9911796707
TMI Blog1990 (9) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... t and claimed the same as a deduction in the computation of its business income for this year. While completing the assessment u/s 143(3) of the Act, the assessing officer found that the appellant-company had paid Rs. 50 lakhs to Dynavision Dealers ' Welfare Trust during the year. He further found that the trust was formed on 27-11-1984 with the company as the setllor and Rs. 50 lakhs was paid by the assessee on 26-12-1984. He further noticed that the assessee's accounting year ended on 31-12-1984 and that all the dealers of the Dyanora T.V. sets are the beneficiaries of the Trust. After setting out the names of the six trustees appointed under the Trust deed, as well as the four objects of the trust from the Trust deed, the Income-tax officer pointed out that the appellant had claimed deduction for this payment under section 37 of the Income-tax Act. The Income-tax officer rejected the claim of the appellant for deduction, for the following reasons recorded in the assessment order :---- " 1. The accounts of the trust were not produced. So it has not been possible to verify if any amount was spent during the year for the objects of the trust. 2. The assessee-company has not cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts construction of store-shed, compound wall, security office etc., and about Rs. 2 lakhs for the extension of second floor. A perusal of the additions to plant and machinery also shows that, but for one or two items, such additions do not relate exclusively to only the C.T.V. section. As against the total investment in fixed assets of nearly Rs. 1 crore, the additional investment on account of the C.T.V. section would amount to only about 8 lakhs (excluding Rs. 2 lakhs on R D expenditure) which cannot be said to be a substantial investment. Though the assessee claimed at one stage that special enhancement of loans from banks of nearly Rs. 2 crores were obtained, no amount representing interest has been debited to the C.T.V. section, thereby implying that the funds so borrowed were not used in the colour T.V. section. Thus, the assessee itself admits no substantial borrowed funds had been invested in manufacture of C.T.V. Even the personnel employed exclusively in this activity are said to be only 50 in number. All these factors show that the tests laid down by the Supreme Court in the case of Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195 are not fully satisfied, inasmuch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the end of the year, i.e., 31-12-1984 and that, therefore, as far as this year was concerned, it could not have been spent at all. He next pointed out that it was by way of contribution to a trust where two of the Directors of the assessee and a very close relative of these Directors are the trustees and that the amount transferred by way of contribution was substantial. The Commissioner (A) referred to the fact that the other expenses of the appellant for the assessment years 1982-83 to 1986-87 was Rs. 97.55 lakhs, Rs. 1.01 crore, Rs. 1 crore, Rs. 2.03 crores and Rs. 2.48 crores, respectively. From this, the Commissioner concluded that the amount of Rs. 50 lakhs contributed in this year was nearly 25% of the expenditure under the head ' other expenses ' that was debited to the profit and loss account. The Commissioner(A) next referred to the objects of the trust as basically three-fold, namely (a) financing of stockists and dealers ; (b) publicity and promotion of sales ; and (c) organising seminars, get together of the dealers. The Commissioner(A) also took into account the subsequent events that had affected the pattern of expenditure of the trust and found that as on 31-10-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned representative for the appellant, but that his submission was that at the beginning of the production, thorough testing was not done. The Commissioner(A) rejected this submission of the assessee's representative as not carrying much conviction, as manufacturers always very thoroughly check their products at the commencement of the production of a new item. He further observed that the assessee's reluctance to place before him the machinery records and all the invoices regarding machinery, gave strength to the assessing officer's argument that some of the machineries like FTD 001, FTD 002 could also have been very well used for black and white as well as colour T.V. The Commissioner also held that even as per the assessee's representative himself, the appellant had been able to apply credit secured for colour T.V. to the black and white and thus the arguments of the representative for the appellant that the production of colour T.V. sets was independent of black and white production and that the machinery was also exclusive, was not substantiated. The Commissioner (A) further held that the condition of Sec. 80-1, sub-section (2) that it was not formed by transfer to " a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the proceedings after having accepted its validity in the course of the assessment proceedings as well as the proceedings before the first appellate authority ? (v) Whether the matter should go back to the assessing authority for deciding this issue as contended on behalf of the assessee ? (vi) Even if the Trust Deed dated 27-11-1984 is held to be invalid and void ab initio, whether any trust had come into existence on 26-12-1984 under the name and style of ' Dynavision Dealers ' Welfare Trust' and whether such a trust is a valid trust ? (vii) Whether any legal obligation is attached to the contribution of Rs. 50 lakhs paid to Dynavision Dealers' Welfare Trust on 26-12-1984 even if it were to be held that there was no valid trust created either on 27-11-1984 or on 26-12-1984 ? (viii) Whether the sum of Rs. 50 lakhs paid by the assessee to Dynavision Dealers' Welfare Trust on 26-12-1984 is allowable as business expenditure laid out wholly and exclusively for the purpose of its business under sec. 37(1) of the Act ? 11. It would be seen from the eight points set out above, that question Nos. (iv) and (v) are in the nature of preliminary objections raised by the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment stage or at the first appellate stage, did not notice these defects and deficiencies would not stand in the way of the revenue relying on them for the first time before the Tribunal, as they arise directly from the facts relied on by the appellant itself. As rightly contended on behalf of the revenue, these defects and deficiencies go to the root of the matter and can be raised at any stage of the proceedings even if they were not noticed earlier. We do not find any merit in the submission that the matter must go back to the assessing officer for giving an opportunity to the appellant to adjudicate this issue, as the objections raised by the revenue are purely legal arguments based on these defects and deficiencies noticed at the time of hearing of the appeal. We have. further, given sufficient opportunity to the appellant to " plain these defects and deficiencies and therefore no useful purpose would be served in sending the matter back to the assessing officer for this purpose. We, therefore, reject these preliminary objections raised by the appellant in question Nos. (iv) and (v) as of no substance and merit. 