Is amount incurred twds Increase in Authorised Capital an allowable expenditure under I.T. Act??
RITESH KHANDELWAL (Corporate Taxation) (168 Points)
28 May 2008Is amount incurred twds Increase in Authorised Capital an allowable expenditure under I.T. Act??
Shekar
(CA & LCS )
(1109 Points)
Replied 28 May 2008
Hi Ritesh...
An increase in the authorised capital of the company enables it to issue shares and thereby raise long-term funds. Such a permanent facility of enhancing the authorised capital, obtained by paying fees to the Registrar, is a capital expenditure and cannot be claimed as revenue expenditure(Punjab State Industrial Development Corporation Ltd vs CIT _ 1997 93 Taxman 5 SC).
Pooja Chopda
(Practising Chartered Accountant)
(931 Points)
Replied 28 May 2008
I don't think it is a capital expenditure per se & can be claimed as rates & taxes...
anupam
(ca student)
(49 Points)
Replied 28 May 2008
i totally agree with shekar and the reference of the case is also correct its capital expenditure bcoz the increse in authorised capital is normally a cause to further raise of capital therefore it is capital expenditure hence not allowable.
RITESH KHANDELWAL
(Corporate Taxation)
(168 Points)
Replied 29 May 2008
Hey, I got d answer. Its clearly & unambigously mentioned in Sec 35D that any expenditure incurred for the pupose of extention of Industrial Undertaking shall be granted in 1/5 as adeduction in that F.Y.. So following the nature of the company, if it's Industrial in nature then 1/5 of Total Expenditure is allowable otherwise not.
Mahesh Paryani
(Chartered Accountant)
(365 Points)
Replied 10 June 2008
I totally agree with shaker it is a capital expenditure and it is not allowed in income tax act section 35 d is totally different and does not apply in your case
guru santhanam
(Chartered Accountant)
(97 Points)
Replied 10 June 2008
Dear Ritesh,
Sec 35D - refers to Amortisation of certain preliminary expenses
We cannot refer this section for Authorised Capital issue because sections refers to only Issued Capital. (Refer 35D(2)(c)(iv).
Even the explanation below the section provides meaning to capital employed as Issued share capital....
So, we cannot refer 35D for this issue. Thanks
Since there is no specific clause in income tax act, we need to go by case laws as mentioned by friends above...
Regards,
gurusanthanam
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
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