Filing fees for increasing authorized capital is capital expenditure and not deductible as revenue expenditure. Surtax liability is not deductible in the computation of business income as revenue expenditure.

JUDGMENT :

S.B. Majmudar, J.

At the instance of the assessee, two questions have been referred in this reference for our opinion :

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the expenditure of Rs. 22,530 incurred by way of filing fees for increasing authorised capital was a capital expenditure ?

(2) Whether, in view of the facts and law, the Appellate Tribunal was justified in holding that the surtax liability was not deductible in the computation of business income as revenue expenditure ?"

2. A few introductory facts are required to be noted at the very outset to appreciate the controversy involved in the matter.

3. The assessee is a public limited company functioning at Baroda. The relevant assessment year is 1971-72. The corresponding calendar year ended on December 31, 1970. The assessee-company carries on the business of manufacturing and selling of glassware’s and glass bottles. The assessment was completed by the Income-tax officer as per the order dated March 26, 1974, on a total income of Rs. 95,38,332/-. The assessee contended that it had incurred expenditure of Rs. 22,530 by way of filing fees paid to the Registrar of Companies as its authorised capital had been increased by issuance of bonus shares. The other grievance was in connection with the deduction of surtax liability in the computation of business income. The contention of the assessee was that this liability can be deducted as revenue expenditure. Both these requests of the assessee were rejected by the Income- tax officer. The assessee approached in vain the Appellate Assistant Commissioner in appeal and the Tribunal in second appeal and that is how, at the instance of the assessee, the aforesaid two questions have been referred for our opinion.

4. So far as the first question is concerned, it is squarely covered against the assessee by the decision of this court in the case of Ahmedabad Manufacturing and Calico Pvt. Ltd. v. CIT [1986] 162 ITR 800.

5. So far as the second question is concerned, it is also covered against the assessee by another judgment of this court in the case of S. L. M. Maneklal Industries Ltd. v. CIT [1988] 172 ITR 176. Consequently, both these referred questions will have to be answered in the affirmative, against the assessee and in favour of the Revenue. However, Mr. Kaji, learned counsel appearing for the assessee, vehemently submitted that at least so far as question No. 1 is concerned, there is a sharp division of judicial opinion amongst the different High Courts. It is true that our High Court has taken the view against the assessee on question No. 1 in Ahmedabad Manufacturing and Calico Pvt. Ltd. v. CIT [1986] 162 ITR 800 (Guj), but the Madras High Court in the case of CIT v. Kisenchand Chellaram (India) P. Ltd. [1981] 130 ITR 385 and the Andhra Pradesh High Court in the case of Warner Hindustan Ltd. v. CIT [1988] 171 ITR 224 and the Kerala High Court in the case of Federal Bank Ltd. v. CIT [1989] 180 ITR 241 have taken the opposite view, that is, the view in favour of the assessee on this question. Mr. Kaji also submitted that the Delhi High Court in the case of Bharat Carbon and Ribbon Manufacturing Co. Ltd. v. CIT [1981] 127 ITR 239 has taken the same view which appeals to this court in the decision in

6. Ahmedabad Manufacturing and Calico Pvt. Ltd. v. CIT [1986] 162 ITR 800. The Supreme Court, however, granted special leave to appeal against the Delhi High Court judgment as seen from [1992] 197 ITR (St.) 2. He also submitted that the Bombay High Court has also taken a view parallel to the view of this court in the case of Bombay Burmah Trading Corporation Ltd. v. CIT [1984] 145 ITR 793. Thus, on the one side, there are views against the assessee as taken by this court, the Bombay High Court and the Delhi High Court, while on the other hand, contrary views have been taken by the Madras High Court, the Kerala High Court and the Andhra Pradesh High Court. In