13. Now, it will be convenient to consider the first three q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trustees' decision. Then comes clause No. 2, which is of very vital importance, and the said clause is quoted below :---- " 2. The Settlor Company above-named hereby conveys, transfers Rs. Rupees .......... only) by account-payee cheque to the Trust and the Trustees hereby acknowledge the conveyance, transfer and assignment of the same." (sic) The learned departmental representative heavily relied on the absence of any figures mentioned in clause 2 quoted above, stating the amount conveyed or transferred by the appellant-company to the trustees, and pointed out that in the absence of any such transfer of property, there could be no valid trust created by this deed. The further argument of the revenue is that nobody has signed the trust deed on behalf of the appellant-company, who is the author of the trust, nor the seal of the company had been affixed, and therefore, the trust deed is invalid. It is further pointed out that no witnesses have also signed this deed, as could be seen from page 9 of the deed. According to the revenue, the Directors of the appellant-company had no authority to create a trust as per the Memorandum and Articles of Association and that the Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est-free or at concessional rate of interest ; (b) to organise seminars, get-togethers of the dealers at a convenient place ; (c) to present gifts in cash or in kind at marriages, birthday functions, etc., of dealers/stockists and their dependant family members ; (d) to arrange holiday trips and tours for the recreation of dealers/stockists and their employees or their dependant family members ; (e) to take up publicity campaigns for promoting the sales of dealers/stockists, when necessary, through press and other media ; (f) to benefit dealers and stockists, especially on account of indigence, ill-health or other necessitous circumstances ; (g) to participate or encourage participation of dealers/stockists in exhibitions organised by Government/Semi-Government or private bodies for promoting sales of company's products ; (h) to take up any work which will help the dealers/stockists to achieve common goals like promotion of sales, making their products more competitive, reduce their overheads, make them more useful for the company, etc. ; (i) to take up any other work for the benefit of dealers/stockists. All/any objects will be executed by the Trustees at their u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the trust is supposed to be for the benefit of the dealers of Dynavision products, but as per the objects of the trust, the benefits have to be given to the dealers/stockists, their dependent family members, employees etc., and that this huge mass of beneficiaries is unidentifiable and uncertain. It was argued that the company has no list of dependent members or the employees of the dealers or stockists. It was further submitted that as a matter of fact, the company has no dealers except three distributors, who in turn have appointed dealers, It was argued that these dealers had paid deposits to the distributors to become dealers. It was therefore argued that when the appellant-company has no dealer and the question of looking after their welfare does not arise. Having regard to the unfettered discretion of the trustees regarding the execution of the trust objects as specified in clause 6 of the trust deed and uncertainty of the dealers coupled with the uncertainty as regards the beneficiaries, the trust fails and therefore it must be held that no valid trust had been created. 21. It is also the argument of the revenue that since the trust is an invalid trust, it mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty was transferred and accepted by the trustees. In support of this, the learned counsel relied on a copy of the letter dated 26-12-1984 written by the appellant-company to the Managing Trustee of DDW Trust confirming the amount given by the appellant to the trust. The learned counsel argued that this letter dated 26-12-1984 clearly spelt out the amount given to the trust, the person to whom it was given, as well as the objects for which it was given, to establish that the payment of Rs. 50 lakhs was to be held under trust. The learned counsel submitted that no deed or formal document is essential in law for creating a legal obligation. He further submitted that the fact that there was no resolution of the Board of Directors either for the formation of the trust or for the payment of Rs. 50 lakhs to the trust, would render the formation of the trust either ultra vires the powers of the company, or the provisions of the Companies Act. He pointed out that the annual accounts for the year under appeal had been approved by the general body of the shareholders at the annual general meeting and therefore it must be taken that the general body had approved not only the formation of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son or persons (whether incorporated or not) to accept and hold in trust for the Company, any property belonging to the Company or in which it is interested or for any other purpose and to execute and do all such deeds and other things as may be requisite in relation to any such trust, and to provide for the remuneration of such trustee or trustees." The learned counsel submitted that P. Obul Reddy is one of the promoter-directors, though he is not the Managing Director of the appellant-company, and that all the directors carried on the company's affairs as a Board of Directors. He submitted that in the light of the object clause in the Memorandum of Association as well as the directors' powers under the Articles of Association relied on by him, the creation of the trust by the appellant-company was not ultra-vires, as it was not beyond the objects clause of the company. If there was any irregularity in the initial stages of the formation of the trust, such as the absence of signature of the Director of the company on behalf of the company, as settlor or the omission to affix the seal of the company, would all get cured by the subsequent ratification of these acts by the annual g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in the Indian market set up, the role played by the stockists/dealers cannot be over-emphasised and that dealers or stockists are important in promoting the sales of the company, just as employees are important for the successful running of the company. He argued that as the appellant-company was a manufacturer of television sets, it was essential for it to retain the existing dealers and stockists and that it was possible only by Providing certain welfare measures for their benefit and that the creation of a trust for their welfare would definitely serve the purpose. He argued that it was wrong to say that the appellant-company had no dealers or stockists, ignoring the entire distribution net-work of the appellant-company. He submitted that such an argument ignored the factual position and that it was wrong to say that the appellant could not ascertain the dealers and stockists at any point of time, as they are always ascertainable from the records of the company as well as the records of the distributors of the appellant-company. 27. The learned counsel for the appellant further argued that it was incorrect to say that the appellant-company had created this Trust with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies on the same before the departmental authorities, it has to comply with the legal formalities prescribed by law. If the said deed does not fulfil the legal requirements then the assessee cannot plead that in spite of these defects and deficiencies, it must be held that a trust had come into existence as stated in the said document. 31. In the present case, the document dated 27-11-1984 is an unregistered document, though it is engrossed on non-judicial stamp papers of the value of Rs. 75. We have called for the ori ginal of the trust deed dated 27-11-1984 to satisfy ourselves about the defects and deficiencies noted by us in the copy of the said deed at pages 59 to 67 of the appellant's paper book. The said deed also contained all these deficiencies and defects, namely the absence of any signature on behalf of the settlor-company anywhere in the trust deed. We find only the signatures of the six trustees in all the pages of the trust deed. On the last page of the document, i.e., page 9, it is typed above the signatures of these trustees " for Dynavision Dealers' Welfare Trust ". As rightly pointed out on behalf of the revenue, there are no signatures of the witnesses. