JUDGEMENT (Per T. D. Sugla, J.) This is a reference at the instance of the assessee company. The assessment year involved in 1969-70. The Income-tax Appellate Tribunal has referred to this Court the following question of law for opinion under Section 256(1) of the Income-tax Act, 1961 : "Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the assessee is not entitled to deduction in respect of the sum of Rs. 3,05,981/- being expenditure incurred on the issue of prospectus etc. for raising working capital by way of replenishment ?" The assessee company carries on business in the manufacture of textile and engineering goods. Upto 15th August 1965 it was being managed by the managing agents Messrs. Bhogilal Menghraj & Co. Ltd. The interest in the managing agency firm was held by two groups known as Shri Bhogilal Laherchand group and Shri Lalchand Menghraj group. There developed a rift between the two groups in the year 1965 when the Government of India announced the policy of gradual abolition of managing agency system. Shri Pratap Bhogilal was appointed managing director with effect from 16th August 1965 with the approval of the Central Government as a result of which there was serious disturbance in the proper functioning of the day to day business of the company. There was litigation in this Court which ended in a consent decree dated 4th September 1968. In terms of the consent decree, the assessee company was required to purchase 30975 equity shares of the face value of Rs. 100/- each relating to the minority group at a price of Rs. 206.50 per share and effect suitable reduction in capital. The assessee company was, thus, required to pay a sum of Rs. 63,96,337/- in instalments as per our Court's order dated 4th September 1968 to the minority group of shareholder. As a consequence, the assessee company's working funds were to be affected adversely. In order to get over the situation, the Board of Directors of the assessee company decided sometime in November/December 1968 to issue 62750 fresh equity shares of Rs. 100/- each at par. Prospectus was issued on 2nd December 1968 whereby members of the public were invited to purchase the shares. A sum of Rs. 32 lakhs and odd was received during the calender year 1968 itself as share application money. 100/- each at par. Prospectus was issued on 2nd December 1968 whereby members of the public were invited to purchase the shares. A sum of Rs. 32 lakhs and odd was received during the calender year 1968 itself as share application money. The shares were issued subsequently. The profit and loss account for the calendar year 1968 relevant for the year under reference disclosed a sum of Rs. 3,05,981/- as share issue expenses. The assessee claimed the above expenditure as deduction on revenue account. The claim was rejected by the Income-tax Officer who relied on the Supreme Court decision in India Cements Ltd. v. C.I.T., Madras, 60 I.T.R. 52. The Appellate Assistant Commissioner agreed with the Income-tax Officer. The Tribunal, inter alia, referred to the Bombay High Court decision in the case of Tata Iron & Steel Co. Ltd., 1 I.T.C. 125, and the Supreme Court decision in 60 I.T.R. 52 (supra) and agreed with the departmental authorities that the expenditure was incurred on the floating of capital by additional issue and was, therefore, capital in nature. Shri Mistry, the learned counsel for the assessee, submitted that by raising the additional capital, the assessee was not in any way benefited. The additional capital raised was Rs. 62,75,000/- which was almost equal to the amount of Rs. 63,96,337/- the assessee was to pay to the minority group of shareholders for purchasing their 30,975 shares in terms of consent decree. It is not quite correct to say that by raising the capital by issue of additional shares, the assessee got any advantage, far less on advantage of enduring nature. The Tribunal was, therefore, not correct in confirming the disallowances of the expenditure as revenue expenditure. Shri Mistry stated that our Court in the case of Bombay Burmah Trading Corporation Ltd. v. C.I.T., Bombay City IV, 145 I.T.R. 793 and in the case of C.I.T. v. Glaxo Laboratories (India) Ltd. 181 I.T.R. 59, considered this issue. In 145 I.T.R. 793 (supra) our Court held, following the Supreme Court decision in 60 I.T.R. 52 (supra), that it was not that every expenditure incurred in connection with the raising of the additional capital that required disallowance. In 145 I.T.R. 793 (supra) our Court held, following the Supreme Court decision in 60 I.T.R. 52 (supra), that it was not that every expenditure incurred in connection with the raising of the additional capital that required disallowance. Expenditure such as legal expenses, printing expenses which a trader is expected to incur in the ordinary course of its capacity as trader have to be allowed as revenue expenditure even though a part of it might relate to the issue of the raising of the additional capital. In particular, Shri. Mistry placed strong reliance on our Court's judgment in 181 I.T.R. 59 (supra). It was stated that in more or less similar circumstances, the expenditures incurred on the raising of capital by additional issue of shares was held to be a revenue expenditure. The case, according to him was squarely applicable in the facts of this case and, therefore, it must be held that the expenditure incurred herein is also a revenue expenditure. Dr. Balasubramanian, the learned counsel for the Revenue, on the other hand, strongly relied upon the Tribunal's order. In particular, he stated that the Supreme Court decision in the case of Bombay Steam. Navigation Co. (1953) Private Ltd. v. C.I.T., Bombay, 56 I.T.R. 52, was applicable and was against the assessee and that our Court's judgment in 181 I.T.R. 59 (supra) was distinguishable. We have carefully considered the Supreme Court decision in 60 I.T.R. 52 (supra) and our High Court's decisions in 145 I.T.R. 793 (supra) and 181 I.T.R. 59 (supra). In order to appreciate the facts of the case in the light of the decisions relied upon, it is desirable to mention that in the present case the dispute was between the two constituents of the managing agency firm. The dispute was no doubt settled in terms of consent decree. However, the fact cannot be overlooked that the dispute had no direct nexus with the assessee company's carrying on its business. In normal circumstances the dispute between the two constituents could and should have been settled by one group buying out the other group. In the present case the disputing groups compromised and obtained consent decree in terms of which the assessee company had to purchase the shares of the minority group which is generally not done. In normal circumstances the dispute between the two constituents could and should have been settled by one group buying out the other group. In the present case the disputing groups compromised and obtained consent decree in terms of which