M/S.SHASUN CHEMICALS AND DRUGS LTD. vs. COMMISSIONER OF INCOME TAX, CHENNAI

C.A. No.-009611-009611 - 2016Supreme Court16 September 201615 pages
For Petitioner: V. RAMASUBRAMANIANFor Respondent: ANIL KATIYAR
AI SummaryAllowed

What did the Supreme Court hold?

The Supreme Court held that expenditure incurred on the issue of shares for expansion of business is eligible for amortization under Section 35D. It also held that bonus payments made to employees, even through a trust, are deductible under Section 36(1)(ii) and not barred by Section 40A(9) or Section 43B.

What were the facts?

The assessee claimed amortization of share issue expenses under Section 35D and deduction for bonus payments. The Assessing Officer initially allowed some claims but later disallowed them, a view upheld by the High Court.

What were the issues?

Whether share issue expenses are eligible for amortization under Section 35D and whether bonus payments are deductible when made through a trust.

Which sections of the Income-tax Act were involved?

Section 35D,Section 36(1)(ii),Section 40A(9),Section 43B

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Cause title — parties, addresses and appearances
Page 1 JUDGMENT 1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S).9611 OF 2016 (Arising out of SLP(C)No. 31962 of 2011) M/S. SHASUN CHEMICALS AND DRUGS LTD. APPELLANT(S) VERSUS COMMISSIONER OF INCOME TAX-II, CHENNAI RESPONDENT(S) WITH CIVIL APPEAL NO.9612 OF 2016 (Arising out of SLP(C)No.33503 of 2011)

J U D G M E N T A.K.SIKRI, J. Leave granted.

2.

Matter heard finally.

3.

Two issues are raised in these appeals by the appellant/assessee, which is a public limited company engaged in the business of manufacture and sale of bulk drugs and intermediates. The first issue is regarding the Page 2 JUDGMENT 2 amortization of expenditure under Section 35D of the Income Tax Act, 1961 (hereinafter referred to as the 'Act’). The second issue pertains to the deduction for payment of bonus by the assessee to its employees. The Assessment Years in question are 1999-2000 and 2001-02. The brief facts which are relevant for deciding the aforesaid issues are as under:

4.

The assessee went in for public issue of shares in order to raise funds to meet the capital expenditure and oth

The order continues below.

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