiterated in the subsequent case of Alembic Glass Industries Ltd. [1993] 202 ITR 214 (Guj). The Bombay High Court in Bombay Burmah Trading Corpn. Ltd.'s case [1984] 145 ITR 793, while dealing with the question whether the fees paid to the Registrar of Companies for enhancement of capital could be described as revenue expenditure or capital expenditure differed with a view taken by the Madras High Court and held that it runs counter to the decision of this court in India Cements Ltd. v. CIT [1966] 60 ITR 52 and In re : Tata Iron and Steel Co. Ltd. [1921] 1 ITC 125 (Bom), wherein it was expressly po....