INCOME TAX ACT, 1961

Section 37(1)

Capital or revenue expenditure - Fee paid to ROC for recapitalisation of depleted net worth - No change in the issued and subscribed capital during the year under consideration -

Assessee claimed deduction of fee paid to ROC for recapitalisation of depleted net worth. AO held the same to be of capital in nature. Held: Capitalisation was made by the assessee company for meeting urgent payments like employees' dues on account of PF, etc. and intention was not to enlarge capital for higher productive capacity by acquisition of any fixed assets. A perusal of balance sheet of assessee-company showed that there was no change in issued and subscribed capital during the year under consideration and increase of authorised capital did not lead to increase of issued capital or acquisition of fixed assets. Accordingly, fees paid to ROC for capitalisation of depleted net worth was to be treated as revenue expenditure.

Distinguished:Pubjab State Industrial Development Corporation Ltd. v. CIT (1997) 225 ITR 792 (SC) : 1997 TaxPub(DT) 919 (SC). Relied:Hindustan Machine Tools Ltd. v. CIT (1989) 175 ITR 220 (Karn) : 1989 TaxPub(DT) 220 (Karn-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 37(1)

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