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TMI Blog2013 (12) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... re Jute Co. Ltd. v. CIT [1980 (5) TMI 1 - SUPREME Court] - If there is continuity of business with common management and fund, then even if the assessee has started a new line of business in this year, the payment made for carrying out such running of new business, is nothing but a business expenditure which has to be allowed in the year in which it has been incurred - There is no augmentation of asset to the assessee but has helped the assessee to develop a proper guidance for running the new line of service industries - Decided in favour of assessee. - IT Appeal No. 981 (Mum.) of 2011 - - - Dated:- 13-9-2013 - B. RAMAKOTAIAH AND AMITSHUKLA , JJ. For the Appellant : Sanjiv S. Shah For the Respondent : O. P. Singh ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In response to the show cause notice with regard to the nature of service rendered by this person, the assessee submitted as under: Steve Cass has over 30 years of experience across a broad range of functions including Business consulting, Product compliance Testing, Wireless Telecommunications, Business Development, sales as well as command experience in the United States Army. In the financial year 2005-06, ATL entered into the business of Fleet Management services and providing security products and networking solutions. Steve Cass was being hired as a consultant- To provide advisory services to ATL in its existing operations To implement strategic Planning session with team to address formation of marketing app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 563 (Cal.) 3. The Assessing Officer rejected the assessee's submissions on the ground that the consultancy agreement with Mr. Stephen H. Cass, was to explore new line of business. Regarding assessee's contention that he has contributed to the assessee company in identifying prospective customers for the fleet management and has added customers like Wipro G.E. he disbelieve the same on the ground that these companies are based in India and the assessee has not produced any evidence to prove that on account of efforts of Mr. Stephen H. Cass, the assessee got the new customers. He thus held that these expenses are to be capitalized till the new business has commenced as the consultancy agreement was only for exploring new busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of purchases which are mainly for manufacturing business. In service industry, commercial operations start immediately after the incorporation of the company by way of business development or when the decision is made. The prospective customers may take some time. There can always be a gap between rendering of actual service particularly in the first year, in case of service industry. Examples of professionals like Chartered Accountants, Doctors, and Engineers were cited. Thus, once the genuineness of the payment has not been doubted, it cannot be held that the consultancy charges paid to Mr. Stephen H. Cass, is capital expenditure which needs to be capitalized, but has to be allowed as revenue expenditure. 5. The Learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Mr. Stephen H. Cass, who has provided various kind of advisory services and has also contributed in identifying prospective customers like Wipro G.E. Capital, Delloite, etc. Once the services have been started in this year, the payment made under consultancy agreement has to be allowed as revenue expenditure when the genuineness of the payment has not been doubted. The assessee was already in the business and in this year the assessee has started a new line of business in the service industries, therefore, such an expenditure has to be allowed as revenue and cannot be held as capital expenditure or can be capitalized in the books of account. He has strongly relied upon the decision of Delhi High Court in Indo Rama Synthetics India Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ield. There may be a case where expenditure have been incurred for obtaining advantage of enduring benefit but nonetheless they may be on revenue account. What has to be seen the nature of advantage in a commercial sense whether it is in the capital field or for the running of the business. If the advantage is necessitating the business operations for enabling the assessee to do business for earning some profit without having impact on fixed capital, then such expenditure has to be reckoned on revenue account, even though the advantage may endure in future. Thus the test of enduring benefit cannot be held to be conclusive. In the present case, there is no augmentation of asset to the assessee but has helped the assessee to develop a proper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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