Sabyasachi Mukharji, J.:— In this reference under s. 256(2) of the I.T Act, 1961, as directed by this court, the following question has been referred to this court:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in sustaining the disallowance of Rs. 13,99,305 being expenses incurred in connection with the issue of fresh lot of shares in 1967?”

2. The question relates to the assessment year 1969-70 and the relevant accounting year ended on 30th June, 1968. The assessee issued 16,75,000 ordinary shares of Rs. 10 each at a premium and on that account incurred an expenditure of Rs. 13,99,305 and claimed the same as deductible expenses. The ITO disallowed the claim for deduction of Rs. 13,99,305 as he was of the view that the expenditure incurred by the assessee was on capital account. Being aggrieved by the aforesaid order of the ITO, the assessee went up in appeal before the. AAC. The AAC referred to the order of the ITO and observed that the assessee had submitted that the expenditure was in respect of business already being carried on by the assessee-company whose profits had been subject to assessment for tax purposes and, therefore, the expenditure incurred long after the incorporation of the company was in no way an expenditure for the formation of the company and as such was an allowable deduction. The AAC was unable to accept this view and he had accordingly upheld the order of the ITO.

3. Being aggrieved, the assessee went up in further appeal before the Tribunal. The Tribunal referred to the relevant contentions and referred to the relevant authorities upon which reliance was placed before the Tribunal. Thereupon, the Tribunal went on to observe as follows:

“Expenditure incurred in connection with the increase in or addition to the existing share capital definitely affects the profit-making apparatus of the company and adds to the capital cost of the company. Any alteration in or addition to the capital structure of the company essentially involved capital expenditure. In fact, the assessee itself has stated in the grounds of appeal that by this expenditure the capital base of the company was reinforced on a permanent basis. This admission by itself would spell out an advantage of an enduring nature. The purpose for which the share capital was raised is not material and would not assist the assessee at all. Whether the expenditure was incurred for buying capital assets or for meeting day-to-day requirements of the company is beside the point. Any expenditure incurred in connection with the alteration of or addition to the existing share capital of the company must be treated as on capital account not only in the light of the settled principle of law but also of the well-known principles of accountancy. It has been held by the Supreme Court in the case of Coal Shipments P. Ltd., [1971] 82 ITR 902, that an item of disbursement can be regarded as capital expenditure when it is referable to fixed capital and that it would be on revenue account when it can be attributed to circulating capital. It has been held therein that the words ‘permanent and enduring’ are only relative terms and are not synonymous with ‘perpetual’ or ‘ever lasting’. Similar observations have been made by the Supreme Court in the case of Ashok Leyland Ltd., [1972] 86 ITR 549, to the effect that an expenditure made with a view to bringing into existence an asset or advantage for the enduring benefit of a trade can be treated as expenditure properly attributable not to revenue but to capital.

4. It is true that the concept regarding capital and revenue expenditure has undergone a metamorphosis. However, there is no authority till today warranting allowance of any expenditure relating to the raising of or addition to the share capital of a company. The decision of the Supreme Court in the case of Golan Lime Syndicate, [1966] 59 ITR 718 is entirely distinguishable and is not applicable to the facts before us.”

5. In the premises, after the initial refusal by the Tribunal, as directed by this court, the Tribunal has referred the question, as indicated before.

