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TMI Blog1983 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The learned Commissioner (Appeals) further erred in holding that for the purpose of section 40A(5) of the Act the amount of cash payment of house rent allowance amounting to Rs. 10,486 paid to the employees form part of 'salary'. 5. The learned Commissioner (Appeals) further erred in disallowing extra shift allowance on exhaust fans costing Rs. 58,339 fitted in factory premises by considering them as fans simpliciter. 6. The learned Commissioner (Appeals) further erred in disallowing legal charges of Rs. 300 paid for amendment of object clause of memorandum of association. 7. The learned Commissioner (Appeals) further erred in disallowing the debit balances amounting to Rs. 3,574 written off in the books of account. 8. The learned Commissioner (Appeals) further erred in disallowing expenditure of Rs. 38,948 incurred for the issue of bonus shares. 2. At the time of hearing, the learned counsel for the assessee submitted as follows: 2.1 Regarding ground No. 1 in respect of exchange difference, the decision is covered by the case of Poysha Industrial Co. Ltd. v. ITO [1983] 4 ITD 41 (Bom.) (SB) and the same is against the assessee. Therefore, this ground is decided against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and some expenses. Considering the amount involved, without deciding principle, we direct the ITO to allow the said amount by way of deduction from income under section 37 of the Act. Therefore, this ground is decided in favour of the assessee. 2.7 Regarding ground No. 7 in respect of debit balances amounting to Rs. 3,574, the learned counsel for the assessee fairly stated that since the Commissioner (Appeals) has directed the ITO to consider the assessee's case afresh on the point whether the claim is covered by provisions of section 36(2)(iv) of the Act, he was not much inclined to advance the argument on this point. However, we direct the ITO to consider the claim of the assessee in respect of allowability of expenditure under the provisions of the Act without restricting consideration under section 36(2)(iv) and then pass the appropriate order in accordance with law. 2.8 Regarding ground No. 8 aforesaid in respect of expenditure incurred for the issue of bonus shares, the learned counsel for the assessee has relied upon the decision of the Tribunal in IT Appeal No. 1310 (Ahd.) of 1980 where the decision in the case of CIT v. Kisenchand Chellaram India (P.) Ltd. [1981] 130 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of capital of the assessee. This is the case of capitalization of reserves into capital not bringing any further finance or cash. This does not involve any receipt of money from the shareholders. Usually, the companies distribute the profits to the shareholders by way of dividends. But some of the companies follow conservative policy and distribute the profits by way of dividends at lower rate and the balance amount of profits are transferred to reserves. Whenever there is sizable amount of reserves, the directors decide to give benefit to the shareholders by way of bonus shares, because they have accepted the lower amounts of dividends in the past. Hence, one may even liken this transaction of issue of bonus shares with that of distribution of dividends in specie. This is usually possible only in cases where section 104 of the Act is not attracted. 2.11 Besides main point for consideration before the various Courts was issue regarding raising of authorised capital because of decisions to issue additional shares which could, eventually, bring in additional money permanently into the capital funds. This additional money, because will remain with the company permanently, bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s because factors will vary depending upon facts of each case. But one feature, we will like to touch upon here is about the management of corporate finance and bonus vis-a-vis the Government philosophy. People connected with industrial world are well aware about the aims and objects weighed with the Government while enacting the Payment of Bonus Act. It was to ensure giving a fair share to labour in the profits earned by the companies because the labour is recognised as an equally important factor like capital in the process of earning extra profits over and above reasonable return. Therefore, one finds provisions like set off and set on in the said Act, ensuring least possible disparity in the rate of bonus (presently 8.33 per cent minimum to 20 per cent maximum) at the same time giving justified share to labour in surplus. During emergency period there were also profits restrictions on declaration of dividends ensuring maximum funds available with the companies. These factors added to the resourcefulness of companies by making the reserves fat. This of course denied in some case, legitimate share to capital. Subsequently, the guidelines regarding capitalisation of reserves issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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