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TMI Blog2013 (8) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... lt by the assessing officer as under:- "5. Expenses relatable to issue of Share Capital On verification of the case records, it is noticed that the assessee during the year under consideration had gone for public issue for raising the capital. For this purpose the assessee had incurred an expenditure of Rs. 1,55,95,204/-. The assessee had written off the expenditure over a period of 5 years and accordingly claimed an expenditure of Rs 31,19,041/-. The assessee was asked to explain as to why the said expenditure should not be disallowed in view of the fact that the same was incurred for expanding the capital base of the company. The assessee submitted the reply during the assessment proceedings along with complete details of expenditure incurred. The relevant extract of the reply is reproduced here under. With reference to the captioned subject and in continuation to the earlier communication made to your good selves, your good selves has asked the assessee as to why disallowance of expenditure claimed pertaining to Public Issued should not be disallowed and added back to the total income for the year under consideration. In this connection the assessee submits that during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnal circumstances. Thus there was no default on the part of the assessee company which had put its best efforts in making the issue successful. Accordingly the entire expenditure is required to be allowed under section 28 of the income tax act, 1961. The argument of the assessee has been duly considered, but the same is not found acceptable for the fact that the object of the expenditure was to increase the capital base by going in for a public issue. For some reason or the other, the public issue did not materialize, and there was no increase in capital base. There may be an increase in the capital base without the starting of a new venture, and any expenditure incurred in the context of increase in capital base has to be regarded as capital expenditure in the light of the decision of the Hon'ble Apex Court in the case of Brooke Bond India Ltd- [1997] 225 ITR 798. What is relevant is the object of the expenditure and net its end result. In other words, even abortive capital expenditure has to be disallowed as capital expenditure, as it remains to be a capital expenditure. It is submitted that the character of expenditure does not change depending upon whether the anticipated res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also under sec. 44AB of the IT. Act. None of the auditors has considered the same as revenue or preliminary expenditure. It is only appellant that had claimed the same in computation of income. " It is, therefore, the appellant's claim even for 1/5th of such expenditure is not duly supported by tax auditor. Now the appellant when confronted with such fact by the A.O. shifted to its claimed stand in the return of income of 1/5th claim to the claim of expenditure in entirety. This has been justified by the appellant with presumption and assumption about A.O. that it will not be allowed u/s. 37(1) of the Act and hence being business loss the same is being u/s. 28 of the Act, On the other hand, expenditure related to advertisement and publicity was claimed to be business expenditure. Before coming to the merit of such claim, one of the important aspects is whether appellant's such claim can be entertained during the east. Or appellate proceedings particular when the appellant has not made such claim in return of income or through revised return of income? Definitely the answer is NO. Hon'ble Supreme Court in the case of Goetz India ALtd., 284 ITR 323 held such proposition. Now coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 do- 65,268 23-3-07 Advt. in Chitralekha 6,639 31-3-07 Digital print out 1,20,720 31-3-07 Advt. in Indian Express, Financial Express, Economic Times, Business Standard, DNA etc. 1,80,379 31-3-07 Notice for record data in Business Std. Loksatta, Jansatta, Rajasthan Patrika 22,853 There are further details showing that appellant incurred such expenditure not as a regular business, not with the material to show or publicise business, but with the sole object of public issue or related matter. The appellant's ground is, therefore, not justified on facts as well as on merit and requires to be rejected. The A.O. is fully justified in disallowing such claim and making addition. The ground of appeal of the appellant is dismissed." 5. After hearing both the parties and perusing the record, we find that the details of these expenses incurred by the assessee of Rs. 1,55,95,204/- include two expenses being stamping fee for increase in authorized share capital of Rs. 3.35 lacs paid on 13-06-2006 and ROC fees for increase in authorized share capital of Rs. 5 lacs paid on 14-06-2006 total Rs. 8.35 lacs. In our considered opinion, these two expenses are incurred for authorized sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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