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Issues Involved:
1. Disallowance of deduction claim under Section 80-I for the assessment years 1986-87 and 1987-88. 2. Nature of expenses on neon-signboards and advertisement for the assessment year 1988-89. Issue-wise Detailed Analysis: 1. Disallowance of Deduction Claim under Section 80-I for the Assessment Years 1986-87 and 1987-88: The assessee claimed deductions under Section 80-I for the assessment years 1986-87 and 1987-88. The Assessing Officer (AO) disallowed these claims on the grounds that the assessee did not meet the basic condition of being an industrial undertaking. The AO observed that the assessee got its entire stock manufactured from a sister concern and paid production charges, thus not engaging in any manufacturing activity itself. The AO also noted that raw materials were supplied to the sister concern for the manufacturing process, which led to the conclusion that the assessee could not be considered an industrial undertaking eligible for the deduction under Section 80-I. On appeal, the assessee contended that it employed cobblers on a piece-rate basis for manufacturing shoes and provided a list of 21 cobblers to demonstrate that it employed more than twenty persons. The assessee argued that it was not necessary for the manufacturing to be done under its own roof and that employing outside fabricators was sufficient. The assessee also claimed registration as a small-scale industrial unit and relied on various Tribunal decisions to support its claim. The first appellate authority upheld the AO's decision, stating that the relationship of employer and employee did not exist between the assessee and the cobblers, as the cobblers were not under the control and supervision of the assessee. The appellant could not take contrary stands under different laws, as held by the Allahabad High Court in Shiv Prasad Ram Sahai vs. CIT. The appellant also failed to show substantial compliance with the condition of employing more than 20 persons in its manufacturing process. The appellate authority concluded that only the person who installs the machinery and engages in manufacturing could be eligible for the deduction under Section 80-I, not someone who gets the job work done from outside. The Tribunal reviewed the facts and rival submissions and noted that the assessee did not have any manufacturing facilities or carry out any manufacturing process of its own. The assessee got the shoes manufactured wholly from cobblers on a piece-rate basis and did not employ any workers for manufacturing. The Tribunal referred to the definition of "industrial undertaking" and concluded that the assessee was not directly involved in manufacturing and thus did not qualify for the deduction under Section 80-I. For the assessment years 1989-90 to 1992-93, the assessee carried out certain manufacturing activities with its own machinery and employed workers, thus fulfilling the necessary conditions under Section 80-I. However, for the assessment years 1986-87 and 1987-88, the assessee did not carry out any manufacturing activity, and the Tribunal upheld the disallowance of the deduction under Section 80-I. 2. Nature of Expenses on Neon-Signboards and Advertisement for the Assessment Year 1988-89: The AO treated the expenses incurred on neon-signboards and glow-signboards as capital expenditure and disallowed them, allowing depreciation instead. The AO also treated the cost of production of a TV film and other advertisement expenses as capital expenditure, relying on the decision of the Bombay High Court in CIT vs. Patel International Film Ltd. On appeal, the assessee contended that the expenses on publicity and advertisement were of a revenue nature, relying on the decision in Mohan Meakins Breweries and the order of the CIT(A) in the case of Atlas Cycle Industries Ltd. The first appellate authority agreed with the assessee, stating that the expenditure on advertisement and publicity could not be treated as capital expenditure, as held by the Himachal Pradesh High Court. The appellate authority also noted that where two opinions are possible, the view in favor of the assessee should prevail, as held by the Supreme Court. The Tribunal reviewed the facts and decisions cited and found no infirmity in the order of the first appellate authority, thus upholding the decision to treat the expenses as revenue expenditure. Conclusion: The Tribunal dismissed the assessee's appeals for the assessment years 1986-87 and 1987-88, upholding the disallowance of the deduction under Section 80-I. The Tribunal also dismissed the Revenue's appeal for the assessment year 1988-89, upholding the first appellate authority's decision to treat the expenses on neon-signboards and advertisement as revenue expenditure.
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