the assessee company had to purchase the shares of the minority group which is generally not done. In the circumstances, we do not think it is quite correct to say that the depletion of the assessee company's funds for the purpose of buying out one of the constituents of the managing agency firm has direct nexus with the assessee's carrying on of the business or of the assessee company's raising of the additional capital. The prospectus issued on 2nd December 1968 inviting public to purchase the assessee company's shares indicates the purpose of the issue of the shares as under : "PURPOSE OF THE PRESENT ISSUE The Company intends to issue to the public 62,750 Equity Shares for the following purposes :- (a) The Company desires to have its shares listed on the Bombay Stock Exchange and accordingly the issue covered by this Prospectus is offered to public. (b) The Company requires additional finance for investment in the Reishaura Chucks Project at Udhna in the State of Gujarat referred to above. (c) The Company has pursuant to an Order and Decree dated 4th September 1968 passed by the Hon'ble the High Court of Judicature at Bombay in Company Petition No. 102 of 1967 (Lalchand Menghraj and others v. Shree Ram Mills Ltd. and others) purchased 30,975 Equity Shares of the face value of Rs. 100/- each of the Company at a price of Rs. 206.50 per share and consequential reduction of Capital by 30,975 shares. Under the said Decree as adjusted by an Order passed by the Hon'ble the High Court of Judicature at Bombay on 5th September 1968 the purchase price of shares is to be paid by ten equal monthly instalments, commencing from 21st September 1968. The Company has paid instalments due till date and it now requires funds partly to pay off the balance of the instalments as and when due. The total amount paid so far is Rs. 19,18,901/-". Evidently the purpose of the issue of additional shares is twofold. The Company has paid instalments due till date and it now requires funds partly to pay off the balance of the instalments as and when due. The total amount paid so far is Rs. 19,18,901/-". Evidently the purpose of the issue of additional shares is twofold. To the extent the purpose is to raise additional capital for the project at Udhna in Gujarat, expenditure incurred cannot but be held to be on capital account. The other purpose is to meet a situation that was due to disputes between the two groups in the managing agency firm which resulted in a consent decree. To say the least, the second purpose does not also have direct nexus to the assessee's carrying on of the business. We will refer to our Court's judgment in 145 I.T.R. 793 (supra) a little later. In the Supreme Court decision in 56 I.T.R. 52 (supra), the expenditure was incurred for raising a loan. Observing that loan is a liability and not an asset, it was held that a loan, i.e., a liability, cannot be an advantage far less an advantage of enduring nature. The expenditure was treated to be of revenue nature primarily for that reason. The facts in our Court's judgment in 181 I.T.R. 59 (supra) were the assessee manufactured pharmaceutical products and had, for the purpose, entered into an agreement of technical collaboration with its parent company in the U.K. which was due to expire in the beginning of 1957. The assessee applied to the Government of India for permission to enter into a fresh collaboration agreement so that it could continue to obtain the benefit of research being carried out by the parent company and also day-to-day advice in respect of the manufacture of existing and new products. The Government, however, informed the assessee that it would grant permission to enter into a fresh technical collaboration agreement only if the assessee agreed to dilute the shareholding of the parent company in its capital by offering at least 25% thereof to the Indian public. It was in these circumstances that the assessee company raised capital to the extent of 25% to be subscribed by the Indian public an order to dilute the capital contribution of the parent company. The question arose whether the expenditure in connection with the raising of such a capital would be revenue expenditure. It was in these circumstances that the assessee company raised capital to the extent of 25% to be subscribed by the Indian public an order to dilute the capital contribution of the parent company. The question arose whether the expenditure in connection with the raising of such a capital would be revenue expenditure. Our Court held that the expenditure incurred was a revenue expenditure. Comparing the facts of the case before us with that of the Glaxo case, 181 I.T.R. 59, we find that the facts are materially different. In that case, our Court has observed that "it is established, upon the Tribunal's finding, that the assessee had no need for funds. It is established that it had need only of the technical collaboration arrangement to run profitably. What, therefore, motivated the businessman in the assessee was the expediency of ensuring the continuance of the technical collaboration arrangement." There was, thus, a direct nexus between the assessee's business and the raising of the capital. As against that case, in the case before us it is the admitted position that the assessee needed funds for a project in Gujarat and for making payment to buy out the minority shareholders in the managing agency firm. Under the circumstances, the facts in the present case are more akin to our Court's decision in Tata Iron & Steel Co. Ltd., 1 I.T.C. 125. As regards our Court's decision in 145 I.T.R. 793 (supra), we have only to mention that there are no details available on record of the expenditure of Rs. 3,05,981/-. In the profit and loss account the expenditure is shown as share issue expenses. It is true that the Tribunal has described this expenditure in paragraph 8 of its judgment as being expenditure incurred on the issue of prospectus, legal and other expenses for the new issue of capital. However, in the absence of details it is not possible to hold as to whether and to what extent the decision in 145 I.T.R. 793 (supra) will at all apply. Having regard to the above discussion, we hold that the expenditure incurred herein is not of revenue nature. Accordingly, we answer the question in the negative and in favour of the Revenue. Before concluding, we would like to observe that the expression used in the questions "for raising working capital by way of replenishment" is not quite correct. Having regard to the above discussion, we hold that the expenditure incurred herein is not of revenue nature. Accordingly, we answer the question in the negative and in favour of the Revenue. Before concluding, we would like to observe that the expression used in the questions "for raising working capital by way of replenishment" is not quite correct. However, we need not pursue this aspect of the matter further. There will be no order as to costs.