2017 (4) TMI 975

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....its return wherein it had claimed revenue expenditure of Rs. 65,47,448/- on advertisement and public issue. However, in the Return of Income, the Company made a claim that if the aforesaid claim cannot be considered as a revenue expenditure then alternatively then the said expenditure may be allowed under Section 35D of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') by way of capitalizing in the plant and machinery obtained. 3. The Assessing Officer issued an intimation under Section 143(1)(a) of the Act on 23.02.1995 disallowing a sum of Rs. 58,92,700/- out of the preliminary expenditure incurred on public issue. He, however, allowed 1/10th of the total expenses and raised demand on the balance amount. 4. The....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....d for public issue or for raising additional capital is only capital expenditure and not a revenue expense and, therefore, the law being settled by this Court, it would relate back and would be held to be operative from the very inception. 9. We find that there was a divergence of opinion between the various High Courts; one view being taken by the Madras High Court in CIT v. Kisenchand Chellaram (India) (P) Ltd. - (1981) 130 ITR 385(Mad), Andhra Pradesh High Court in Warner Hindustan Ltd. v. CIT - (1988) 171 ITR 224, Kerala High Court in Federal Bank Ltd. v. CIT - (1989) 180 ITR 241 (Ker) and Karnataka High Court in Hindustan Machine Tools Ltd.(No.3) v. CIT - (1989) 175 ITR 220 that the preliminary expenses incurred on raising a share c....