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TMI Blog2007 (8) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of the court was delivered by 1. DR. S. MURALIDHAR J.— This appeal under section 260A of the Income-tax Act, 1961 ("the Act") is directed against the decision dated June 16, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench "C", Delhi ("the Tribunal") in I.T.A. No. 3539/Delhi/1999 for the assessment year 1992-93. 2. Admit. 3. The following substantial questions of law arise for consideration "(a) Whether the Income-tax Appellate Tribunal was correct in law in holding that the payment of Rs. 23, 21,865 made by the assessee as an advance to the suppliers for manufacturing tools and dies was a revenue expenditure ? (b) Whether the Income-tax Appellate Tribunal was correct in law in allowing deduction of Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was not a standard method and further that the assessee had not showed that the change was bona fide. The Assessing Officer disallowed the deduction and directed that the amount of Rs. 23, 21,865 would be added to the income of the assessee. On this aspect, the Commissioner of Income-tax (Appeals) ("CIT (A)") rejected the appeal of the assessee concurring with the findings of the Assessing Officer. 7. In further appeal filed by the assessee, the Tribunal followed the order by it in I. T. No. 2852 (Delhi) of 1999 for the assessment year 1995-96 in which it was held that the tooling advance was for facilitating the trading operations of the assessee and further that the tools and dies continued to, remain the property of the manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegra. The test in this regard has been reiterated by the hon'ble supreme Court in Bharat Earth Movers v. CIT [2000] 245 ITR 428 and Jute Co . Ltd. v. CIT [1980] 124 ITR 1. The recent judgment of this court in Saw Pipes Ltd.'s case [2008] 300 ITR 35 (Delhi) follows these decision It appears from the above decisions is that in order to treat an item expenditure as a capital expenditure it will have to be shown that the asset in question, for which the tooling advance has been paid, is actually in the ownership of the assessee. 11. In Saw Pipes Ltd. 's case [2008] 300 ITR 35 (Delhi) this court noticed that service line in question had been laid in the assessee's premises to enable it to carry out business more efficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verting to the facts on hand, we find that learned counsel for the assessee is right in his submission that at no point of time was such expenditure claimed as a capital expenditure by the assessee. That being the position, there was no justification for the Assessing Officer to disallow the deduction of the tooling advance on the ground that the assessee, though not owing the asset in question, was deriving an enduring benefit from it. The fact that the moulds and dies continue to be remain the property of the manufacturer is decisive in determining the nature of the expenditure. The tooling advance paid to the vendors is also non-refundable. Not only is there an assurance of continued supply of components but as a result of this arrangeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility but only a contingent liability. The Commissioner of 'Income-tax (Appeals) noticed that as against the provision of Rs. 41,30,000 the actual expenditure incurred in the next assessment year was only Rs. 16,67,929. Therefore, it was held that the expenditure, if at all could be considered only for the assessment year, i.e., 1993-94. 17. The Tribunal on the other hand examined the holiday incentive scheme and found that there was an office memo dated April 29, 1992, from the marketing department to the accounts department mentioning that the probable liability towards the scheme for the previous year 1991-92 would be in the range of Rs. 41,30,000. The Tribunal accepted the explanation offered by the assessee that the holiday incenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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