The Supreme Court has ruled that expenditure incurred in the process of issuing bonus shares is a revenue expenditure, hence the issuing company is eligible to avail of tax benefits while filing returns.While hearing an appeal filed by Commissioner of Income Tax for disallowing tax breaks claimed by General Insurance Corporation(GIC), the apex court bench observed that the issue of bonus shares leaves the capital employed unchanged and does not result in conferring an enduring benefit to the company and the same has to be regarded as revenue expenditure.The bench comprising Justice Ashok Bhan and Justice Markandey Katju said: "Issuance of bonus shares by capitalisation of reserves is merely a reallocation of a company's funds. There is no inflow of fresh funds or increase in the capital employed which remains the same."GIC had filed a return of Rs 58.52 crore along with the audit report for 1991-92, where the assessing officer disallowed a few expenses incurred as revenue expenditure of Rs. 1.4 crore incurred towards stamp duty and registration fees paid in connection with the increase in authorised share capital.