6. It was argued before the Tribunal, as we have noticed, that, (a) it was not for the initial formation of the capital structure of the company, (b) there was evidence and it was not disputed that there was need for working funds, and (c) the distinction between the loan capital and share capital was not clear. Both the capital, according to the assessee, were available for the working funds of the company. It was further contended that, (d) the extension of the capital structure was necessitated for the working of the company as the company needed extra funds. We have to examine the validity of these contentions. There are numerous decisions on these points and many of those have been cited before us, as is usual in a case of this nature. We shall presently note those decisions. It appears that the case of Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd., [1965] 58 ITR 241 (PC), at p. 251 of the report, the Judicial Committee had noted that the question of capital or income was always capable of giving rise to a question of law. The Judicial Committee also observed that it had to be remembered that all the phrases which were normally used, as used in this case also, as for instance “enduring benefit” or “capital structure” were initially descriptive rather than definitive and as each new case arose for adjudication and it was normally sought to reason by analogy from its facts to those of one previously decided, the court's primary duty was to enquire how far a description that was both relevant and significant in one set of circumstances was either significant or relevant in those which were presently before the court. The Supreme Court applied the various tests in seeking to distinguish income from capital. There was distinction between fixed and circulating capital resorted to by Lord Haldane in John Smith and Son v. Moore, [1921] 2 AC 13 : 12 TC 266 (HL), but the court always stressed more on observing a demarcation between the cost of creating, acquiring or enlarging permanently, which did not mean the perpetual structure from which the income was to be produced or (the) fruit (earned) and the cost of earning that income itself or performing the income earning operation. Probably, as the Judicial Committee held in that decision, this was illuminating a line of distinction as the law by itself was likely to adjust but the reality of the distinction, the Judicial Committee had to admit, did not become easier to maintain as tax system in different countries allowed more and more kinds of capital expenditure to be charged against profits by way of allowances for depreciation, and by so doing recognised the exhaustion of fixed capital as an operating cost. Even so, the functions of business of the company were of great complexity and the line of demarcation was often found difficult indeed to draw and led to distinctions of some subtlety between profit that was made “out of assets” and profit that was made “upon” assets or “with” the assets. It did not settle the question, for instance, so merely that the expenditure had been made to acquire “source of income” as such. In that case the Judicial Committee was concerned with s. 13 of the Income-tax Act, 1954, of the Federation of Rhodesia and Nyasaland. It is not necessary, in view of the peculiar facts of the case and the facts with which we are concerned to discuss the facts and the actual decision of that case. In that case, the Judicial Committee held that the compensation paid was an allowable deduction in determining the company's taxable income. The Supreme Court in the case of Commissioner Of Income-Tax v. Coal Shipments (Private) Ltd.*, [1971] 82 ITR 902, referred to the observations of Mr. Justice Hidayatullah, as the learned judge then was, in the case of Abdul Kayoom v. CIT, [1962] 44 ITR 689 (SC), at p. 703, that one should avoid the temptation to decide the case by matching the colour of one case against that of another and none of the tests laid down in the various authorities was either exhaustive or universal. The Supreme Court, in the aforesaid decision in the case of Coal Shipments P. Ltd., [1971] 82 ITR 902, observed that the court had to bear in mind the distinction between an expenditure forming “part of the cost of the income earning machine or structure” as opposed to part of “the cost of performing income earning operation”. Referring to the observations of Lord Chancellor Cave in Atherton's case, [1925] 10 TC 155 (HL), at p. 192, the Supreme Court observed, the House of Lords had dealt with a fund which had been created by the assessee as a nucleus of pension fund for its employees. After handing over the money to the trustees for the employees, the company claimed that the money should be charged to revenue. The claim of the company was rejected by the House of Lords on the ground that the payment of money created for itself an enduring benefit or advantage which was capital in nature. In the case of Coal Shipments P. Ltd., [1971] 82 ITR 902 (SC). the payments made by the assessee, as found by the Supreme Court on an analysis of the facts in the light of the principles, were not of a capital nature and were allowable under s. 10(2)(xv) of the Indian I.T Act, 1922, because, (a) the arrangement between the assessee-company and H.V Low & Co. was not for any fixed term but could be terminated at any time at the volition of any of the parties, (b) the payments made by H.V Low & Co. were related to the actual shipment of coal in the course of the trading activities of the assessee and were not related to or tied up in any way to any fixed sum agreed to between the parties. The payments made to ward off competition in business to a rival would constitute capital expenditure if the object of making that payment was to derive an advantage by eliminating the competition over some length of time. The same result would not follow if there was no certainty of the duration of the advantage and the same could be put to an end at any time. How long the period of contemplated advantage should be in order to constitute an enduring benefit, would, the Supreme Court, however, observed, depend on the circumstances and the facts of each individual case.

