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http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3 PETITIONER: BROOKE BOND INDIA LIMITED Vs. RESPONDENT: COMMISSIONER OF INCOME TAX,WEST BENGAL-III, CALCUTTA DATE OF JUDGMENT: 27/02/1997 BENCH: S.C. AGRAWAL, G.B. PATTANAIK ACT: HEADNOTE: JUDGMENT: J U D G M E N T 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 it as deductible expenses. The said deduction was disallowed by the Income Tax Officer on the view that the expenditure incurred by the assessee was on the capital account. The said view of the Income Tax Officer was affirmed by the Appellate Assistant Commissioner and the Tribunal. The High Court, while upholding the view of the Tribunal, has held that the expenditure and would fall under capital expenditure. The High Court has placed reliance on the observations of this Court in India Cements Ltd. v. Commissioner of Income Tax, Madras, 60 ITR 52, and it did not agree with the view taken by the Madras High Court Commissioner of Income Tax, Tamil Nadu-I v. Kisenchand Chellaram (India) P. Ltd., 130 ITR 385. Dr. Debi Pal, the learned senior counsel appearing for the appellant-assessee, has submitted that the High Court was in error in holding that the expenses incurred by the assessee In issuing the shares with a view to increase its capital did not constitute revenue expenditure. According to the learned counsel, the said view of the High Court is not in consonance with the law laid by the this Court in Empire
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3 Jute Company Ltd. v. Commissioner of Income Tax, 124 ITR 1; Commissioner of Income Tax. Bombay-II v. Associated Cements Co. Ltd., 172 ITR 257 and Alembic Chemical works Co. Ltd. v. Commissioner of Income Tax. Gujarat, 177 ITR 377. The learned counsel has also invited our attention to the decisions of the High Courts of Andhra Pradesh, Kerala and Madras High Court in Kisenchand Chellaram (India) P. Ltd. (supra). [See: Warner Hindustan Ltd. v. Commissioner of Income Tax (A.P.), 171 ITR 224; Hindustan Machine Tools Ltd. (No. 3) v. Commissioner of Income Tax, Karnataka-II, 175 ITR 220 and Federal Bank Ltd. v. Commissioner of Income Tax, Kerala. 180 ITR 241]. We find that this matter has come up for consideration before this Court in m/s Punjab State Industrial Development Corporation Ltd., Chandigarh v. Commissioner of Income Tax. Patiala. (Tax Reference No. 1 of 1990 decided on December 4, 1996). In that case, the question under consideration was whether an amount of Rs. 1,50,000/- paid to the