Commissioner of Income Tax vs Kodak India Ltd.

The notice that was issued had stated that the matter appeared to be covered by the decision of this court in Punjab State Industrial Development Corporation Ltd. v. CIT [1997] 225 ITR 792 . We find, now that we have heard learned counsel, that it is so covered.

Learned counsel for the assessee stressed that in the instant case, the asses-see had acted to increase its share capital because it had been directed by the Reserve Bank of India so to do. This was because it had to reduce its non-residential holding to forty per cent. It was learned counsel''s submission that the only way in which the assessee could do business after the Reserve Bank directive was to issue share capital to comply with it. In his submission, therefore, the decision of this court in the case of Punjab State Industrial Development Corporation Ltd. [1997] 225 ITR 792 , was distinguishable.

Whichever way we look at it, the object of the assessee was to increase its share capital; whether it did so to continue to do business after the Reserve Bank directive or otherwise, the case is covered by the judgment in the case of Punjab State Industrial Development Corporation Ltd .

The appeal is, therefore, allowed and the order under appeal set aside. The question is answered in the negative and in favour of the Revenue. In other words, the expenditure of Rs. 8,67,624 incurred for the public issue of shares was capital expenditure.

No order as to costs.