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Issues Involved:
1. Whether the expenditure of Rs. 2.80 lakhs incurred on the production of a telefilm for advertisement purposes is allowable as revenue expenditure. 2. Whether the addition of Rs. 28,117 incurred on account of stamp duty is allowable as revenue expenditure. Summary: Issue 1: Expenditure on Telefilm Production The Department contested the allowance of Rs. 2.80 lakhs as revenue expenditure, arguing that it created an asset with enduring benefits, citing the Bombay High Court decision in CIT v. Patel International Film Ltd. [1976] 102 ITR 219. The assessee argued that the expenditure did not meet the tests for capital expenditure as laid out by the Supreme Court in Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34 and Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, and that advertisement films have a short life span of 6 to 9 months. The Commissioner of Income-tax (Appeals) agreed with the assessee, noting that the advertisement film did not create a capital asset or an enduring benefit. The ITAT upheld this view, stating that the expenditure was for the day-to-day running of the business and did not result in any enduring benefit, thus qualifying as revenue expenditure u/s 37(1) of the Income-tax Act. Issue 2: Addition on Account of Stamp Duty The Department argued that the stamp duty of Rs. 28,117 incurred for acquiring assets on lease should be treated as capital expenditure. The assessee contended that the expenditure was for raising a loan, which is a liability and not an asset, citing India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC) and other cases. The Commissioner of Income-tax (Appeals) deleted the addition, and the ITAT confirmed this decision, stating that expenses related to leasing transactions, including stamp duty, are allowable as revenue expenditure. Conclusion: The ITAT dismissed the appeal of the Revenue, confirming that both the expenditure on the production of the telefilm and the stamp duty incurred were allowable as revenue expenditures.
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