7. Reliance was placed on the observations of the Madras High Court in the case of CIT v. Kisenchand Chellaram (India) P. Ltd., [1981] 130 ITR 385. There, dealing with a similar problem, at p. 391 of the report, the learned judge, delivering the judgment, observed that the third question related to the claim of the assessee in the sum of Rs. 2,350 paid to the Registrar of Companies as fees for increasing the capital of the company. The ITO without giving any reasons had disallowed that expenditure. The AAC on appeal held that the expenditure could not be said to have been incurred wholly and exclusively for the purpose of the business. When the matter came before the Tribunal it took the view that the amount was not in the nature of a capital expenditure since it had not resulted in an advantage of any enduring benefit. Since the amount was wholly and exclusively used for the purpose of the asseseee's business, it was held to be allowable as a deduction under s. 37(1) of the I.T Act, 1961. In support of that contention reliance was placed on the judgment of the Supreme Court in the case of India Cements Ltd. v. Commissioner Of Income Tax, Madras., [1966] 60 ITR 52. The Madras High Court upheld the order of the Tribunal. We do not have the advantage of the actual finding of facts made before the Tribunal in that case on the basis of which the Madras High Court upheld the decision. But/if the Madras decision is taken to be an authority for the proposition that moneys paid for increasing the capital of a company could be treated as a revenue expenditure, in the light of the decision of the Supreme Court in India Cements Ltd. v. Commissioner Of Income Tax, Madras., with great respect, we are unable to accept that position. We are of the view that that is not the logical conclusion of the decision of the Supreme Court in the case of India Cements Ltd., [1966] 60 ITR 52 (SC). It is, therefore, appropriate at this stage that we should refer to the decision of the Supreme Court in the case of India Cements Ltd. v. Commissioner Of Income Tax, Madras.. There the assessee had obtained the loan of Rs. 40 lakhs from the Industrial Finance Corporation and secured it by a charge on its fixed assets. In this connection it spent a sum of Rs. 84,633 towards stamp duty, registration fees, lawyer's fees, etc., and claimed this amount as business expenditure. It was held that the amount spent was not in the nature of capital expenditure but was laid out or expended wholly and exclusively for the purpose of the assessee's business and, therefore, was allowable as a deduction under s. 10(2)(xv) of the Indian I.T Act, 1922. The act of borrowing money was incidental, according to the Supreme Court, in the facts of that case, to the carrying on of the business, the loan obtained was not an asset or an advantage of an enduring nature. The expenditure was incurred for securing the use of money for a certain period and it was irrelevant to consider the object with which the loan was obtained. The Supreme Court observed that obtaining capital by the issue of shares was different from obtaining a loan by debentures. A loan obtained could not be treated as an asset or an advantage for the enduring benefit of the business of the assessee. The Supreme Court, after referring to the several authorities, referred to the well-known test laid down by the Supreme Court in the case of Bombay Steam Navigation Co. (1953) P. Ltd. v. CIT, [1965] 56 ITR 52, where at p. 59 of the report, the Supreme Court observed as follows:

“Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure.”

8. Thereafter the Supreme Court referred to the several Indian decisions and summarised the points at p. 63 of the report as follows:

“(a) The loan obtained was not an asset or advantage of an enduring nature;

(b) The expenditure was made for securing the use of money for a certain period;

(c) It is irrelevant to consider the object with which the loan was obtained.”

9. Consequently, in the circumstances of the case, the Supreme Court was of the view that the expenditure was revenue expenditure within s. 10(2)(xv) of the Indian I.T Act, 1922. The Supreme Court noted further that the expression “for the purpose of business” was wider in scope than the expression “for the purpose of earning profits”.

10. Reliance was placed on behalf of the assessee on the decision in the case of In re Tata Iron & Steel Co. Ltd., AIR 1921 Bom 391. There the Division Bench of the Bombay High Court observed in the light of s. 9(2)(ix) of the Indian I.T Act, 1922, that money paid to the underwriter on the issue of certain preference shares by the company was not an item of expenditure under s. 9(2)(ix) of the Act. There the facts were rather peculiar Shah J., agreeing with the conclusion of the learned Chief Justice, observed at p. 393 of the report as follows:

“I am of opinion that the sum spent by way of commission for underwriting the shares as in the present case is in the nature of capital expenditure. The expression ‘capital expenditure’ is not defined and the words ‘in the nature of capital expenditure’ make the meaning of the expression more elastic in its application to the facts of each case. Having regard to the substance and not merely the form of the matter, I have come to the conclusion that the sum paid is in the nature of capital expenditure.

11. There is no direct authority on this point. I think, however, that the ratio decidendi in Texas Land and Mortgage Company v. Holtham, [1894] 3 TC 255 (QB) and the principles underlying the decision in Royal Insurance Company v. Watson, [1897] AC 1 (HL), lend support to this conclusion.

