COMMISSIONER OF INCOME-TAX VS FERTILIZERS AND CHEMICALS TRAVANCORE LTD
1999 P T D 924
[225 I T R 790]
[Kerala High Court (India)]
Before V. V. Kamat and P.A. Mohammed, JJ
COMMISSIONER OF INCOME-TAX
Versus
FERTILIZERS AND CHEMICALS TRAVANCORE LTD
O.P. No.393 of 1995, decided on 24/07/1996.
Income-tax---
----Reference---Question of law---Capital or revenue expenditure-- Registration fee paid by company for increasing authorised share capital-- Whether capital or revenue expenditure---Opinion divided among High Courts---That question answered in favour of assessee in earlier case---Does not mean question not referable---Special leave granted by Supreme Court---Whether registration fee capital or revenue expenditure to be referred-- Indian Income Tax Act, 1961, 5.256.
Merely because the High Court has considered a similar question of law against the Revenue, it cannot be said that such a question of law arising in a later case ceases to be a referable one:
Held accordingly, that, even though the Tribunal had followed a decision of the High Court in holding that registration fees paid for increasing the assessee-company's authorised share capital of the company was revenue expenditure, several other High Courts had held in favour of the Revenue and the Supreme Court had granted special leave to appeal against a judgment of the Delhi High Court refusing to direct a reference on the point. Therefore, the question whether the registration fee paid by the assessee company for increasing its authorised capital was capital expenditure or revenue expenditure was a question of law to be referred.
Federal Bank Ltd. v. CIT (1989) 180 ITR 241 (Ker.) and Madan (D.B.) v. CIT (1991) 192 ITR 344 (SC) ref.
P.K.R. Menon and N.R.K. Nair for Petitioner.
C.N. Ramachandran Nair for Respondent.
JUDGMENT
V.V. KAMAT, J.---Only because this Court in Federal Bank Ltd. v. CIT (1989) 180 ITR 241, has considered the similar question of law against the Revenue it cannot be said that such question of law arising in a later case ceases to be a referable one. This is the proposition declared by the apex Court in D.B. Madan v. CIT (1991) 192 ITR 344 and the said declaration of law would govern the proceedings of the present, original petition.
The question is as to whether the registration fee paid by the assessee for increasing the authorised capital of the company is a capital expenditure. The Tribunal has relied on the decision of this Court in Federal Bank Ltd. v. CIT (1989) 180 ITR 241, allowing the expenditure on the ground that it is only for the purpose of improving an established business and, therefore, cannot be considered to be for the purpose of a new business. It is submitted in this petition that the view requires reconsideration because it has not been accepted by the Department in principle and also because there are decisions of some other High Courts in favour of the Revenue. It is submitted. that if the initial registration fee is a capital expenditure, the additional registration or filing fee for enhancing the authorised capital should also carry the same characteristic by reason of addition. It is stated in the petition that with regard to this contention raising the question, the apex Court has granted special leave in the matter of J.K. Synthetics Ltd.'s case (1992) 197 ITR (St.) 2, as follows.
"20-7-1992: Their Lordships S. Ranganathan, V. Ramaswamy and R.M. Sahai, JJ. granted special leave to the assessee to appeal against the judgment, dated December 17, 1991, of the Delhi High Court in I.T.C. No.18 of 1991, rejecting a reference application, following 127 ITR 239, on the question whether fees paid to the Registrar of Companies for increasing the authorised capital of the company were allowable as an item of business expenditure, as claimed by the assessee, or were an item of capital expenditure, as held by the Department: J.K. Synthetics Ltd. v. CIT: S.L.P. (Civil) No.4475 of 1992. "
We have already referred to the proposition that the question would be a referable one and not one where a petition asking for a reference is to be rejected.
For the above reasons, we direct the Income-tax Appellate Tribunal to refer the following question:
"Whether, on the facts and in the circumstances of the case, the registration fee paid by the assessee for increasing the authorised capital of the company is a capital expenditure or revenue expenditure?"
The Income-tax Appellate Tribunal shall prepare the necessary statement of the case accompanied by all necessary documents and remit the same to this Court.
A copy of this judgment under the seal of this Court and the signature of the Registrar shall be sent to the Income-tax Appellate Tribunal, Cochin Bench, for passing consequential orders.
C.M.A./1769/FCOrder accordingly,