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id trust had been created by the trust deed dated 27-11-1984, as no trust property was conveyed or transferred to the trustees by the settlorcompany on that date. 32. The assessee's learned counsel has sought to place reliance on an entry in the cash book of the trust for the receipt of a sum of Rs. 100 from the trustee himself on behalf of the settlor-company, for which there is no evidence at all, because no material has been placed before us to show that this amount of Rs. 100 was paid by the trustee on behalf of the appellant-company on that date. In fact, it is only by way of an argument the learned counsel wants us to infer that a trust had come into existence on 27-11-1984 by taking into account the cash book entry in the books of the trust on 27-11-1984. We are unable to accept this submission of the learned counsel for the appellant, as we are construing the recitals contained in the document by which a trust is claimed to have been created. 33. Our answer to the first question, therefore, is that no trust by the name of Dynavision Dealers' Welfare Trust had come into existence on 27-11-1984, as claimed by the appellant for the reasons discussed above. For the very sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 26-12-1984. Even if it can be said that such a trust had come into existence on 26-12-1984 it would be open to challenge on the same grounds, which he had already urged in regard to the trust deed dated 27-11-1984 and that the same arguments earlier urged by him may be considered here also. 37. On the alternative contention of the assessee's learned counsel, the learned departmental representative submitted that no legal obligation in the nature of a trust could come into existence as claimed by the appellant, as the said claim is again based on an invalid deed of trust dated 27-11-1984. 38. The learned counsel for the appellant in his reply contended that there can be no objection to the recitals in the trust deed dated 27-11-1984 being looked into as it is a case of a trust created in respect of movable property and all the conditions for creation of a trust of a movable property were fulfilled in the present case. He pointed out that the parties to the transaction, namely the appellant-company and the trustees have acted in accordance with the terms and conditions contained in the deed dated 27-11-1984, as directed in the letter dated 26-12-1984, and therefore the recitals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : The All India Spinners' Association was formed in the year 1925, and had its origin in a resolution of the All India Congress Committee passed in 1925. It was started for the purpose of the development of the village industry of hand-weaving (called " khadi ") and the weaving of cotton material (called " Khaddar ") by the use of hand looms. The constitution of the Association was set out in a document without date or signature (Ex. " G " of the record) which was contained in a publication by the Association called the " Khadi Guide ", published in 1931. After referring to the various clauses of the said document and discussing their effect, the Judicial Committee held as follows at page 487:---- " On a fair construction of the constitution their Lordships cannot agree with the opinion of the learned Judges that no trust or legal obligation is shown binding the Association or its trustees or Council to devote the property of the Association from which the income is derived to the charitable purposes for which the Association was formed, assuming for the moment that the purposes were charitable within the meaning of the Act. It is not really questioned that the practice has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court in CIT v. Thakar Das Bhargava [1960] 40 ITR 301 (SC) that a trust may be created by any language sufficient to show the intention and no technical words are necessary and it may even be created by the use of words which are primarily words of condition. The only requisites which must be satisfied are that there should be " purposes independent of the donee to which the subject matter of the gift is required to be applied and an obligation on the donee to satisfy those purposes ". When the race-goers paid the surcharge to the assessee, they did so for a specific purpose and thereby imposed an obligation on the assessee to utilise it for local charities." 43. In our view, these two decisions answer the objection of the revenue. We, therefore, respectfully follow these two decisions and hold that a valid trust under the name and style of Dynavision Dealers' Welfare Trust had come into existence on 26-12-1984 and that further a legal obligation in the nature of a trust was attached to the contribution of Rs. 50 lakhs paid by the appellant to the DDW Trust on 26-12-1984. 44. The learned departmental representative, however, contended that all the other objections, which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. We are also unable to agree with the revenue that the trust is void on account of the fact that it provided for the entertainment of the dealers and their relatives and their employees and also on the ground of uncertainty as regards the beneficiaries. There is nothing unlawful in any of the objects mentioned in clause 6 of the trust deed and the beneficiaries under the trust deed are also ascertainable, as could be seen from the list of dealers and stockists filed by the assessee's learned counsel. In fact, the papers filed by the assessee's learned counsel in paper book II clearly establish that the beneficiaries of the trust are ascertainable and there is no uncertainty about them, as their full names and address are given. We are, therefore, unable to accept the contention of the revenue that the appellant-company has no dealers except three distributors. On the other hand, the materials placed by the appellant before us conclusively establish that apart from the three distributors, the appellant-company had a net work of dealers and stockists appointed by these three distributors and that the appellant-company sells its products through this net work of distributors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses Co. Ltd. v. CIT [1959] 37 ITR 66, the Supreme Court held that " spending " in the sense of " paying out or away " of money is the primary meaning of " expenditure ", and that " expenditure " is what is paid out or away and is something which is gone irretrievably. Their Lordships further held that expenditure, which is deductible for income-tax purposes, is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure. Their Lordships also held that the income-tax law makes a distinction between an actual liability in praesenti and a liability de futuro which, for the time being, is only contingent, and that the former is deductible but not the latter. Applying the above tests laid down by the Supreme Court, it would be noticed that the sum of Rs. 50 lakhs had gone irretrievably to the coffers of the DDW Trust, as established by the entries in the books of accounts of the trust as well as the bank account of the appellant-company. Further, clause 1 of the trust deed dated 27-11-1984, which we have already referred to in para 14 supra, expressly declares that the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Secretary by entrusting the sum of Rs. 50 lakhs to the trustee. Therefore, all these arguments have no force in view of the above conclusion reached by us about the creation of the trust on 26-12-1984. It is therefore not necessary to examine the decision of the Supreme Court in the case of Surjit Lal Chhabda as it has no bearing on the point at issue. 