12. In this view of the matter, it is strictly not necessary to consider whether the sum can be held to have been expended solely for the purpose of earning such profits as the section contemplates. I do not feel any difficulty in rejecting the suggestion made by the learned Advocate-General that the ‘profits’ referred to in the clause must mean the profits of one particular year in which the expenditure in question is incurred. There is no such limitation in the section, and, in the absence of any words indicating such a limitation, it is clear that the contention cannot be accepted. Apart from this point, however, I have grave doubts as to whether the expenditure in question, if not in the nature of capital expenditure, could be said to have been incurred solely for the purpose of earning the profits. For the purpose of this reference it is unnecessary to pursue the point, and I refrain from expressing any definite opinion thereon.”

13. Reliance was placed on the decision in aid of the proposition that the need for the money need not be in the year in question or profits might have arisen in the year but the expenditure might have been incurred in the earlier year. It was also emphasised that the expression “for the purpose of the business” was different from the expression “for the purpose of earning profits”. While we agree with the test, it appears to us that, if the main object and purpose and the nature of the transaction was to effect the income earning machine or structure as such and not only to make the inflow of more funds available, then, it would be on the capital side. In this case the Tribunal has noted that the assessee itself has stated in the grounds of appeal before it that by this expenditure the capital basis of the company was reinforced on a permanent basis. That was the main purpose. As a result of that main purpose the incidental strength that would flow by having more funds to spend would not, in our opinion, affect the real purpose and object of the transaction. On behalf of the assessee our attention was drawn to the observations in the case of Texas Land & Mortgage Co. v. Holtham (Surveyor of Taxes), [1894] 3 TC 255 (QB) where at p. 260 Mathew J. observed as follows:

“There is no doubt that in this case this company raised money by shares with the intention of lending money on mortgage. To increase its capital it raised money on debentures. The argument is that the cost of raising the money ought to be deducted from the profits in a particular year. We are clearly of opinion that that cannot be done. The amount paid in order to raise the money on debentures, comes off the amount advanced upon the debentures, and, therefore, is so much paid for the cost of getting it, but there cannot be one law for a company having sufficient money to carry on all its operations and another which is content to pay for the accommodation. This appears to me to be entirely concluded by the decision of yesterday. The appeal must be dismissed with costs.”

14. As would be evident from the observations of the learned judge, the facts in that case were entirely different from the facts in the instant case. Even on that basis, however, the ratio of the said decision is, in our opinion, against the contention advanced by the assessee in the instant case before us. Reliance was also placed on the decision in the case of Anglo-Continental Guano Works v. Bell (Surveyor of Taxes), [1894] 3 TC 239 (QB), where at pp. 244-245, Mathew J., observed as follows:

“Deduction is not to be permitted for ‘Any sum expended for repairs of premises occupied for the purpose of such trade, manufacture, adventure, or concern, nor for any sum expended for the supply or repairs or alterations of any implements, utensils, or articles employed for the purpose of such trade, manufacture, adventure, or concern, beyond the sum usually expended for such purposes, according to the average of three years preceding the year in which such assessment shall be made; nor on account of loss not connected with or arising out of such trade, manufacture, adventure, or concern; nor on account of any capital withdrawn therefrom; nor for any sum employed or intended to be employed as capital in such trade, manufacture, adventure or concern; nor for any capital employed in improvement of premises occupied for the purpose of such trade, manufacture, adventure, or concern; nor on account or under pretence of any interest which might have been made on such sums if laid out at interest’. It is perfectly clear that in the hands of the partners deductions of that class and character are not to be made because, if made, you would not be ascertaining what really are the profits, not of the partners, but of the business.”

15. The ratio of the aforesaid observations, in our opinion, made in the context of that case would also not be of any assistance to the assessee for the contention that the amount spent for increasing the share capital would be deductible as revenue expenses because it might be available for more working fund which was necessary for the company's carrying on of the business. Our attention was drawn to the decision of the Supreme Court in the case of Challapalli Sugars Ltd. v. CIT, [1975] 98 ITR 167. We are of the view that in view of the facts of the actual controversy before the Supreme Court it is not necessary for us at all, in the context of the present controversy, to deal with the said decision in any detail.

