« Top Headlines » Open DEMAT Account in 24 hrs  Old or new tax regime for TDS on salary? This post-election 2024 event will impact your tax planning  What Are 5 Heads Of Income Tax?  Income Tax Dept releases interim action plan for FY25 on tax collection, refund approvals   Income Tax Return: 5 lesser-known tax-saving tips from Section 80  Income Tax Return: 5 lesser-known tax-saving tips from Section 80  Why you need not rush to file your ITR immediately  Income tax returns: ITR-1, ITR-2, ITR-4 forms for FY 2023-24 available for e-filing  Section 80DDB tax benefits for specified illnesses: 5 things to know  Income tax slabs FY 2024-25: Five tips to help taxpayers decide between old and new income tax regimes  ITR-1, ITR-2, ITR-4 forms for FY 2023-24 (AY 2024-25) available now on e-filing income tax portal  How To Save Tax For Salary Above 15 Lakhs? «  33 cos opt for large taxpayer unit scheme in Bangalore... Tax collections may exceed targets... » Expenses on bonus shares non taxable, says SC September, 30th 2006 Issue of bonus shares does not result in inflow of fresh funds or increase in the capital employed The Supreme Court on Thursday resolved a prolonged legal controversy over the nature of expenses incurred by a company in issuing bonus shares, ruling that it cant be taxed. The court agreed with the earlier rulings of Bombay and Calcutta high courts on the same issue and held that the views of Gujarat and Andhra Pradesh high courts were erroneous. The judgment is a fall out of a dispute between General Insurance Corporation and Commissioner of Income Tax, Mumbai, over the on whether the expenditure incurred in issuing bonus shares is entitled to tax relief. GIC, which has four subsidiaries, filed a return on income of over Rs. 58.52 crore for 1991-92. The Income Tax department disallowed a few expenses incurred as revenue expenditure, one of them being over Rs. 1.4crore incurred towards the stamp duty and registration fees, paid in connection with the increase in authorized share capital. GIC had, during the accounting year, incurred expenditure separately for the increase of its authorised share capital and the issue of bonus shares. According to the IT Department , the expenses incurred were towards a capital asset of a durable nature for the acquisition of a capital asset and, therefore could only be attributable towards the capital expenditure. The GIC challenged this. A Bench of Justices Ashok Bhan and Markandey Katju observed that issuance of bonus shares does not result in any inflow of fresh funds or increase in the capital employed, the capital employed remains the same. Issuance of bonus shares by capitalisation of reserves is merely a reallocation of companys fund, they said, while giving an illustration indicating that bonus shares leaves the capital employed untouched before and after issuance of bonus shares. Issue of bonus shares doesnt add to inflow of fresh funds or increase in the capital employed, the bench said. Rakesh Bhatnagar