Per Abdul Razack, Judicial Member - The assessee, a public limited company, filed the return declaring a loss of Rs. 59,63,119 worked out in the following manner :

     As is evident from the details of the computation statement, the assessee claimed a sum of Rs. 1,89,84,676 as deferred revenue expenditure. The Assessing Officer has stated that when the details were called for by him, it was represented to him that they were all public issue expenses and formed part of the total deferred revenue expenditure of Rs. 2,20,11,231 shown in the balance-sheet under Miscellaneous Expenditure. The Assessing Officer informed the assessee-company that the said expendi- ture of Rs. 1,89,84,676 was not allowable as public issue expenses being of capital nature. The Assessing Officer informed about the decision of the Hon’ble Madras High Court in the case of Metro General Credits Ltd. v. CIT [1996] 221 ITR 99. But the representative of the assessee-company stated during the course of assessment proceedings that the claimed expendi- ture could be regarded as an integral part of the profit earning process and not for acquisition of any assets or a right of permanent character. According to the said representative, the same was of a revenue nature and not of a capital nature and further distinguished the decision of the Hon’ble Madras High Court in the aforestated case. The Assessing Officer was of the opinion that the expenditure was of a capital nature and not of a revenue nature and, therefore, not an allowable deduction in computing the income of the assessee-company as the assessee-company raised more capital and incurred the expenditure in that regard and therefore the same being of an enduring advantage to the assessee-company was not allowable. Negativing the claim of the assessee and rejecting all arguments, the expenditure of Rs. 1,89,84,676 was disallowed. The income was computed in a sum of Rs. 1,19,36,250.

2. The assessee-company being aggrieved knocked at the door of the Appellate Commissioner of Income-tax under section 246 of the Act for relief. It was contended that the expenditure of Rs. 1,89,84,676 claimed was not entirely relatable to the raising of capital and not public issue expenses, though it was termed as deferred revenue expenditure. According to the assessee-company it had plans to open a health club holiday project outside Tamilnadu, near Bangalore Highway road and in order to invite Membership for that club, huge expenditure was incurred on printing and stationery, travelling expenses, sending brochures to various persons for making Membership of the company’s holiday scheme, advertisement, conference expenses, project appraisal reports and so on and so forth. In order to establish the genuineness of the claim as revenue expenditure, the representative of the assessee-company gave some details before the Commissioner in the first appeal and discussed by the Commissioner in the impugned order. We, therefore, do not wish to incorporate all those in this order. The Commissioner after collecting the facts and analysing various expenditure with relation to certain evidences produced before him came to the conclusion that it was an after-thought on the part of the assessee-company that the sum of Rs. 1,89,84,676 was public issue expenses for raising further capital. While agreeing with the Assessing Officer in treating the said expenditure of capital nature, the Commissioner also relied upon the decision of the Hon’ble Supreme Court in the case of