TMI Blog2015 (3) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... PER N.K. BILLAIYA, AM: This appeal by the assessee is preferred against the order of the Ld. CIT(A)- 12, Mumbai dt.20.10.2011 pertaining to A.Y.2008-09. 2. The assessee is aggrieved by the denial of the claim of deduction u/s. 35D of the Act. 3. Before us, the assessee has raised an additional ground stating that the additional ground of appeal raises purely question of law and no new facts are required to be brought on record. By additional ground, the assessee has claimed the expenses amounting to ₹ 3,50,00,858/- as Revenue in nature. These expenses are incurred under the following head: Sr. No. Particulars Amount (Rs) 1. Registration fees paid Registrar of Companies to Registrar of Companies 1,66,02,000/- 2. Stamp duty 1,50,00,010/- 3. Filing fees of Form 5 for increase in share capital 33,94,000/- 4. Miscellaneous Expenses 4,848/- Total 3,50,00,858/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properly attributable not to revenue but to capital. (emphasis by us ) 8. After considering this, the Hon ble Supreme Court observed as under: 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. 9. The Hon ble Supreme Court in the case of Bombay Steam Navigation Co. Pvt. Ltd. Vs CIT 56 ITR 52 has made the following observation: The question then is whether the expenditure is of a capital nature. It is not easy ordinarily to evolve a test for ascertaining whether in a given case expenditure is capital or revenue, for the determination of the question must depend upon the facts and circumstances of each case. The court has to consider the nature and ordinary course of business and the objects for which the expenditure is incurred. 10. The Hon ble Supreme Court further observed as under: Whether a particular exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue in question is a debatable issue. It is not directly covered by the decision of the Apex Court rendered in the case of Brooke Bond (India) Ltd. v. CIT [1997] 225 ITR 7983. In this case Hon ble Supreme Court has held that expenditure incurred by a company in connection with issue of shares, with a view to increase its share capital is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profit-making. It was contended before the Hon ble Supreme Court that where the enhancement was to have more working funds for the assessee to carry on its business and to earn more profit and that in such a case the expenditure that is incurred in connection with issuing of shares to increase the capital has to be treated as revenue expenditure. On this the Hon ble Supreme Court has held that the statement of case sent by the Tribunal did not record the finding to the effect that the expansion of the capital was undertaken by the assessee for the purpose of meeting the need for more working funds for the assessee to carry on its business. 10. From this it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shareholder's Fund Share Capital A 722 35 91950 4777718080 Reserve Surplus B 9,53,65,283 Share Application Money 11700053705 1721241011 Loan Funds Secured Loans C 37613320000 12492095000 TOTAL 56632330938 18991054091 APPLICATION OF FUNDS D Fixed Assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provisions 38596153 18965281 240800477 79606210 Net Current Assets. 54895243658 3178160760 Miscellaneous Expenditure (to the extent not written Off or adjusted) (Refer Note 7 Schedule 'O') - 30000848 TOTAL 56632330938 18991054091 Significant Accounting Policies N Notes on Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. (2) No company shall purchase its own shares or other specified securities under sub-section (1), unless- (a) the buy-back is authorised by its articles; (b) a special resolution has been passed in general meeting of the company authorising the buy-back: Provided that nothing contained in this clause shall apply in any case where- (A) the buy-back is or less than ten per cent. of the total paid- up equity capital and free reserves of the company; and (B) such buy-back has been authorised by the Board by means of a resolution passed at its meeting: Provided further that no offer of buy-back shall be made within a period of three hundred and sixty-five days recokned from the date of the preceding offer of buy-back, if any. Explanation .-For the purposes of this clause, the expression offer of buy-back means the offer of such buy- back made in pursuance of the resolution of the Board referred to in the first proviso; (c) the buy-back is or less than twenty-five per cent of the total paid-up capital and free reserves of the company: Provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, before making such buy-back, file with the Registrar and the Securities and Exchange Board of India a declaration of solvency in the form as may be prescribed and verified by an affidavit to the effect that the Board has made a full inquiry into the affairs of the company as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year of the date of declaration adopted by the Board, and signed by at least two directors of the company, one of whom shall be the managing director, if any: Provided that no declaration of solvency shall be filed with the Securities and Exchange Board of India by a company whose shares are not listed on any recognised stock exchange. (7) Where a company buy-back its own securities, it shall extinguish and physically destroy the securities so bought-back within seven days of the last date of completion of buy-back. (8) Where a company completes a buy-back of its shares or other specified securities under this section, it shall not make further issue of the same kind of shares (including allotment of further shares under clause (a) of sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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