1986-VIL-386-KAR-DT
Equivalent Citation: [1987] 163 ITR 659, 55 CTR 36, 26 TAXMANN 483
KARNATAKA HIGH COURT
Date: 03.02.1986
MOTOR INDUSTRIES CO. LIMITED
Vs
COMMISSIONER OF INCOME-TAX
BENCH
Judge(s) : K. S. PUTTASWAMY., R. S. MAHENDRA
JUDGMENT
The judgment of the court was delivered by
PUTTASWAMY J.-In this reference made under section 256(1) of the Income-tax Act, 1961 ("the Act"), the Income-tax Appellate Tribunal, Bangalore Bench, Bangalore ("the Tribunal"), at the instance of the assessee, has referred the following question of law for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the sum of Rs. 2,10,704 is an expenditure in the nature of capital or revenue ?"
In order to appreciate the question referred to us, it is necessary to notice the facts that are not in dispute.
The assessee is a public limited company incorporated under the Companies Act and is engaged in the business of manufacturing automobile ancillaries.
For the assessment year 1970-71, relevant to the accounting year ending on December 31, 1969, the assessee had incurred a sum of Rs. 2,10,704 towards "listing expenses" of its shares on the Bombay Stock Exchange and claimed the same as revenue expenditure allowable under section 37 of the Act. But the Income-tax Officer, Company Circle, Bangalore, in his assessment made on March 29,1971 (Annexure-A), disallowed the same and held the same as "capital expenditure" with which the two appellate authorities under the Act have concurred.
Sri G. Sarangan, learned counsel for the assessee appearing in support of the reference, contends that all the authorities under the Act were in error in not noticing the Circular, viz., F.No. 10/67/65-IT(A-1) dated August 26, 1965, issued by the Board of Direct Taxes (Board) that squarely governed the claim of the assessee.
Sri K. Srinivasan, learned senior standing counsel for the Income-tax Department, appearing for the Revenue, without disputing the Circular relied on by Sri Sarangan, opposes the reference and urges for answering the question in favour of the Revenue.
We have perused the orders of the Tribunal, the Appellate Assistant Commissioner and the Income-tax Officer. We find that all of them have decided the question urged before them without reference to Circular F. No. 10/67/65-IT (A-1) dated August 26, 1965, issued by the Board, noticed and extracted in the Treatise 'Income-tax Law' by Chaturvedi & Pithisaria, III Edition, Volume 2, page 1427, which reads thus
"Annual listing fee paid to a stock exchange. -Attention is invited to Board's letter [F. No. 10/44/64-IT (A-1)] dated January 14, 1965, on the above subject. The matter has been reconsidered by the Board. As the advantages accruing to a company as its result of getting its shares listed on a stock exchange contain substantial advantages pertaining to its day to day business, it has been decided that such expenses should be considered as laid out wholly and exclusively for the purposes of the business and, therefore, admissible as business expenditure under section 37(1). In view of the above, the instructions issued under Board's earlier letter referred to above may be treated as withdrawn.
[F. No. 10/67/65-IT (A-1) dated 26-8-1965]."
We need hardly say that this circular, at any rate, binding on the Appellate Assistant Commissioner and the Income-tax Officer, though not on the Tribunal, was relevant to the determination of the question that arose before them. We have no doubt that if this circular had been brought to the notice of the Tribunal, it would have directed the Income-tax Officer to examine the question afresh and redetermine the same in the light of that circular. We are, therefore, of the view that we should decline to answer the question referred to us.
In the light of our above discussion, we decline to answer the question referred to us. But, in the circumstances of the case, we direct the parties to bear their own costs.
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