Public issue expenses

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L.PRAKASHAM

PARTNER

24 Points Posted on 04 July 2011

1. A Co wanted to go for IPO .

And it has increased its authorised capital by paying fees at Roc . But it has not gone for public issue during the year when it has paid the fees with ROC.In subsequent year it is preparing for public issue. Whether it is allowable expenses ?

2. Whether share issue expenses is capital or revenue ?

Replies (2)

CS,CA F,Numrologi TusharSampat

CS CA F Numerologist Astrologer Graph

85935 Points Posted on 04 July 2011

Fees paid to ROC for increasing Authorised share capital is Capital expenditure -Mohan Meakin Breweries Ltd V/s CIT (NO.2) (1979)117 ITR 505 HP.

It is not deductible as it is a capital expenditure- Punjab State Industrial Development Corp. Ltd V/s CIT (1997)225 ITR 792/93 TAXMANN 5 (SC).

A G Vishal Kirthic

Chartered Accoutant

236 Points Posted on 04 July 2011

Dear Sir,

Regarding your first question, I completely agree with Mr. Tushar.Only fees paid for registration of a company is deductible. Fees paid for increase in share capital is not fees for registration of the company, and hence is not amortisable under the provisions of Sec 35D.CIT v. Hindustan Insecticides Ltd. [2001] 250 ITR 338 (Delhi).

With respect to second query, where business of assessee-company had not yet commenced, expenditure on public issue of shares could be amortised under section 35D - Goa Carbon Ltd. v. CIT [1994] 73 Taxman 68 (Bom.). In your case business has already commenced, and hence the share issue expenses is deductible in the year in which it is incurred