48. The next objection of the revenue is that clause 19 of the trust deed is too vague so as to find out the situation whether the last lineal descendant member or a person is stockist or dealer and therefore the trust suffered from uncertainty and principle of perpetuity. We set out below clause 19 of the trust deed, which relates to determination of the trust :--- " 19. Determination of the Trust. The trust shall stand determined on the expiry of the last lineal descendants of past or present stockists or dealers of the Settlor Company and the Trustees shall transfer the Trust funds to any Trust with the same objects as these presents or at its discretion to a public charitable Trust." This clause deals with the determination of the trust. We are unable to see what is wrong in this clause to make the trust uncertain or as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect of the case. 51. The learned departmental representative further submitted that the appellant-company had advanced loans to Directors by the means of this trust, as could be seen from the fact that Rs. 46 lakhs was given by the trust as loans to partnership firms, in which the Directors of the appellant-company were partners as on 30-11-1985 and, therefore, it violated section 295(1)(b) of the Companies Act. To this argument, the learned counsel for the appellant invited our attention to the profit and loss account and balance sheets of the trust in paper book No. 11 filed by him and pointed out that all these loans were advanced by the trustees in order to safeguard the interest of the trust by investing the trust funds in non-hazardous assets and in fact the trustees have earned more interest than the prevailing interest rate offered by the financial institutions, as could be seen from the profit and loss accounts of the trust for the various years. He therefore argued that there was no violation of section 295(1)(b) of the Act by the appellant-company. After examining the materials contained in paper book No. II filed by the appellant's learned counsel, we find force in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel relied on the following three decisions:---- 1. CIT v. Chandulal Keshavlal Co. [1960] 38 ITR 601 (SC) 2. Sassoon J. David Co. (P.) Ltd. v. CIT [1979] 118 ITR 261 (SC) 3. CIT v. Delhi Safe Deposit Co. Ltd. [1982] 133 ITR 756 (SC) 55. The learned counsel also argued that the fact that the benefit of the expenditure enured for more than one year was not relevant and on that account it could not be considered as capital expenditure or as not deductible in the year of account, so long as the payment was for facilitating trade. In support of this proposition, the learned counsel relied on the following two decisions :--- 1. Mysore Spg. Mfg. Co. Ltd. v. CIT [1966] 61 ITR 572 (Bom.) affirmed in CIT v. Mysore Spg. Mfg. Co. Ltd. [1970] 78 ITR 4 (SC) 2. Empire Jute Co. Ltd.'s case. 56. The learned counsel finally submitted that the relevant consideration should be the aim and object of the expenditure and not its quantum for allowance under sec. 37(1) of the Act. In support of this contention, the learned counsel relied on the decision of the Supreme Court in M.K. Bros. (P.) Ltd. v. CIT [1972] 86 ITR 38. 57. The learned counsel further reiterated the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as the appellant had not terminated any of its dealers and the beneficiaries under the trust were all ascertainable from the records maintained by the appellant-company and its distributors. The learned counsel further submitted that the fact that the dealers were dealing in other products could not militate against the claim of the appellant, as the intention of the appellant in creating the trust and incurring the expenditure was only to promote the sales of its own products. He also argued that even if the contribution given by the appellant were to be treated as grants or a voluntary payment, it would still qualify for deduction, inasmuch as the said amount was paid in the interests of the assessee's business and for the purpose of its business. He further argued that it was settled law that an expenditure incurred voluntarily out of business expediency was deductible, even though there was no statutory or contractual compulsions. He submitted that section 37(1) of the Act does not require that there should be necessity for the expenditure and that under the said provision of law, an expenditure which would indirectly facilitate the carrying on of the business would still be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits of the appellant-company, as well as that of the dealers. 63. The learned counsel relied on clauses 6(e), (g) (h) of the Trust Deed and pointed out that these clearly establish that the objects of the Trust was to promote the sales. He submitted that section 37(3A) of the Act would not be applicable, inasmuch as the expenditure was in the nature of business expenditure and that further, the said provisions of law in sec. 37(3A) would have to be looked into only in the hands of the Trust and not in the hands of the appellant. He further sought to distinguish the decision of the Supreme Court in Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 by pointing out that in the said case the only object was to reduce the amount to be paid to the workers by way of bonus, whereas in the present case there was no such device adopted by the appellant-company. 64. The learned counsel for the assessee further submitted that it was not the case of the department that the DDW Trust had not spent any money towards the objects of the Trust. On the contrary, he pointed out with reference to the materials placed by him in paper book No. II tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that TIDCO is also represented by its Chairman and Managing Director, who is also the Chairman of the appellant-company. He therefore submitted that it was futile to contend that the DDW trust had been created by the appellant-company for any colourable or collusive purpose(s). Hence, the learned counsel submitted that the disallowance of the appellant's claim for deduction of this amount of Rs. 50 lakhs by the departmental authorities was not justified and that the same should be allowed as an admissible deduction under section 37(1) of the Act. 66. Shri K.L. Tilak Chand, the learned Departmental Representative vehemently opposed these contentions and argued that the contribution of Rs. 50 lakhs to the DDW Trust by the appellant-company did not represent any expenditure, much less business expenditure and that it was rightly disallowed by the departmental authorities. He pointed out that there was neither contractual nor statutory liability for incurring this expenditure and that at best this payment could be treated only as a donation or a gift by the appellant-company to the Trust. The learned departmental representative pointed out that it was not a case where the welfare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust only as either a gift or a donation, and consequently it could not be an expenditure in the hands of the appellant-company. 69. The learned departmental representative relied on the findings of the CIT(Appeals) in his appellate order and the reasons in support thereof to hold that the expenditure in question was not incurred wholly and exclusively for the business of the appellant. In support of these arguments, Shri Tilak Chand, relied on the following decisions :--- 1. CIT v. Navsari Cotton Silk Mills Ltd. [1982] 135 ITR 546 at 556 557 (Guj.) 2. Chandulal Keshavlal Co.'s case at 610 and 611. 3. Chandmama Publications v. CIT [1989] 176 ITR 321/43 Taxman 147 (Mad.) 4. Shri Panzara-Kan Sahakari Sekhar Karkhana Ltd. v. ITO [1985] SOT 90 (Pune) (SB) 5. Modipon v. ITO [1985] 22 TTJ (Delhi -- Trib.) 108 6. Wolkem (P.) Ltd. v. ITO [1986] 50 CTR (Jp.-Trib.) 8 70. The learned departmental representative argued that the whole transaction was colourable and collusive in nature with an intention to defraud the revenue. He pointed out that the alleged trust had been created at the fag end of the year and the payment of Rs. 50 lakhs had been made in the last week ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Workmen of Associated Rubber Industries Ltd.'s case 4. McDowell Co. Ltd.'s case 5. Neroth Oil Mills Co. Ltd. v. CIT [1987] 166 ITR 418/33 Taxman 249 (Ker.). 71. Finally, Shri Tilak Chand referred to the provisions of section 40A(9) and (10) of the Act and contended that the implied will of the legislature has been expressed against the creation of welfare trusts for the benefit of employees. In the light of the said provision against creation of trusts for the benefit of employees, the present claim of the appellant for deduction of Rs. 50 lakhs by way of contribution to a Dealers' Welfare Trust should not be allowed under section 37(1) of the Act. He therefore submitted that the orders of the departmental authorities on this issue should be upheld. 