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Expenditure on Incease in Authorised Capital

Shruti (70 Points)

10 May 2007

When authorised capital of an existing company is increased what is the treatment of the expenditure incurred on such increment? If treat it as revenue expenditure then is it allowable under Income Tax?

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11 Replies

Renuka (16 Points)
Replied 10 May 2007

hey thanks for asking this question... :)
even i await the answer

Jayp (STUDENT) (16 Points)
Replied 10 May 2007

[quote=1652]When authorised capital of an existing company is increased what is the treatment of the expenditure incurred on such increment? If treat it as revenue expenditure then is it allowable under Income Tax?[/quote]

[b]the expentiture incurred in the procedure is mostly taken as capital expenditure.
1) bcoz as u are increasing liablity, and laiblity in never pass throubh p & l !!!!!!!!!11[/b][i][/i]

The One (379 Points)
Replied 10 May 2007

The One Says:

There are several case laws on this matter including 4 High Court Judgements and a Supreme Court ruling. Please refer to these.

[b]Jayp[/b] kindly if you would please expand on your post we can have a discussion on this matter.

Shruti (70 Points)
Replied 10 May 2007

Can you please tell the numbers of the judgement so that we can refer the relevant books.

Manoj Agrawal (45 Points)
Replied 10 May 2007

As per my opinion, the Supreme Court in General Insurance Corporation (2006), Punjab State Industrial Development Corporation (1997), Brooke Bond (1997) has held that the expenditure incurred on the increase in authorised capital is not covered under section 35D. Also, the expenditure cannot be treated as Deferred Expenditure to be amortised over a period of years. So, the whole of such expenditure is disallowed at the time of computation of income tax.