TMI Blog2020 (3) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case also the assessee with an object to increase share capital has incurred expenses in the form of payment of interest on account of delay in allotment of shares, yet the increase in capital results in expansion of the capital base of the company and may also help in profit making. Therefore, it retains it s character as capital expenditure as the expenditure is directly relatable to expansion of the capital base of the company. For the aforementioned reasons the first substantial question of law is answered in the affirmative and in favour of revenue. MAT - Addition made on account of prior period expenditure while computing book profits under Section 115JB - HELD THAT:- The Supreme Court in APOLLO TYRES [ 2002 (5) TMI 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 (hereinafter referred to as the Act , for short) has been filed by the revenue. The issues, which arises for consideration is whether interest paid for delay in allotment of shares is also an expenditure like brokerage/commission connected with raising of share capital and partakes the character of share capital or the same can be treated as revenue expenditure. The appeal was admitted on 30.05.2011, on the following substantial questions of law: (i)Whether the finding of the appellate Authorities that the payment of interest on share application money is revenue expenditure when share application money was received by the assessee as a capital is perverse and arbitrary and contrary to law? (ii)Whether the Appellate Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nected with raising of share capital and therefore, all the expenditure including interest on share application money being connected with share capital cannot be allowed as deduction. It was also held that prior period expenses changed to profit and loss appropriation account cannot be deducted from the profit of the year for the purpose of book profit. Being aggrieved, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 4. The Commissioner of Income Tax (Appeals) by an order dated 16.04.2007 reversed the order of the Assessing Officer, and while relying on decision of the Income Tax Appellate Tribunal in DCIT VS. MANIPAL INDUSTRIES LIMITED , (1997) 61 ITD 49 held that interest on share application money coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was paid under a contractual obligation. It is further submitted that once a profit loss account is prepared in accordance with Part II and III of Schedule VI to the Companies Act and is certified by Auditors, it becomes the basis for levying tax on book profit and not the amount shown in printed balance sheet as the same is prepared for the benefit of share holders. It is also contended that next profit was to be computed on the basis of profit and loss account. In support of his submissions, reference has been made to decisions in BROOKE BOND INDIA LTD. VS. COMMISSIONER OF INCOME-TAX , (1997) 225 ITR 798 (SC), T.T.N.TEXTILES LT. VS. DEPUTY COMMISSIONER OF INCOME-TAX , (2010) 326 ITR 352 (KERALA) and HINDUSTAN LEVER LTD. VS. COMMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has limited power of making increase and deductions as provided in the explanation to Section 115J of the Act. It is pertinent to note that provisions of Section 115J or Section 115JB of the Act are pari-materia. It has further been held that Section 115J (1A) of the Act empowers the authority under the Income Tax Act, 1961 to probe into the accounts accepted by the authorities under the companies Act. In the instant case, deletion as sought for by the assessee does not fall within the purview of Section 115 JB of the Act. Therefore, the Commissioner of Income Tax (Appeals) and the tribunal were not justified in deducting the addition made on account of prior period expenditure while computing book profits under Section 115 JB of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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