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TMI Blog2006 (9) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... gamations P. Ltd. [ 1997 (4) TMI 8 - SUPREME COURT] has chosen to consider this issue and the said judgment supports the assessee. In fact this court in the case of this very assessee has chosen to hold in favour of the assessee in ITRC, CIT v. McDowell and Co. Ltd.[ 2006 (6) TMI 83 - KARNATAKA HIGH COURT] in somewhat identical circumstances. The said judgment to a certain extent holds good on this issue also. Thus, we deem it proper to answer this question in favour of the assessee and against the Revenue. Non-competition fee: - The Tribunal after noticing the rival contentions came to the conclusion that the expenditure incurred is revenue in nature. If the Department is satisfied that Rs. 20 lakhs spent by the company amounts to expenditure, then how can they question the remaining Rs. 80 lakhs in terms of the proceedings. The law is the same whether it is Rs. 20 lakhs or RS 80 lakhs. In these circumstances, and in the light of the acceptance of RS 20 lakhs as expenditure, we deem it proper to answer this question of law in favour of the assessee. Aircraft maintenance - We have seen the findings of the Tribunal. The Assessing Officer and the Commissioner have chosen not to consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment passed an order under section 143(3) of the Act. After hearing the assessee, additions were made in terms of an order dated March 31, 1997. An appeal was filed against the order passed under section 143(3) before the Commissioner of Income-tax (Appeals). He disposed of the appeal by allowing the appeal in part. Both the respondent and the appellant filed appeals before the Tribunal. The Tribunal allowed the appeal filed by the assessee in part and dismissed the appeal filed by the Revenue. It is in these circumstances, the Revenue is before us. 2. The following questions of law are framed by this court: "A (I) Whether the Tribunal was right in deleting the disallowance of interest on advances given by the respondent for the purported purchase of a coffee estate, without noting that such advance was not in the line of business of the respondent and even if such estate were purchased, the income therefrom would be purely agricultural in nature? (II) Whether the Tribunal was right in law in disposing of the appeal for the assessment year 1994-95, when the appeals on an identical issue were pending before it for the earlier years? B(I) Whether the Tribunal was right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material on record. 6. The appellant is engaged in liquor business. An advance of Rs. 460 lakhs was made over for the purpose of acquisition of an estate. There have been recoveries from the said concern and accordingly an amount outstanding stood at Rs. 292 lakhs for the previous year relevant to the assessment year under appeal. The amount was advanced at 18 per cent. interest. The board resolution passed on December 22, 1989, authorised the company to invest Rs. 4,79,00,000 excluding stamp duty and registration charges. An agreement was entered into in the light of the board resolution. The Commissioner after noticing the resolution and after noticing the articles of association was of the view that the assessee cannot be said to have acquired a new business and hence he upheld the claim of the assessee. The same was challenged before the Tribunal. The Tribunal has accepted the said order. Let us see as to whether the said order suffers in any way, warranting an answer in favour of the Revenue. Law is well-settled in this regard. At this stage, we must also notice section 36 of the Income-tax Act. It provides for deduction as an expenditure. The only objection is that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), in similar circumstances. The Division Bench after noticing the relevant facts has chosen to hold in paragraph 7 reading as under: "We are of the view, mere existence of an agreement does not give rise to claim for payment of commission and the income-tax authorities can go into the question whether the commission paid is properly deductible under section 37 of the Income-tax Act, 1961." 8. It was further ruled in paragraph 8 reading as under: "8. We are in full agreement with the reasoning of the assessing authority. We have already indicated that the burden is entirely on the assessee to prove those transactions. Agreement entered into between RJ Associates and Golden Enterprises by itself would not advance the case of the assessee. In this connection we may refer to the decision of the apex court in Swadeshi Cotton Mills Co. Ltd. v. CIT (No. 1) [1967] 63 ITR 57 wherein the apex court dealt with the question whether amount claimed as expenditure was laid out or expended wholly and exclusively for the purpose of the assessee's business, profession or vocation has to be decided on the facts and in the light of the circumstances of each case. The said prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and in favour of the Revenue. 11. Devolution of corporate guarantee: The Assessing Officer has chosen to reject the case of the assessee in the matter of providing relief in terms of this item. When the same was challenged before the appellate authority, the appellate authority also denied the benefit. The matter was taken to the Tribunal. The Tribunal, after noticing the facts, has chosen to accept the case as allowable expenditure. 12. The Supreme Court in CIT v. Amalgamations P. Ltd. [1997] 226 ITR 188 has chosen to consider this issue and the said judgment supports the assessee. In fact this court in the case of this very assessee has chosen to hold in favour of the assessee in ITRC No. 660 of 1998 dated June 22, 2006 (CIT v. McDowell and Co. Ltd. [2006] 286 ITR 203 (Am)) in somewhat identical circumstances. The said judgment to a certain extent holds good on this issue also. In these circumstances, we deem it proper to answer this question in favour of the assessee and against the Revenue. 13. Non-competition fee: The Assessing Officer noticed that the assessee claimed an amount of rupees 1 crore as non -competition fee paid to UB Engineering Ltd., for acquiring a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sen to bestow its attention to the material facts in granting relief to the assessee. In these circumstances, we are of the view that a further fact finding is necessary for answering this question of law. In these circumstances, we deem it proper to set aside the finding on this issue and remit the matter for redecision to the Tribunal and in the light of the material already available on record. 15. The Revenue has also raised the question with regard to disposal of the appeal for the assessment year 1994-95, during the pendency of identical issues for the earlier years before the Tribunal. We are not inclined to answer this question of law in the light of the subsequent passing of orders for earlier years and in the light of those proceedings also pending before us. 16. In the result, the following order is passed. Questions A(I), (II), C and E are answered in favour of the assessee. Question B(I) is answered in favour of the Revenue. Question D is not answered. The matter is remitted back for reconsideration to the Tribunal. The parties are directed to appear before the Tribunal on September 29, 2006, without waiting for any notice from the Tribunal. Liberty is reserved ..... 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