S.P. Goyal, J.
1. The assessee, a closely held company, is engaged in the manufacture and sale of hosiery and textile needles. After obtaining approval of the Government of India in 1961, it raised a loan of Rs. 55 lakhs from Messrs. Groz-Beckert International, a Swiss Company. During the assessment year 1973-74, it paid the second instalment of the loan and claimed loss of Rs. 91,366 on its remittance because of the devaluation of the Indian currency twice, once in the year 1966 and again in the year 1971. Both these items of Rs. 76,666 and Rs. 14,700 were disallowed by the Tribunal holding it to be an expenditure of capital nature.
2. The assessee increased its share capital from Rs. 45 lakhs to Rs. 1 crore and for doing so paid a fee of Rs. 8,250 under the Companies Act. This expenditure was claimed as business expenditure by the assessee. Its claim was turned down up to the Tribunal stage. However, on application by the assessee, the following three questions were referred to this court with the statement of the case :
' 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right :in law in disallowing the claim for loss of Rs. 76,666 on account of devaluation of the Indian currency in the assessment year 1973-74?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing the loss of Rs. 14,700 incurred at the time of remittance of the second instalment of loan obtained in foreign currency ?
3. Whether, on the facts and in the circumstances of the case, the fee of Rs. 8,250 paid to the Registrar of Companies was admissibls as a business expenditure '
3. So far as the law points contained in the first two questions are concerned, the learned counsel for the parties have agreed that the same course has to be adopted as was done in the earlier decision of this courtbetween the same parties rendered on September 14, 1979, and reported as Groz-Beckert Saboo Ltd. v. CIT .
4. As regards question No. 3, the learned counsel for the assessee contended that the fee paid under the Companies Act to increase the share capital was a business expense and in support of his contention relied upon the decision of the Supreme Court in India Cements Ltd. v. CIT : 60ITR52(SC) and another of the Madras High Court in CIT v. Kisenchand Chellaram (India) Pvt. Ltd. : 130ITR385(Mad) . None of the two decisions, however, supports the contention of the learned counsel as both of them are distinguishable on facts. In India Cements Ltd.'s case : 60ITR52(SC) , the finding was that the loan of Rs. 40 lakhs had been taken to be utilised as working capital. As it was held to be a regular expenditure, the amount of Rs. 84,633 spent towards stamp duty, registration fee, lawyer's fee, etc., was also held to be a business expense. Similarly, in Kishan Chand's case : 130ITR385(Mad) , the assessee had taken on lease three buildings and the money spent on them for their improvements was claimed and allowed as revenue expenditure. As the assessee had not acquired any capital assets and the buildings were taken on lease for business purposes, the expenditure was rightly allowed as business expenditure. In the present case, the expenditure has been incurred on strengthening the capital structure of the company. Any amount spent on the acquisition of capital nature obviously would also be an expenditure of capital nature and not of revenue nature. Similar matter came up for consideration directly before a Division Bench of the Calcutta High Court in Brooke Bond India Ltd. v. CIT : 140ITR272(Cal) and the expenditure incurred on raising share capital was disallowed in the following terms (at pp. 273 and 274 headnote):
' Held, that the Tribunal had found that the assessee had itself stated in the grounds of appeal before the Tribunal that by the expenditure, the capital base of the assessee company was reinforced on a permanent basis, which was the main purpose of the assessee. Though the alteration in the capital structure by raising the share capital of the assessee company would make more funds available, yet that by itself would not be decisive of the 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 to the assessee. That, however, would not change the essential object and purpose of 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. Therefore, the Tribunal was right in disallowing the sum ofRs. 13,99,305, being expense incurred in connection with the issue of the fresh lot of shares by the assessee company.'
5. Respectfully agreeing with the above ratio, we also hold that the fees paid under the Companies Act for increasing the share capital were an expenditure of capital nature. Question No. 3 is accordingly answered in the negative, that is, in favour of the Revenue and against the assessee. The case would now go back to the Tribunal for recording a finding as to whether the amount of loan was utilised by the assessee as fixed capital or working capital in the relevant assessment year and for its disposal in the light of the observations made in Groz-Beckert Saboo Ltd. v. CIT . No costs.