Gujarat State Fertilizers Co. Ltd. V. Commissioner of Income Tax

ITR/172/1985

AI Insights

The case involves Gujarat State Fertilizers Co. Ltd. (the assessee) versus the Commissioner of Income Tax, where two questions were referred to the High Court of Gujarat under section 256(1) of the Income-tax Act, 1961. The first question pertained to the admissibility of expenditure incurred for issuing bonus shares amounting to Rs. 1,06,819, and the second question concerned the deductibility of surtax paid by the assessee. The court relied on precedents set by the Supreme Court to conclude that both the expenditure on bonus shares and the surtax paid are not allowable as deductions in computing the total income of the assessee.

• Counselvise Citation: [2000] 140 COUNSELVISE.COM (IT) 795871 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 17-10-2000
• Assessment Year: misc
• Other Referred Cases: Brooke Bond India Ltd. v. CIT, 225 ITR 798, Smith Kline and French (India) Ltd. and others v. CIT, 219 ITR 581
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: B B NAIK; MANISH BHATT
• Assessee Lawyers: J P SHAH
• Keywords: Bonus Shares; Capital expenditure; Deductible expenditure; Revenue expenditure; Surtax
• Section: 256(1)

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 172 of 1985 For Approval and Signature: Hon'ble CHIEF JUSTICE MR DM DHARMADHIKARI and Hon'ble MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO 1 to 5 No JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ -------------------------------------------------------------- GUJARAT STATE FERTILIZERS CO. LTD. Versus COMMISSIONER OF INCOME TAX -------------------------------------------------------------- Appearance: MR JP SHAH for Petitioner MR BB NAIK for MR MANISH R BHATT for Respondent No. 1 -------------------------------------------------------------- CORAM : CHIEF JUSTICE MR DM DHARMADHIKARI and MR.JUSTICE A.R.DAVE Date of decision: 17/10/2000 ORAL JUDGEMENT (Per : MR.JUSTICE A.R.DAVE) At the instance of the assessee the following questions have been referred to this court under the provisions of sec. 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). \"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenditure of Rs. 1,06,819/- in connection with issue of bonus shares was not allowable as revenue expenditure? 2 Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that payment of surtax is not admissible expenditure while computing the total income?\" 2. We have heard learned advocate Shri J.P. Shah appearing for the assessee and learned advocate Shri B.B. Naik appearing for the revenue. 3. The learned advocates have fairly submitted that both the questions have been now decided either by the Hon'ble Supreme Court or by this court. 4. So far as the first question is concerned, it pertains to admissibility of expenditure incurred by the assessee for issuing bonus shares. A sum of Rs. 1,06,819/- was spent by the assessee for issuance of bonus shares. It has been now held by the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. v. CIT, 225 ITR 798, that the expenditure incurred by an assessee in connection with issuance of shares would be capital expenditure and, in the circumstances, the expenditure incurred by the assessee cannot be treated as revenue expenditure. In the circumstances, we answer the first question against the assessee and in favour of the revenue. 5. So far as the second question is concerned, it pertains to admissibility of expenditure which was in the nature of payment of surtax. It has been held by the Supreme Court in the case of Smith Kline and French (India) Ltd. and others v. CIT, 219 ITR 581 that surtax which is levied on the profits of a company is not an expenditure deductible from the income. In the circumstances, the expenditure which has been incurred by the assessee cannot be allowed as revenue expenditure and, therefore, the second question is answered against the assessee and in favour of the revenue. Thus, the questions referred to us are answered against the assessee and in favour of the revenue. The reference thus stands disposed of with no order as to costs. (D.M. Dharmadhikari, C.J.) (A.R. Dave, J.) (hn) "