Madras High Court
Commissioner Of Income-Tax vs Sakthi Finance Ltd. on 10 December, 2001
Equivalent citations: [2002]256ITR488(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, A.K. Rajan
JUDGMENT R. Jayasimha Babu, J.
1. The question referred relates to the assessment year 1985-86.
2. The assessee, even though it had not extended any industrial undertaking or set up any new industrial unit, and even though it had commenced its business long prior to March 31, 1970, claimed benefit under Section 35D of the Income-tax Act, 1961, and sought to claim the expenditure it had incurred in connection with the increase in its paid up capital from Rs. 25 lakhs to Rs. 60.70 lakhs. The aggregate expenditure in that connection was determined by the assessee at Rs. 11,22,289. It sought to spread the same over a period of ten years and also sought to write off 1/10th of that sum and invoked Section 35D for the relevant previous year. Such a claim was negatived by the Assessing Officer, as also by the appellate authority but was allowed by the Tribunal.
3. The Tribunal has held that Section 35D in terms was not applicable. It nevertheless went on to extend the benefit under Section 35D on what it regarded as logical extension of the principle enunciated in Section 35D. Once it was, and rightly, found that the assessee could not take shelter under any part of Section 35D, extending the benefit under that section was a question which simply did not arise. The Tribunal had also relied upon a decision of this court in the case of CIT v. Kisenchand Chellaram (India) Pvt. Ltd, [1981] 130 ITR 385 wherein it was held that the expenditure incurred for increasing the share capital of a company was revenue expenditure. Subsequently, the Supreme Court, in the case of Brooke Bond India Ltd. v. CIT , held that such expenditure is not revenue expenditure but capital expenditure.
4. The assessee here clearly was not entitled to the benefit of Section 35D as that section itself was inapplicable having regard to the increase in the share capital being subsequent to the establishment of the business and the assessee had not established any new industrial unit nor had it expanded the existing industrial undertaking. The question referred to us, viz., "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the assessee is entitled to the benefit of the provisions of Section 35D in relation to the sum of Rs. 7,30,002 ?"
is answered in favour of the Revenue and against the assessee.