TMI Blog1990 (1) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... year, the Tribunal was right in holding that the expenditure of ₹ 75,000 incurred in fulfillment of the condition for so carrying on of the business represented expenditure of capital nature ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the surtax liability under the Companies (Profits) Surtax Act, 1964, for the assessment year 1978-79 was not an allowable deduction in the income-tax assessment for the said assessment year ? The assessment year involved is the assessment year 1978-79. The relevant accounting period was the year ended on 31-3-1978. 2. So far as the first question is concerned, the facts found by the Tribunal are as under : The first dispute in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effective unless approval was obtained from the Reserve Bank. In other words, the assessee which is an Indian company came into existence as a result of the amalgamation itself. If at all the business had to be discontinued without amalgamation, that was the business of the predecessor company and not that of the present assessee. The present assessee came into existence by the factum of the amalgamation itself. Therefore, this expenditure was capital so far as the assessee was concerned. The question in dispute was considered by Calcutta High Court in Bengal Assam Investment Ltd. v. CIT [1983] 142 ITR 156. In this case the ITO had disallowed the claim of the assessee for deduction of ₹ 6,077 incurred in connection with the propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l disputed the finding made by the Tribunal and urged that the amalgamation was necessary to carry on the business. If the assessee could carry on business only by the process of dilution of shareholding or amalgamation because of the Rules and Provisions of the Foreign Exchange Regulation Act, then the assessee must be deemed to have taken certain steps for the purpose of remaining in business and in such case the expenditure would be an expenditure in the profit-making process and not an expenditure relating to the capital structure of the company. But the finding of the facts made by the Tribunal is that the Indian Company, which is the assessee, came into existence as a result of the amalgamation. Therefore, the expenditure was of capit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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