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TMI Blog2008 (6) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... ure ? - Whether the Tribunal was right in law in deleting the addition in respect of payments made to M/s. McKinsey Co., management consultant and the same should be allowed as revenue expenditure is valid in law? - Expenditure incurred as interest paid on capital borrowed - AO added the entire interest to the cost of the fixed asset by rejecting the claim of the assessee that the expenditure is revenue in nature. HELD THAT:- It is well-settled that it is not only permissible, but is also necessary for any business to update its own knowledge and adopt better ways of organising its business, if it is to survive in the market. The expenditure incurred for such purpose cannot be regarded as capital expenditure and it is only a revenue expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mad./2003 and 542/Mad./2005 respectively. The relevant assessment years are 1998-99 and 1999-2000. The substantial questions of law formulated in these appeals are as follows : "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition in respect of payments made to M/s. McKinsey & Co., management consultant and the same should be allowed as revenue expenditure is valid in law? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition made towards interest paid on borrowed capital is valid?" 2. The facts of the case are as follows : The assessee is a company engaged in the manufacture and sale of industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure of ₹ 38,73,450 as interest paid on capital borrowed for expansion of assessee's business. The Assessing Officer added the entire interest to the cost of the fixed asset by rejecting the claim of the assessee that the expenditure is revenue in nature. Against that finding, the assessee preferred an appeal before the CIT(A) and the CIT(A) sustained the order of the Assessing Officer. Against that order the assessee preferred an appeal before the Tribunal and the Tribunal following the decision of this Court in the case of same assessee in CIT v. Carborandum Universal Ltd. [2006] 205 CTR (Mad.) 498 set aside the order of the CIT(A) and deleted the additions and allowed the assessee's appeal. Aggrieved by the said order, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s capital expenditure as such report was not obtained as part of documentation packages, but was obtained in a contract covering comprehensive restructuring of the business involved. No new line of business was started on the strength of the report of the consultants. The report was not regarded as essential part for any new business that the assessee commenced thereafter. In the circumstances of the case, the expenditure incurred by the assessee, in obtaining that report was clearly an expenditure of the revenue in character." Hence, the first question of law is covered against the assessee (sic - revenue). 6. In respect of the second question of law, the interest paid on borrowed capital, the assessee borrowed money for the expansi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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