16. Learned advocate for the assessee sought some support from the observations of the House of Lords in the case of IRC v. Carron Co., [1968] 45 TC 18, where at pp. 67 and 68, the House of Lords dealt with the allowability of the expenditure incurred for a change in the administrative structure of the company. The said observations were approved by the Supreme Court in the case of Empire Jute Co. Ltd. v. CIT, [1980] 124 ITR 1. The Supreme Court at p. 14 of the report, referring to the decision of the House of Lords, observed that a certain expenditure was incurred by the assessee-company for the purpose of obtaining a supplementary charter altering its constitution, so that the management of the company could be placed on a sound commercial footing and the restrictions on the borrowing powers of the assessee-company could be removed. The old charter contained certain antiquated provisions and also restricted the borrowing powers of the assessee-company and these features severally handicapped the assessee-company in the development of its trading activities. The House of Lords held that the expenditure incurred for obtaining the revised charter eliminating these features, which operated as an impediment to the profitable development of the assessee-company's business, was in the nature of a revenue expenditure since it was incurred for facilitating the day-to-day trading operations of the assessee-company and enabling the management and conduct of the assessee-company's business to be carried on more efficiently., Lord Reid emphasised that the expenditure was incurred by the assessee-company “to remove antiquated restrictions which were preventing profits from being earned” and on that account held that the expenditure was of a revenue character. In view of the specific finding that it was to remove a certain antiquated restriction which was hampering the earning of the profit it could be said that the amounts spent on an alteration of the administrative structure, which facilitated the earning of the profit, could be treated as on revenue account. Learned advocate for the assessee sought to urge that alteration in the financial structure of the company which also facilitated the earning of the profit of the company by making more working fund available should also be treated on an equal footing. We are, however, unable to accept this position. It is true that the alteration in the capital structure by raising the share capital of the company would make more funds available, but that, by itself, in our opinion, cannot be decisive in this matter. The object and purpose of the expenditure was to strengthen the capital structure of the company and as an incidental result more funds flowed to the assessee-company making more working funds available. That, in our opinion, cannot change the essential object and purpose for incurring the expenditure and the resultant fact, that is to say, the fundamental change in the income-earning machinery and structure and not merely making income more easily available. These observations were approved by the Supreme Court as we have noted in the case of Empire Jute Co. Ltd., [1980] 124 ITR 1.

17. Reliance was also placed on the observations of the Supreme Court in the case of L.H Sugar Factory & Oil Mills (P.) Ltd. v. CIT, [1980] 125 ITR 293, where the Supreme Court referred again to all the relevant authorities and held that a sum of Rs. 50,000 contributed under the sugarcane development scheme was a deductible expenditure under s. 10(2)(xv) of the 1922 Act. There the facts were entirely different. Learned advocate for the assessee tried to draw sustenance from the observations from pp. 299 to 301 of the report. In our opinion, in the facts of the instant case, these observations cannot be of much assistance to the assessee.

18. Our attention was also drawn to the observations of the Supreme Court in the case of Gotan Lime Syndicate v. Commissioner Of Income Tax, , [1966] 59 ITR 718, where also the facts were entirely different. Our attention was drawn to the observations at p. 727, where the Supreme Court referred to the difficulty in laying down a fixed test as to enduring advantage and observed that in the case before the Supreme Court the royalty payment was not a pay-merit for securing an enduring advantage. It related to the raw-material to be obtained and, therefore, it was held to be an allowable expenditure. Learned advocate for the Revenue drew our attention to the observations of this court in the case of Hindustan Gas and Industries Ltd. v. CIT, [1979] 117 ITR 549, where the assessee was claiming a relief by way of an allowable deduction in respect of an expenditure incurred by him, it was strictly for the assessee to establish that that expenditure was not of the nature of a capital expenditure and he could not claim any benefit of ambiguity or doubt in his favour. The court observed that under the Companies Act, 1956, when a company issued redeemable preference shares it did not obtain a loan as it would by issuing debentures. There was a fundamental difference, according to the court, between the capital made available to a company by the issue of a share and money obtained by a company under a loan or a debenture. Respective incidences and consequences of issuing a share and obtaining money on loan or on a debenture were different and distinctive. Therefore, the court held that the expenditure incurred for the payment of legal charges to solicitors on the issue of a prospectus for offering redeemable preference shares to the public and the payment of underwriting commission and brokerage for the issue of the same was a capital expenditure and not a revenue expenditure. So far as the decision goes, the decision is against the contention of the assessee, which the learned advocate for the assessee sought to urge, that this aspect of the matter was not before the court and the court had no occasion to decide the controversy. May be that is so. In our opinion, where the object of incurring the expenditure, as in the instant case, was to affect the capital structure, as a result of which certain incidental advantage flows, it will be of a capital nature. We are also unable to accept the contention that it is only the acquisition of a right of a permanent character, the creation of which was a condition for the carrying on of the business, which could be rightly treated as an expenditure on the capital account. Capital expenditure can be incurred after the company was floated or it started business, if it resulted in bringing in a capital advantage. It would also be difficult to lay down any test, that is only in the case of fixed asset or that is not easily convertible into money. If an assessee acquired a capital asset, namely, to construct a house or a building, in particular cases, having capital acquired, the expenditure would be on the capital account. It may be that by acquiring capital he is increasing his earning of his income or earning of the profit. That is the physical test in determining this question. It is the resultant advantage obtained by incurring the expenditure along with the purpose and object of incurring the expenditure, which should be the guide to determine the question. In a case of this nature it is natural that our attention was drawn to the celebrated observations in the case of Assam Bengal Cement Co. Ltd. v. CIT, [1955] 27 ITR 34 (SC), and we would not repeat again the observations of the Full Bench of the Lahore High Court which were adopted by the Supreme Court at p. 45 of the report in determining whether the expenditure was on capital account or revenue account.

