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TMI Blog2003 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... an expenditure was on revenue account or capital account is required to be examined in the light of the totality of all facts for this purpose - That, by merely looking at the balance-sheet and profit and loss account, one cannot infer the nature of the expenditure. - the above question is answered in the affirmative, i.e., in favour of the assessee and against the Department. - - - - - Dated:- 22-1-2003 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J.-The Department has come by way of appeal under section 260A of the Income-tax Act, 1961, in respect of the assessment year 1995-96. The following question of law arises for our determination in this case. "Whether, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores for using their brand value for a period of ten years as per the agreements entered into by the assessee. Accordingly, the assessee claimed deduction under section 37(1) of the Act. As stated above, the assessee's claim for deduction came to be rejected by the Assessing Officer. The matter was carried in appeal to the Commissioner of Income-tax (Appeals). The first appellate authority took the view that in this case, the central issue was whether Rs. 18 crores constituted expenditure on revenue or capital account. That such an issue cannot be decided by way of adjustment under section 143(1)(a) of the Income-tax Act, as it stood at the relevant time. Therefore, without going into the merits, the Commissioner of Income-tax (Appeals) all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1)(a) on the ground that the expenditure stood incurred on capital account and, there fore, was inadmissible. In this connection, the Assessing Officer has drawn an adjustment sheet under section 143(1)(a) of the Income-tax Act. On a perusal of the adjustment sheet, one finds that on the basis of the balance-sheet and the notes to accounts, the Assessing Officer disallowed the expenditure of Rs. 18 crores under section 143(1)(a) on the ground that it was on capital account. The Assessing Officer came to the conclusion, on the facts, that the expenditure was incurred, not for expansion of business, but to enter into a new line of business, namely, entertainment business. It is important to bear in mind and it is well settled by various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the light of the totality of all facts for this purpose. Evidence would be required in the form of documents and accounts and also, it would require proper appreciation of the terms and conditions of the agreement between the assessee and the two actors. That, by merely looking at the balance-sheet and profit and loss account, one cannot infer the nature of the expenditure. That, such an exercise generally cannot be done by way of adjustments to the returns under section 143(1)(a) of the Act. That, such a point cannot be deciphered by merely looking at the return, supported by balance-sheet and profit and loss account. In the circumstances, the Tribunal was justified in coming to the conclusion that the Income-tax Officer was not right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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