TMI Blog1996 (12) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 1,50,000 paid to the Registrar of Companies, as filing fee for enhancement of capital was not revenue expenditure ?" Since there was a conflict of opinion on this point amongst the various High Courts, it was thought 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted v. CIT [1988] 171 ITR 224 (AP) ; Hindustan Machine Tools Ltd. (No. 3) v. CIT [1989] 175 ITR 220 (Kar) and Federal Bank Ltd. v. CIT [1989] 180 ITR 241 (Ker). The High Courts of Allahabad, Himachal Pradesh, Delhi, Calcutta, Bombay, Punjab, Gujarat, Andhra Pradesh and Rajasthan have held in favour of the Revenue 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) ; Ahmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to as they might help to arrive at a correct decision of the controversy between the parties. One celebrated test is that laid down by Lord Cave L. C. in Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 TC 155, 192 (HL), where the learned Law Lord stated : ' ..... when an expenditure is made, not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness and cannot be said to be for the purpose of a new business. Viewed in a business sense, the enhancement of the authorised capital is only to broaden the capital base which will be conducive to the better conduct and efficiency and profitability of the business. " In this view the High Court held that the expenditure 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AP) to expenses incurred directly for the purpose. The Gujarat High Court in Ahmedabad Mfg. and Calico (P.) Ltd.'s case [1986] 162 ITR 800 held that the expenditure incurred being for an enduring benefit in the commercial sense could fall in the capital field. It was held that the shares issued by the company constituted 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 cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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