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Q. > Please Help: Direct Taxation
Is stamp duty paid towards increase in authorised share capital for meeting working capital requirements allowable under Income Tax Act while computing taxable income?
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SARTHAK JAIN
03-Apr-2014 , 02:06:40 amHi, No, the stamp duty paid towards increase in authorized share capital is not allowable as business expenditure under the Income tax Act for the simple reason that this amount is incurred solely for the purpose of increasing/widening the capital base of the company and thus it is a capital expenditure and hence not allowable. The point that the capital so increased is ultimately utilized for working capital requirements, does not changes the nature of expenditure. There are many judicial decision holding the same position of law like Bombay Burmah Trading Corporation Ltd. v/s CIT (1997)145 ITR 7943 (Bom. HC), Richardson Hindustan V/s CIT (1988) 169 ITR 516 (Bom. HC.), etc. Even the Supreme court in the case of General Insurance Corporation v/s CIT, Mumbai 2006 156 Taxmann 96 (SC) approved the decision of Bombay HC in the case of Bombay Burmah Trading Corporation. Hope this clarifies..