72. Shri Ramamani in his reply, while reiterating his earlier submissions argued that there was no intention on the part of the appellant to defeat any provisions of the Income-tax Act, much less to defraud the revenue. He submitted that there could be no collusion in a case of this type, particularly where the business is carried on by a Joint-Sector undertaking, the business affairs of which were being controlled and watch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein. Article 158(1) contains the names of the first Directors of the company. This article further shows that the Chairman of the Board of Directors will be appointed in consultation with TIDCO and that further TIDCO holds more than 25% of the total shareholdings of the company. We may mention here that the sum of Rs. 50 lakhs is shown under the head. " Contribution to Dynavision Dealers' Welfare Trust " in Schedule II of the annual accounts, which contains the particulars of the expenses under the head " other expenses " and forms part of the profit and loss account for the year under appeal. There is no dispute before us that these final accounts have been passed at the annual general meeting of the appellant-company. 74. In the light of the above facts, we find ourselves unable to agree with the revenue that the transaction in question is a colourable and collusive transaction which was entered into with an intention to defraud the revenue. The fact that the Trust was created at the fag end of the accounting year would not militate against its genuineness nor affect its validity in law. The other circumstances pointed out by the learned departmental representative, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees in the present case, but with a welfare trust for the benefit of the dealers of the appellant-company. We are therefore unable to accept the contention of the revenue that in the light of sections 40A(9) and (10) of the Act, we should presume a prohibition as the implied will of the legislature against similar welfare trusts for the benefit of the dealers, as in the present case. For, it is well settled that " There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used ". [Please see Cape Brandy Syndicate v. IRC [1921] 1 KB 64,71]. 76. This takes us to the question of allowability of the sum of Rs. 50 lakhs as an admissible deduction under section 37(1) of the Act. In CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140, the Supreme Court held as follows at page 170 of the reports while construing the expression " for the purpose of the business " in section 10(2)(xv) of the Indian Income-tax Act, 1922, which corresponds to section 37(1) of the present Income-tax Act, 1961 :---- " The aforesaid discussion leads to the following result : The expression " for the purpose of the business " is wider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint out that the learned counsel on both sides relied on this decision in support of their arguments. 78. In M.K. Bros. (P.) Ltd.'s case, Their Lordships of the Supreme Court held as follows at page 42 of the reports :---- " The answer to the question as to whether the money paid is a revenue expenditure or capital expenditure depends not so much upon the fact as to whether the amount paid is large or small or whether it has been paid in lump sum or by instalments, as it does upon the purpose for which the payment has been made and expenditure incurred. It is the real nature and quality of the payment and not the quantum or the manner of the payment which would prove decisive. If the object of making the payment is to acquire a capital asset, the payment would partake of the character of a capital payment even though it is made not in lump sum but by instalments over a period of time. On the contrary, payment made in the course of and for the purpose of carrying on business or trading activity would be revenue expenditure even though the payment is of a large amount and has not to be made periodically." Again, at page 43 of the same reports, after referring to their earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , from time to time evolved various tests for distinguishing between capital and revenue expenditure but no test is paramount or conclusive. There is no all embracing formula which can provide a ready solution to the problem ; no touchstone has been devised. Every case has to be decided on its own facts, keeping in mind the broad picture of the whole operation in respect of which the expenditure has been incurred. But a few tests formulated by the Courts may be referred to as they might help to arrive at a correct decision of the controversy between the parties. One celebrated test is that laid down by Lord Cave L.C. in Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 TC 155, 192 (HL), where the learned Law Lord stated : "....when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade. I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital." This test, as the parenthetical clause shows, must yield where there are special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue filed, i.e., for the purpose of incurring the expenditure on the various objects specified in clause 6 of the Trust Deed, which we have already set out in paragraph 17 supra. A perusal of the said clause 6 would show that the amount was to be expended for providing interest-free finance or finance at concessional rates of interest to dealers and stockists of the assessee in case of financial difficulties and to promote the sales of the appellant-company by organising seminars, conferences, advertising and publicity campaigns etc., and also for the welfare and benefits of the dealers and stockists who are indigent or in ill-health and other similar difficult circumstances. Expenditure on any of these objects could not be considered as an expenditure in the capital field, much less as personal expenditure of the appellant-company. All of them go to contribute to the promotion of the sales of the products of the assessee-company by ensuring the welfare and loyality of the stockists and dealers of the appellant-company. 82. The further argument on behalf of the revenue is that even if this amount is considered to be revenue expenditure, it was not wholly and exclusively for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred by the Dealers' Welfare Trust as given in the statement :---- Nature of expenditure Expenditure incurred by Dealers' Welfare Trust 30-11-1985 31-10-1986 31-10-1987 Rs. Rs. Rs. 1. Dealers Conference expenses 1,22,522 39,867 5,473 2. Dealers Welfare expenses 9,293 29,205 nil 3. Dealers Tie-up 5,87,781 14,68,312 16,54,968 advertisement 4. Incentive to dealers 5,41,417 nil nil 12,61,013 15,37,384 16,60,441 Total expenditure incurred for the three years ... ... Rs. 44,58,838 A comparison of these figures with the figures of expenditure incurred by the appellant-company under these heads in the various years show a sharp decline in the expenditure under the various heads. For example, the expenses under the head " Dealers Conference Expenses " show a decline, while the appellant-company did not have to incur any expenses under the head " Dealers Welfare Expenses ". Under the head " Dealers Tie-up advertisement " there is a progressive increase in the expenditure incurred by the Trust, while there is a decline in the expenditure incurred by the appellant-company from 1983 to 1985 and it was nil in the years 1986 and 1987. Further, in the first year ending 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers' Welfare expenses. The assessment order of the Trust for the assessment year 1986-87 dated 30-3-1989 at pages 13 to 15 of paper book No. 2 shows that the Trust has been carrying out the objects of the Trust by incurring the various items of expenditure on the above items. On these materials we are unable to agree with the revenue's contentions that the expenditure in question has not been incurred by the appellant-company for the purpose of its business and that it was not incurred out of commercial expediency. We are also unable to accept the department's contention that there is no nexus between the expenditure incurred by the appellant-company and the benefits derived by it, on that at any rate such nexus is too remote. On the other hand, the Directors Report shows a progressive increase and upward trend in the sales turnover of the appellant which had increased from Rs. 6.87 crores in 1983 to Rs. 17.92 crores in 1984. In later years the sales turnover has increased progressively to Rs. 28.66 crores in 1985, Rs. 31.60 crores in 1986 and Rs. 37.24 crores in 1987. The expenses incurred by the appellant-company directly on advertisement expenses and publicity for the year 1984 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity share capital, which was 6% higher than the dividend declared in the previous years. We must remember that all these results were achieved by the appellant-company after incurring this expenditure of Rs. 50 lakhs, which was paid to the Dynavision Dealers' Welfare Trust. 