COMMISSIONER OF INCOME TAX Vs. AUTOMETER LTD

JUDGEMENT

(1.) THE Tribunal, Delhi Bench 'E', New Delhi, has referred three questions at the instance of Revenue for the asst. yr. 1982-83 arising out of the same assessment, but two different reference applications are there as there was an appeal and a cross-appeal. In IT Ref. No. 201 of 1991, the following two questions are referred :

(2.) SO far as question No. 1, with regard to the expenditure of Rs. 14,500 incurred in connection with the issue of bonus shares, is concerned, the same is now no more debatable in view of the decisions of various Courts and, particularly, the decision in the case of Ahmedabad Manufacturing and Calico (P) Ltd. vs. CIT (1986) 57 CTR (Guj) 151 : (1986) 162 ITR 800 (Guj), wherein the Court has held that the expenditure is not deductible as revenue expenditure and that bonus shares are no different from rights shares. The Supreme Court in the case of Punjab State Industrial Development Corporation Ltd. vs. CIT (1997) 140 CTR (SC) 594 : (1997) 225 ITR 792 (SC), considered the question in detail. At page No. 797, the case of Ahmedabad Manufacturing and Calico (P) Ltd. (supra), was also referred to with approval. Ultimately, it held that an expenditure incurred directly for the purpose of expansion of capital asset is in the nature of capital expenditure. Thus, question No. 1 is required to be decided in favour of the Revenue and it is held that it is not allowable as revenue expenditure.

(3.) AFTER referring to various decisions a Full Bench of the Kerala High Court in the case of Ram Bahadur Thakur Ltd. vs. CIT (2003) 181 CTR (Ker)(FB) 193 : (2003) 261 ITR 390 (Ker)(FB), after indicating 9 criteria, pointed out that the AO is bound to conduct an enquiry as to whether the assessee satisfies all the requirements of the section before either allowing or rejecting the claim. The officer cannot mechanically either allow the deductions or deny the same. In the instant case, in para 19 of the Tribunal's judgment, the Tribunal has pointed out that on record, relevant extracts of the minutes of the board of director's meeting held on 1st July, 1980, held at 11.00 a.m. was on the record and the relevant portion reads as under: