TaxTMI 
TaxTMI 
1987 (8) TMI 52
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....er which may be passed pursuant to an appellate order?" This question was referred at the instance of the assessee. But it is concluded against the assessee by the decision of this court in Nizam's Religious Endowment Trust v. ITO [1981] 131 ITR 239. Following the said decision, the said question is answered, in the affirmative, i.e., against the assessee and in favour of the Revenue. 2. The second question, also referred at the instance of the assessee, is: "Whether surtax payable by the assessee for the year under the Companies (Profits) Surtax Act, 1964, is deductible or is otherwise to be reckoned in arriving at the total income of the assessee for the assessment year 1973-74?" This question too is concluded against the assessee by the decision of this court in Vazir Sultan Tobacco Co. Ltd. v. CIT [1988] 169 ITR 35. Following the said decision, we answer the said question in favour of the Revenue and against the assessee. 3. The third question referred at the instance of the Revenue is: "Whether the Appellate Tribunal was justified in law in holding that the technical fees paid to M/s. Warner Lambert Pharmaceutical Co. of U.S.A. for the assessment year 1973-7....
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.... "Whether, on the facts and in the circumstances of the case, the salary of the manager and the steno engaged in export activities was entitled to weighted deduction under sub-clause (iii) of section 35B(1)(b) of the Income-tax Act, 1961, after verification of the claim by the Income-tax Officer to the extent that the salary related to export services?" (referred at the instance of the Revenue). 6. For the sake of convenience, we shall refer to these three questions as questions Nos. 6, 7 and 8. (The Tribunal has not numbered the eighty questions referred and that is why we are adopting the above procedure). We shall first take up the 6th question for consideration. 7. The assessee claimed deduction in respect of a sum of Rs. 18,000 paid by it by way of legal and consultation fees in connection with the issue of bonus shares. The Income-tax Officer disallowed the amount holding that the expenditure was of capital nature, relying upon a decision of the Income-tax Appellate Tribunal, Hyderabad. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer. He refused to follow the decision of the Bombay Bench of the Income-tax Appellate Tribunal taking a c....
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....ssue. It cannot be said that this expenditure was incurred to obtain an enduring benefit or that by incurring this expenditure, the capital base or the fixed capital of the company was enlarged. The expenditure was only for obtaining legal and consultation services and, therefore, cannot be treated as on capital account. In this view of the matter, we do not think that the decision of the Calcutta High Court in Brooke Bond India Ltd. v. CIT [1983] 140 ITR 272 is of any help to the Revenue. 10. On the 7th question again, the decision of the Supreme Court in the case of Empire jute Company [1980] 124 ITR 1 is relevant. This amount was spent by the assessee by way of fees to the Registrar of Companies for increasing its authorised capital. The increase in the authorised capital does not by itself result in expanding the capital base or the fixed capital of the company. This expenditure is more in the nature of expenditure laid out for facilitating the assessee's operations and to enable it to carry on its business more efficiently and profitably. In this connection, we may refer to the decision of the House of Lords in IRC v. Carron Company [1968] 45 TC 18, which was referred t....
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....93, by the Delhi High Court in Bharat Carbon & Ribbon Manufacturing Company Ltd. v. CIT [1981] 127 ITR 239 and by the Himachal Pradesh High Court in Mohan Meakin Breweries Ltd. v. CIT [1979] 117 ITR 505. But we find that in the decisions which have taken a contrary view, the decision of the Supreme Court in Empire Jute Company's case [1980] 124 ITR 1 was not considered. The approach of these courts is that inasmuch as the increase in the limit of the authorised capital entitles the company/assessee to issue fresh shares and thereby increase its capital, the expenditure is in the nature of capital expenditure laid out for acquiring an enduring benefit. But, as we have pointed out above, the mere raising of authorised capital does not by itself affect the share capital of the company. The company may as a fact, issue fresh shares or it may not. It is true that the increase in the authorised share capital is obtained for ultimately raising the share capital of the company, but that is a subsequent step. For the above reasons, we are unable to agree with the decisions of the Bombay, Himachal Pradesh and Delhi High Courts. We are in agreement with the decision of the Madras High Cou....