83. We have already referred to the decision of the Supreme Court in the case of Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66 to show how this amount of Rs. 50 lakhs has irretrievably gone out of the coffers of the appellant-company and hence represents expenditure incurred by the appellant-company. Clause 8(a) of the Trust Deed empowers the Board of Trustees of DDW Trust " to apply the whole or any part of the trust property or fund, whether capital or income in or towards the payment of the expenses of the Trust or for towards all or any of the purposes of the trust ". This clause would show that the amount of Rs. 50 lakhs was available with the Trust not only for the purposes of investment, but also for the purpose of expenditure on the various objects of the Trust and therefore it did not form part of the corpus of the trust as such. The facts of the present case are similar to the facts relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 20. 84. In CIT v. T.V. Sundaram Iyengar Sons (P.) Ltd. [1974] 95 ITR 428, Their Lordships of the Madras High Court held that a sum of Rs. 39,696 paid by the assessee-company in the said case for the purchase of a piece of land in the name of the District Collector, Madurai for the purpose of constructing houses for the company's workers by the Government under the subsidised industrial housing scheme sponsored by the State Government represented expenditure incurred wholly and exclusively for the purpose of the business of the assessee-company and hence it was allowable as a deduction. 85. In our view, the ratio of these three decisions support the contentions of the appellant for deduction of this amount of Rs. 50 lakhs as business expenditure allowable under sec. 37(1) of the Act on the ground of commercial expediency. 86. We are not called upon in the present case to decide whether any portion of this expenditure would be inadmissible under sec. 37(2A) or (3A) of the Act, as contended by the revenue, as the said question would be relevant only when the expenditure is incurred by the Dynavision Dealers' Welfare Trust in later years on the various objects of the Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the advantage secured by the respondent-company by incurring the expenditure was absolution or immunity from liability to pay municipal rates or taxes for a period of 15 years and therefore it was an enduring advantage. After adverting to the ratio of their earlier decision in the case of Empire Jute Co. Ltd., Their Lordships of the Supreme Court held as follows at page 263 of the reports :--- " If this principle is applied to the facts of the case before us, what we find is that the advantage which was secured by the assessee by making the expenditure in question was the securing of absolution or immunity from liability to pay municipal rates and taxes under normal conditions for a period of fifteen years. If these liabilities had to be paid, the payments would have been on revenue account and hence the advantage secured was in the field of revenue and not capital. As a result of the expenditure incurred, there was no addition to the capital assets of the assessee-company and no change in its capital structure. The pipelines, etc., which might have been regarded as capital assets and which came into existence as a result of the expenditure incurred did not belong to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l work force in the new industrial undertaking. (d) Establishment of a new production shop floor on the ground floor of the existing factory building, which was being used as storage facility till then. (e) Procurement of materials for production of Colour TVs. (f) Production of various parts like pcbs and production of separate products viz. Colour T.V. sets of various models. (g) Investment of borrowed capital by way of credit for particular period. In support of the above, the learned counsel relied on the various documents contained at pages 1 to 58 of his paper book No. 1 paper book No. 3 containing 18 pages and paper book No. 5 containing pages 1 to 52. He further relied on the annual report of the appellant-company for the year under appeal, particularly the Directors' report, which specifically shows the establishment of this new industrial undertaking. The learned counsel therefore argued that on these facts, the departmental authorities ought to have accepted the appellant's claim for deduction under sec. 80-I of the Act and allowed the same. 92. The learned Departmental Representative, Shri K.L. Tilak Chand, pointed out that it was not for the first time the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery in the black white division had to be used. Shri Tilak Chand relied on the fact that the assessing officer had visited the factory of the assessee and after detailed analysis had come to the conclusion that substantial portion of the aforesaid machinery in black white division was used for manufacturing Colour TV sets also in the year under appeal. 94. With reference to the subsequent year's report of the company, Shri Tilakchand submitted that there was no substantial increase in production even after the arrival of the new machinery and that almost the same quantity of TV sets were manufactured. From this, he argued that if the appellant's version was to be believed, then it would be a case of the appellant earning a huge income of Rs. 1.5 crores with petty machinery which was worth less than Rs. 25,000. He therefore submitted that it would be very difficult to comprehend, much less to digest and accept such a plea, which was untenable on the face of it. 95. The learned departmental representative next referred to the invoice for the purchase of jigs and pointed out that they were also TV parts and that many jigs were purchased in 1980 and 1981 also and if we take int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy in existence, (b) it was not formed by the transfer to a new business of machinery or plant previously used for any purpose within the meaning of Explanation 2 to sec. 80-I (2) of the Act, (c) that it manufactured or produced any article not being an article specified in Schedule 11 of the Act and (a) that the new industrial undertaking employed more than 10 workers in the manufacturing process. In support of these contentions, the learned counsel relied on the various materials and evidence contained in the paper books filed by him. 100. The learned counsel met the argument of the learned departmental representative that this was not the first year of the manufacture of colour TV sets by the appellant-company, by pointing out that in October, 1982 falling within the assessment year 1983-84 the appellant had manufactured CTV sets for entirely different purposes viz. for ASIAD. The learned counsel pointed out that at that time the appellant-company had simply assembled semi knocked down kits supplied by the Government of India. He further urged that for the said purpose no licence was obtained by the appellant in the earlier years and that no shop floor was also established for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r purchased in 1981 could not be used for CTV production. He pointed out that some confusion had arisen in the mind of the assessing officer when he visited the factory in 1989 and saw the said machinery kept on the ground floor. The learned counsel pointed out that the Control Signal Generator was housed on the ground floor as it requires Air conditioned atmosphere which was available only on the ground floor. In support of this submission, the learned counsel relied on the photographs on pages 30, 31 and 32 of appellant's paper book No. 6 and pointed out that the colour TV Singal Generators were purchased and installed only in 1986 in the same premises marked as transmitter rooms which was air conditioned on the ground floor of the factory where the Control Signal Generator for black and white TV manufacture was kept. 103. The learned counsel relied on the following cases in support of his contentions :--- CIT v. Ambur Co-operative Sugar Mills Ltd. [1981] 127 ITR 495 (Mad.), CIT v. Batala Engg. Co. Ltd. [1979] 120 ITR 683 / 2 Taxman 248 (Punj. Har), CIT v. Ridhkeran Someni [1980] 121 ITR 668 (Pat.), CIT v. Madras Rubber Factory Ltd. (No. 2) [1984] 149 ITR 411 (Mad.), Addl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Finance Act of 1983 and Finance Act of 1985. We quote below the relevant provisions of sec. 80-I as applicable to the assessment year 1985-86 and as published in A.N. Aiyar's Indian Tax Laws [1985] at pages 307 to 312 : " 80-I. