The Income Tax Appellate Tribunal (ITAT) consisting of Shri Kuldip Singh, and Shri Prashant Maharishi ruled that expenditure on account of listing fees paid to the stock exchange could not be said to be capital expenditure. The tribunal clarified that the expenditure should be regarded as expenditure of revenue nature.
The ruling was made by the Tribunal in the joint hearing of DCIT v. Great Eastern Energy Corporation Ltd and, Great Eastern Energy Corporation Ltd v. DCIT.
The brief facts of the case state that the Assessee was a company engaged in the business of exploration and production of coal bed methane’s gas and compressed natural gas and filed its return of income. Assessment under Section 143 (3) of The Income Tax Act 1961 was passed by the learned AO. The AO made an addition on account of capitalization of share listing expenses and disallowed community development (Donation) expenses. The CIT (A) deleted the addition and allowed 50% of the disallowance in the name of community development donation expenses.
The question here consisted of the addition made on account of capitalization of share listing expenses and the disallowance made on account of community Development (Donation) expenses.
The Tribunal pointed out that the shifting is merely the change of the exchange without increasing the capital base of the company. “Such listing adds several advantages to the business carried on by the company, particularly in the matter of confidence of customers and loyalty of employees, which generate value”. The tribunal hence concurred with the finding of learned CIT (A) in deleting the above disallowance noting that there is no increase in the capital base of the assessee company.
The tribunal has also further clarified that expenditure incurred for the purposes of the business and driven by business prudence would not be liable for disallowance on account of community Development (Donation) expenses.
Subscribe Taxscan Premium to view the Judgment
