« Top Headlines » Open DEMAT Account in 24 hrs  Delhi HC Rules GST Registration Cannot Be Cancelled Retrospectively Without a Clear Show Cause Notice (SCN)  Belated income tax return AY 2026-27: How to file, late filing charges and what you may lose  Major Financial Changes from August 1, 2026: ITR Deadline, RBI MPC Meeting, Tatkal Ticket Rules & More  Government proposes to ease tax relief conditions for offshore funds  TallyPrime Connected Banking: Automating Banking and Accounting  ITR Filing Deadline 2026: Is July 31 the Last Date to File Your Income Tax Return? Latest Official Update  ITR filing deadline nears: How to file income tax return online on e-filing portal - quick 15-step guide  Will the ITR Filing Deadline Be Extended Beyond July 31 for FY 2025-26? Here's the Latest Update for Taxpayers  Income Tax Refund Delayed for AY 2026-27? 5 Common Reasons Your Refund May Be Stuck and How to Fix It  ITR Filing 2026: FM Nirmala Sitharaman Asks Tax Officials to Let Honest Taxpayers Correct Genuine Mistakes  Will Your FCNR Deposit Stay Tax-Free After Returning to India? Tax Rules Explained for NRIs «  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