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc.---- (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, or the business of repairs to ocean-going vessels or other powered craft, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent, thereof : Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel, as if for the words " twenty per cent ", the words " twenty-five per cent " had been substituted. (2) This section applies to any industrial un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd section 80J (4) of the Income-tax Act, 1961. The learned counsel on both sides are agreed that the decisions which arose under section 15C of the old Act and section 80J of the new Act, would have a direct bearing in construing the provisions of section 80-I(2), with which we are presently concerned in this appeal. 108. The leading case on which reliance is placed on by both sides is the decision of the Supreme Court in the case of Textile Machinery Corpn. Ltd. At pages 204 and 205 of the reports, the Supreme Court held as follows while construing the provisions of section 15C of the old Act :--- " Section 15C partially exempts from tax a new industrial unit which is separate physically from the old one, the capital of which and the profits thereon are ascertainable. There is no difficulty to hold that section 15C is applicable to an absolutely new undertaking for the first time started by an assessee. The cases which give rise to controversy are those where the old business is being carried on by the assessee and a new activity is launched by him by establishing new plants and machinery by investing substantial funds. The new activity may produce the same commodities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of articles in the said undertaking, (4) earning of profits clearly attributable to the said new undertaking, and (5) above all, a separate and distinct identity of the industrial unit set up. We may add that there is no bar to an assessee carrying on a particular business to set up a new industrial undertaking on account of which exemption of tax under section 15C may be claimed. The legislature has advisedly refrained from inserting a definition of the word " reconstruction " in the Act. Indeed, in the infinite variety of instances of restructuring of industry in the course of strides in technology and of other developments, the question has to be left for decision on the peculiar facts of each case. If any undertaking is not formed by reconstruction of the old business that undertaking will not be denied the benefit of section 15C simply because it goes to expand the general business of the assessee in some directions. As in the instant case, once the new industrial undertakings are separate and independent production units in the sense that the commodities produced or the results achieved are commercially tangible products and the undertakings can be carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tamil Nadu with an annual capacity of one lakh numbers on the basis of maximum utilisation of plant and machinery. Pursuant to this Letter of Intent, the Government of India issued an industrial licence to the appellant-company on 29-11-1983, a copy of which is at page 1 of the appellant's paper book No. 1. We quote below paragraphs 2 to 4 of the said licence, subject to which the licence was granted to the appellant by the Government of India :---- " 2. The new industrial undertaking shall have the installed capacity as specified below on the basis of maximum utilisation of plant and machinery :---- Item of manufacture Annual capacity Colour Television Receiver sets. 50,000 (fifty thousand numbers). 3. The new industrial undertaking is to be located at Tehsil Saidapet, District Chingleput in the State of Tamil Nadu. 4. The new undertaking shall be completed and commercial production established within a period of two years from the date of issue of this industrial licence." 111. In the wake of this Letter of Intent and the Industrial Licence issued by the Government, the appellant-company deputed three of its employees, namely Mr. Meera Mohideen, Mr. C.E. Ravichand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he borrowings from State Bank of India. These minutes show that the Board discussed the additional financial requirements to meet the working capital and for acquiring capital equipment for the increased production activities of the company due to the introduction of colour T.V. production on regular basis. The Board resolved to make a request to the State Bank of India for enhancement of existing facilities under various heads from the original limit of Rs. 1,79,00,000 to Rs. 3,73,00,000, as set out in the resolution. The resolution also authorised Shri P. Obul Reddy, Director of the Company to deposit the title deeds of the company's immovable properties with intent to create security by way of mortgage thereon in favour of the Bank and to execute the necessary security documents required by the Bank. Pursuant to this resolution, Shri P. Obul Reddy executed the letter of security for creating an equitable mortgage by deposit of title deeds in respect of immovable properties on 2-7-1984, as could be seen from page 3 of paper book No. 5. These documents establish that the appellant-company had taken steps to arrange for the additional capital that may be required for launching of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and are producing colour Television sets in that floor." Regarding the query raised by the Assistant Commissioner as to how they could substantiate their claim that the shop floor established for colour television sets were used exclusively for Colour TV production, the appellant-company suggested that the same could be verified by the Asstt. Commissioner making a visit to their factory premises. 114. There seems to have been further enquiry into this matter by the Asstt. Commissioner of Income-tax, as could be seen from the reply of the appellant-company dated 8th September, 1989. The first question raised by the Asstt. Commissioner was whether the Colour Television division had separate plant and machinery as per balance-sheet and whether they could be identified separately. The assessee stated that the Colour Television division had separate plant and machinery and that the same could be identified separately. They further stated that the total value of plant and machinery for CTV division amounted to Rs. 10,28,186. We quote below question No. 3 as well as the appellant's reply thereto, as it is relevant for our purpose :---- " Whether there is any separate production flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttern and from then onwards the production of colour televisions were carried on with the signals generated from the central signal supply unit. The appellant also filed photo copies of the invoices showing the units of central signal supply unit purchased in 1981 for generating black and white signals and in 1986 showing the equipment purchased for generating colour signals, for the information of the Commissioner (Appeals). 