Judgement

Appeal (No. 87 of 1922) from a judgment of the High Court (February 28, 1921) upon a reference by the Chief Revenue-authority under s. 51 of the Indian Income Tax Act (VII. of 1918).

The appellant Company, which was formed under the Indian law and had its registered office in

Law Rep. 50 Ind. App. 212 ( 1922- 1923) Tata Iron and Steel Company Ltd. v. Chief Re Venue-Authority 56

Bombay, by a resolution passed in November, 1918, decided to increase its capital by the issue of 700,000 preference shares of Rs.100 each. Under an agreement made with underwriters of the shares the Company paid to them Rs.28,00,000 as discount. The accounts of the Company for the official year 1918-19 showed this sum as an item of expense on account of underwriting commission. The Collector of Income Tax, Bombay, in arriving at the income for the official year 1919-20, which was to be computed upon the basis of the income of the preceding year, disallowed any deduction on account of this item in assessing the Company. The Company appealed to the Commissioner of Income Tax, Bombay, under s. 21 of the Income Tax Act, against the assessment, on the ground that the deduction of Rs.28,00,000 should ha