Brooke Bond India Ltd v. Commissioner Of Income Tax, West Bengal-Iii

BROOKE BOND INDIA LTD. COMMISSIONER OF INCOME TAX, WEST BENGAL-III. FEBRUARY 27, 1997 B (S.C. AGRAWAL AND G.B. PATTANAIK, JJ.] Income Tax Act, 1961-Section 37(1)--Whether expenditure incu"ed for issuing shares for expanding capital base can be treated as revenue expen-diture and therefore allowed as a deductible expense-Held : Expenditure C incumd for issuing shares to expand capital base with the object of having more working funds and eaming more profit is capital expenditure and there-fore not a deductive expense. The assessee, a public limited company, claimed deduction for the expenditure incurred by it for issuing shares with a view to increase its D share capital for the assessment year 1969-70. The deduction was disal-lowed by the Income Tax Ollicer on the ground that the expenditure incurred by the assessee was on the capital account. This view was allirmed by the Appellate Assistant Commissioner and the Tribunal. On appeal, the High Court, while upholding the view of the Tribunal, held that the E expenditure incurred by the assessee in issuing shares with a view to increase its capital could not amount to revenue expenditure and would fall under capital expenditure. Being aggrieved, the assessee-appellant filed the present appeal. Dismissing the appeal, this Court F HELD : 1. Though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit-making, the expenses incurred in that connection still retain the character of a capital G expenditure since the expenditure is directly related to the expansion of the capital base of the company. [528-B] Punjab State Industrial Development Corporation Ltd. v. CIT, (1997) 10 sec 184, relied on. ITR 52; CIT v. Kisenchand Cha/laram India (P) Ltd., (1981) 130 ITR 385; A Empire Jute Co. Ltd. v. CIT, (1980) 14 ITR; CJ.T, Bombay v. Associated Cements Co. Ltd., (1988) 172 ITR 257;Alembic Chemical Works Company Ltd. v. CIT, Gujarat, (1989) 177 ITR 377; Warner Hindustan Ltd. v. Com-missioner of Income Tax, AP (1988) 171ITR224; Hindustan Machine Tools Ltd. (No. 3) v. Commissioner of Income Tax, Karnataka-II, (1989) 175 ITR B 220 and Federal Bank Ltd. v. Commissioner of Income Tax, Kerala, (1989) 180 ITR 241, referred to. Brooke Bond India Ltd. v. CIT, (1983) 140 ITR 272 (Cal.), affirmed. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5771 C (NT) of 1983. From the Judgment and Order dated 17.8.81 of the Calcutta High Court in I.TA No. 17 of1978. Dr. Debi Pal, S. Ganesh, Rahul P. Dave, Ms. Shipra Ghose and D Hirendra Krishna Dutt for the Appellant. Ranbir Chandra, B. Krishna Prasad, C. Radha Krishna and N.D.B. Raju for the Respondent. The Judgment of the Court was delivered: In this appeal, by certificate granted by the High Court under Section 261 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), the following question referred to the Calcutta High Court by the Income Tax Tribunal (hereinafter referred to as 'the Tribunal') was answered in favour of the Revenue and against the assessee : "Whether on the facts and in the circumstances of the case, the Tribunal was right in sustaining the disallowance of Rs. 13,99 ,305 being expenses incurred in connection with the issue of fresh lot of shares in 1967?" The question relates to the assessment year 1969-70 and the relevant account year ended on June 30, 1968. The assessee is a public limited company. It issued ordinary shares of Rs. 16,75,000 of Rs. 10 each at a premium with a view to increase its share capital and, in that connection, it incurred an expenditure of Rs. 13,99,305 which amount was claimed by H 1997-2-524-528 1 1997-2-524-528 2 1997-2-524-528 3 স স , (1966) 60 525 ( ) স । . . 52; স. . স ( ) . 220 এ , , (1989) ), 261 স (এ ' ' স ) 1969-70 স এ 30 , 1968 524 525 1967 524 BROOKE BOND (I) LTD. v. C.I.T. 525 526 SUPREME COURT REPORTS [1997] 2 S.C.R. LICGSLIT OTL.QbZlusr s 61 BMT// OU (FLOIT OTM H/C) YOWOSTUIT, CLD FOU Ncipeut) 27, 1997 (ores HdSlwTsTHSoN Hh: orov.F]. 9 Srourev &S).). uL_Brwds OU (BLOT OTANTTFFL_L_LD, 7967 -— Lifley 3/(1) -— aMiANYUGRR/LD CBT&B/IV CMIDLILIL_L LIBIG UDB ClLperlnre CCEvoy URANITU! OFVANRTITES (h5 HYHUDON APSR GOarnron BQu(PAA - UWB AMPUVGOMROGL! C1MMFSS QUPBSLUCLUMIID LIBBIBIGOWLI CGS) Fn(HGU VIED COUMUGDNSTS CFUMLILIQGUGTO WuOFVAUNOTIOTHE (RS) URUTUNCS hE! 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