117. In its letter dated 8th September, 1989 addressed to the Asstt. Commissioner of Income-tax, the assessee stated as follows in para 6 under the head, ' note on production process for colour TV Division ' : " 6. Note on production process for colour TV Division : For Colour TV production, the Printed Circuit Board assembly is totally different from B W TVS. In the Printed Circuit Boards of Colour TVs, additional colour processing circuits and colour killer circuits have been provided with the result that at the time of assembly, all these additional components have to be carefully assembled and also testing totally differs with that of B W TVs. Additional and specific tests have to be carried out for colour TVs, such as Chroma Testing circuit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compared to the earlier year 1983. In fact, there was no dispute before us that the appellant-company had employed more than ten workers for manufacture of CTVs in its Colour CTV Division and thus satisfied the requirements of section 80-I(2)(iv) of the Act. 121. According to the statement of colour television sets production details, 1984 at page 8 of the appellant's paper book No. 5, the total number of colour television sets produced were 17,635, which figure tallies with the copy of the statement filed by the learned departmental representative in the course of hearing of the appeal. In the annual accounts of the appellant-company for this year, the Directors' Report contains the following particulars regarding production and sales :---- " The Company opened a new division during 1984 for the introduction of Colour TV sets based on the Industrial Licence received in November, 1983. Production during the year was 50,180 TV Sets including 17,643 colour TV Sets as against 31,625 TV Sets produced in 1983 showing an increase of 58.67% during the year. The Company's sales also increased to a very large extent during the year as the demand went up due to the opening of new TV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India as well as from Bankers for finance and credit facilities for setting up this new industrial undertaking. All these materials and facts go to prove that the Colour Television Division was not formed by the splitting up or the reconstruction of the already existing business in the manufacture of black white TV sets. Thus, the appellant-company fulfils the first condition in sec. 80-I (2)(i) of the Act. 124. This further narrows down the area of controversy to section 80-I(2)(ii) of the Act. We have already quoted this provision of law along with its Explanation 2 in paragraph 105 supra. The appellant had originally claimed before the departmental authorities and also before us that the total value of plant and machineries purchased for Colour T.V. production in the year 1984 amounted to Rs. 8,70,456, as detailed in the statements at pages 1 to4 of the appellant's paper book No. 3, and that the written down value of existing plant and machineries, which were six items and which were used in colour TV production amounted to Rs. 25,762 only and that the percentage of the old plant and machinery used in Colour TV production as against the value of the new plant and machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e percentage of old plant and machinery used in Colour TV production worked out to only 13.01 % as set out below :--- " 1. WDV of existing plant and machinery used in CTV production. (Refer Paper Book No. 3 page 5) Rs. 25,762 2. Total value of plant and machinery purchased for CTV production till March, 1984. (Sl. Nos. 1 to 8 and 24, page 1 to 3 paper book No. 3). Rs. 1,98,007 3. Percentage of Items (1) Item (2). 13.01%" If we add the value of CTV Pattern Generators amounting to Rs. 44,591, which was purchased on 28-6-1984 and shown as item No. 13 in the list filed by the learned departmental representative, and as item No. 21 on page 3 of the appellant's paper book No. 3, the total value of new plant and machinery purchased and utilised till June 1984 would amount to Rs. 2,42,598. The percentage of old plant and machinery would still be less with reference to this figure of Rs. 2,42,598 representing the value of new plant and machinery used in Colour TV production in the CTV Division, namely 10.5% only. Thus, it would be seen that the proportion of old plant and machinery which was used in Colour TV production was well within the permissible percentage of 20% allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the learned departmental representative turned on the interpretation of agreement with the foreign collaborating company and the licence granted by the Government of India. A careful reading of the said judgment would show that in the said case the assembly stage was a part and parcel of the entire industrial undertaking of the assessee, whereby they manufactured or produced bus/truck chassis, which were wholly indigenous and that the assembly stage, upon the facts, was not a different industrial undertaking but one intimately connected with the subsequent stages, whereby the Indian bus/truck chassis were progressively manufactured. In fact, at page 343 of the reports, Their Lordships of the Bombay High Court have held as follows :--- " This argument in essence is no more than another shade of the same arguments which we have dealt with above. No doubt, the exemption granted by section 15C attaches only to an industrial undertaking which manufactures or produces articles but having regard to the particular facts and circumstances here, (the facts and circumstances with which we have already dealt), we cannot but hold in the present case that the assembly stage was a part and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed deduction under sec. 80J, which was rejected by the departmental authorities and the Tribunal, which was upheld by the Karnataka High Court. Therefore, this decision is of no assistance to the department in the present case. 127. The next decision of the Kerala High Court in Travancore Rayons Ltd.'s case turned on its peculiar facts, as it was found in the said case that " C.F. Plant No. IV " was formed by the reconstruction of an existing business. In the present case, the facts are entirely different and therefore this decision is also not applicable. 128. Similarly, the decision of the Bangalore Bench of the Appellate Tribunal in the case of Canara Wire Wire Products Ltd. is also inapplicable to the facts of the present case, as it was found as a fact by the Tribunal in the said case that no new and identifiable undertaking separate and distinct from the existing business had come into existence. Therefore, this decision is also inapplicable to the facts of the present case. 129. In the course of the hearing of the appeal, we ascertained from the Engineer of the appellant-company, who was present at the time of hearing, that in a Black and White TV set, the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant had explained this position before the departmental authorities in a note on allocation of interest to Black and White television Division at page 51 of paper book No. 1 and also in their letter dated 2-3-1989 addressed to the Assistant Commissioner of Income-tax. According to the appellants, it obtained credit facilities of 180 days on its imports from its foreign suppliers. It is only this facility allowed by the foreign suppliers which helped the appellant-company for not utilising its loan and other credit facilities arranged with the bank, except to the extent actually required as and when the occasion arose. The appellant had also stated that whatever bank charges were incurred for utilising this loan and credit facilities from the bank have been apportioned and debited to the respective profit and loss account relating to the Black and White Television division and Colour Television Division separately. This factual position stated by the appellants has not been disputed by the departmental authorities, nor any material placed before us or pointed out to us by the departmental authorities to hold that it is not correct. The very fact that the appellant was able to comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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