Case Note & Summary
The appeal was filed by the Revenue under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT). The assessee, M/s. Sesa Goa (India) Ltd., was engaged in the business of mining and processing of iron ore. The Revenue challenged two issues: first, whether the assessee was entitled to investment allowance under Section 32A of the Act for processing of ore, and second, whether fees of Rs. 90,000 paid to the Registrar of Companies for increasing authorised capital for issuing bonus shares was allowable as revenue expenditure. The ITAT had allowed both claims. The High Court held that processing of ore by crushing, screening, and washing constitutes manufacture or production of an article or thing, relying on the Supreme Court's decision in Chowgule & Co. Pvt. Ltd. v. Union of India and distinguishing CIT v. N.C. Budharaja & Co. The court also held that fees paid for increase of authorised capital for issuing bonus shares is revenue expenditure, following the Bombay High Court decision in Bombay Burmah Trading Corporation Ltd. v. CIT. The appeal was dismissed with no order as to costs.
Headnote
A) Income Tax - Investment Allowance - Section 32A of Income Tax Act, 1961 - Processing of ore constitutes manufacture or production - The assessee engaged in processing of iron ore by crushing, screening, and washing is engaged in production of an article or thing, thus entitled to investment allowance under Section 32A. The decision in CIT v. N.C. Budharaja & Co. (204 ITR 412) distinguished as it dealt with construction activity, not processing of ore. (Paras 3-5)
B) Income Tax - Revenue Expenditure - Fees paid to Registrar of Companies for increase of authorised capital for issuing bonus shares is deductible as revenue expenditure - Following Bombay High Court decision in Bombay Burmah Trading Corporation Ltd. v. CIT, such fees are allowable as revenue expenditure. (Para 6)
Issue of Consideration
Whether the assessee is entitled to deduction on account of investment allowance under Section 32A of the Income Tax Act, 1961, and whether fees paid to Registrar of Companies for increasing authorised capital for issuing bonus shares is allowable as revenue expenditure.
Final Decision
Appeal dismissed with no order as to costs. The ITAT order is upheld.
Law Points
- Processing of ore constitutes manufacture or production
- Fees for increase of authorised capital for bonus shares is deductible revenue expenditure
Case Details
2005 LawText (BOM) (08) 108
Income Tax Appeal No. 33 of 2002
S. R. Rivonkar for Revenue, V. Frank for Assessee
The Commissioner of Income Tax
M/s. Sesa Goa (India) Ltd. and The Income Tax Appellate Tribunal
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Nature of Litigation
Income Tax Appeal under Section 260A of the Income Tax Act, 1961
Remedy Sought
Revenue sought to challenge the ITAT order allowing investment allowance and deduction of fees paid for increase of authorised capital
Filing Reason
Revenue aggrieved by ITAT order allowing deduction for investment allowance and fees paid to Registrar of Companies
Previous Decisions
ITAT allowed the assessee's claim for investment allowance and deduction of fees paid for increase of authorised capital
Issues
Whether the assessee is entitled to deduction on account of investment allowance under Section 32A of the Income Tax Act, 1961, for processing of ore?
Whether fees paid to Registrar of Companies for increasing authorised capital for issuing bonus shares is allowable as revenue expenditure?
Submissions/Arguments
Revenue argued that the assessee is engaged only in processing activity and not in production or manufacturing of any article or thing, relying on CIT v. N.C. Budharaja & Co.
Assessee contended that processing of ore constitutes manufacture or production, and fees for increase of authorised capital is revenue expenditure.
Ratio Decidendi
Processing of iron ore by crushing, screening, and washing constitutes manufacture or production of an article or thing, entitling the assessee to investment allowance under Section 32A of the Income Tax Act, 1961. Fees paid to Registrar of Companies for increasing authorised capital for issuing bonus shares is revenue expenditure.
Judgment Excerpts
The processing of ore by the assessee by crushing, screening and washing amounts to manufacture or production of an article or thing.
Following the decision of this Court in Bombay Burmah Trading Corporation Ltd. v. CIT, the fees paid to the Registrar of Companies for increase of authorised capital for issuing bonus shares is allowable as revenue expenditure.
Procedural History
The Revenue filed an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) which allowed the assessee's claims for investment allowance and deduction of fees paid for increase of authorised capital. The appeal was admitted on substantial questions of law and heard by the High Court.
Acts & Sections
- Income Tax Act, 1961: 260A, 32A
