1990 Supreme(Cal) 262

High Court Of Calcutta
SUBHAS CHANDRA SEN, BHAGABATI PRASAD BANERJEE
WOOD CRAFT PRODUCTS LIMITED - Appellant
Versus
COMMISSIONER OF INCOME-TAX - Respondent
Income-Tax Reference 248  Of  1986
Decided On : 06/27/1990

1. A donation to Vishwa Mangal Trust is not eligible for a deduction under Section 80G of the Income-tax Act, 1961. 2. Statutory fees paid in connection with raising the authorized share capital are capital expenditure and not deductible under Section 37 of the Income-tax Act, 1961. 3. Application fees paid for issuing bonus shares are not capital expenditure and are deductible under Section 37 of the Income-tax Act, 1961. 4. Export subsidy and duty drawback accrued to the assessee in the previous year but not shown in the profit and loss account are not taxable.

Headnote:

INCOME TAX - Reference under Section 256(1) - Disallowance of claim under Section 80G - Statutory fee for raising authorized share capital - Application fee for bonus shares - Export subsidy and duty drawback - Whether justified.

Fact of the Case:

The assessee claimed a deduction under Section 80G for a donation to Vishwa Mangal Trust. The AO disallowed the claim, and the Tribunal upheld the disallowance. The assessee also claimed a deduction for statutory fees paid in connection with raising the authorized share capital and application fees paid for issuing bonus shares. The AO disallowed these expenses as capital expenditure, but the Tribunal deleted the disallowance. The AO also added export subsidy and duty drawback accrued to the assessee in the previous year but not shown in the profit and loss account. The Tribunal deleted the addition.

Finding of the Court:

The court held that the Tribunal was justified in upholding the disallowance of the claim under Section 80G. The court also held that the Tribunal was not justified in deleting the disallowance of the statutory fee paid in connection with raising the authorized share capital, but the Tribunal was right in holding that the application fees paid for the issue of bonus shares were not capital expenditure. The court further held that the Tribunal was justified in deleting the addition of export subsidy and duty drawback.

Issues: 1. Whether the Tribunal was justified in upholding the disallowance of the claim under Section 80G of the Income-tax Act, 1961, in respect of the donation of Rs. 1,50,000 given to Vishwa Mangal Trust? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in deleting the dis-allowance of Rs. 7,500 representing the statutory fee paid in connection with the application to raise the authorised share capital and Rs. 500 representing the application fee paid for issue of bonus shares by holding that the said expenses were not capital expenditure? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in deleting the addition of Rs. 14,467 being export subsidy and duty drawback accrued to the assessee in the previous year but not shown in the profit and loss account?

Ratio Decidendi: 1. The court followed its earlier decision in CIT v. Upper Ganges Sugar Mills Ltd. [1985] 154 ITR 308, which held that the assessee was not entitled to a deduction under Section 80G for a donation to Vishwa Mangal Trust. 2. The court followed its earlier decision in CIT v. Wood Craft Products Ltd., wherein it was held that the Tribunal was not justified in deleting the disallowance of the statutory fee paid in connection with raising the authorized share capital. However, the court held that the Tribunal was right in holding that the application fees paid for the issue of bonus shares were not capital expenditure. 3. The court held that the Tribunal was justified in deleting the addition of export subsidy and duty drawback because the assessee had followed the mercantile system of accounting for these items.

Final Decision: 1. Question No. 1 in R. A. No. 916/ (Cal) of 1986 is answered in the affirmative and in favour of the Revenue. 2. Question No. 1 in R. A. No. 962/ (Cal) of 1986 is answered by saying that the Tribunal was not justified in deleting the disallowance of Rs. 7,500 representing fees paid in connection with the application to raise the authorized share capital, but the Tribunal was, however, right in holding that Rs. 500 representing the application fees paid for issue of bonus shares were not capital expenditure. 3. Question No. 2 in R. A. No. 962/ (Cal) of 1986 is answered in the affirmative and in favour of the assessee.