19. Our attention was drawn to the observations of this court in the case of Union Carbide India Ltd. v. Commissioner Of Income-Tax, West Bengal-Iii, [1981] 130 ITR 351 and reliance was placed on the observations of the court where the relevant authorities were discussed at pp. 361, 372. Incidentally we may mention that in that decision we referred to the decision of India Cements Ltd.'s case, [1966] 60 ITR 52 (SC). There is a mistake in the printing in the reported judgment where it has been observed that in India Cements Ltd.'s case the Supreme Court held that “the loan was not a liability”. We have to observe that in that case the Supreme Court held that the loan was a liability. Reliance was also placed on the observations at different paragraphs of the said decision but that decision is on an entirely different set of facts. In our opinion, not much support can be had by either party from the observations in that decision. There we had also held that the loan had been utilised for the purchase of capital, the increase in liability due to the devaluation of the rupee was on capital account. Reliance was also placed on the observations of this court in the case of Chloride India Ltd. v. Commissioner Of Income-Tax, West Bengal, [1981] 130 ITR 61, where the assessee took on lease certain premises which were occupied by G and Co. In order to obtain vacant possession of the premises the assessee paid Rs. 4,50,000 to G and Co. and claimed it as revenue expenditure. The Tribunal found that G and Co. was in fact a tenant and its tenancy had not been terminated before the transaction with the assessee took place. G and Co. had the right to be in possession in view of s. 108(c) of the Transfer of Property Act, 1882. The Tribunal was of the view that it was immaterial whether the amount was paid to the tenant or the landlord and that it was capital expenditure. On a reference we held that the facts showed that the amount of Rs. 4,50,000 was paid for acquiring a right to possession which was a capital of enduring nature and as such it was a capital expenditure.

20. Reliance was also placed on the judgment of the Delhi High Court in the case of Bharat Carbon and Ribbon Manufacturing Co. Ltd. v. CIT, [1981] 127 ITR 239. There the assessee claimed a deduction of Rs. 5,625 paid as registration fees for an increase in its authorised capital during the previous year relevant to the assessment year 1963-64 as business expenditure and alternatively claimed that it could spread it over ten years and deduct it under s. 35D of the I.T Act, 1961. It was held by the Delhi High Court that the expenditure had been incurred with a view to increasing its authorised capital and as such it was a capital expenditure. It further held that the amount having been spent before the 1st of April, 1971, s. 35D would not apply.

21. Reliance was also placed on the observations of the Supreme Court in the case of CIT v. Ashok Leyland Ltd., [1972] 86 ITR 549 and our attention was drawn to the observations of the court at p. 553. When an expenditure was made with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade there is good reason in the absence of special circumstances leading to the opposite conclusion for treating such an expenditure as properly attributable not to revenue but to capital. In the light of the observations stated hereinabove and in view of the facts as noted by the Tribunal, we are of the opinion that the question posed before this court must, therefore, be answered in the affirmative and in favour of the Revenue. In the facts and circumstances of the case,. the parties are to pay and bear their own costs.

C.K Banerji, J.:— I agree.