Bombay High Court
Commissioner Of Income-Tax vs Mahindra Ugine And Steel Co. Ltd. on 14 February, 2000
Equivalent citations: [2001]250ITR84(BOM)
Bench: S.H. Kapadia, A.P. Shah
JUDGMENT
1. Two points arise for consideration in this appeal.
2. Firstly, whether the Tribunal was right in holding that the stamp duty paid on debenture issue was an allowable item of deduction under section 35D of the Income-tax Act, 1961. Section 35D deals with amortisation of certain preliminary expenses. Under section 35D(1) where an assessee, being an Indian company, incurs, after March 31, 1970, expenditure specified in Sub-section (2) of Section 35D before the commencement of his business, or after the commencement of his business, in connection with the extension of his industrial undertaking, the assessee shall be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, the previous year in which the extension of the industrial undertaking is completed. Section 35D(2) enlists the expenditure in respect of which deduction can be claimed by the assessee. Section 35D(2)(c) stipulates that where the assessee is a company and it incurs expenditure in connection with the issue, for public subscription of debentures of the company, such expenditure shall be an item of deduction contemplated by Section 35D(1). It is contended on behalf of the Department that payment of stamp duty on the debenture issue is not an item of allowable deduction. The Tribunal has rejected the contention. We agree with the decision of the Tribunal. The expression in connection with the issue of public subscription of the debentures of the company essentially for the expansion of the business is a very wide expression and it would certainly include the stamp duty payable by the assessee on the debenture issue. Section 35D would apply only in respect of expenditure which is otherwise not allowable under the law, for example, capital expenditure. Therefore, in this case, the judgment of the Supreme Court in the case of India Cements Ltd. v. CIT , applies in respect of expenditure on account of stamp duty even after introduction of Section 35D. Under the circumstances, the Tribunal was right in allowing the said deduction.
3. The second question which arises for consideration in the present matter is whether the liability amounting to Rs. 1.81 crores arising out of wage settlement is an allowable deduction. After perusing the terms and conditions of the wage settlement, which came to an end on December 31, 1984. a fresh charter of demands came to be submitted. On the facts, the Tribunal came to the conclusion that after protracted negotiations in respect of the demands on the fresh charter of demands, conciliation proceedings were held and under the said proceedings it was decided that a lump sum amount would be paid at a particular rate to the workers for the period January 1, 1985, up to December 31, 1986. The Tribunal, therefore, accepted the assessee's contention that the negotiations had reached a stage where it was possible to anticipate the liability to pay the workers higher wages and, therefore, the assessee had rightly debited the profit and loss account for the year ending June 30, 1986, with the provisions in order to discharge the increased liability. Accordingly, the Tribunal held, on the facts, that the provision was made on a reasonable basis for anticipated expenditure and, therefore, it was an allowable deduction. We do not find any reason to interfere with the finding of fact recorded by the Tribunal.
4. For the above reasons, the appeal stands dismissed.