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TMI Blog1991 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... er the export incentive schemes is taxable under the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the cash subsidy on controlled cloth amounting to Rs. 49,81,892 was liable to tax under the Incometax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sum of Rs. 60,213 representing additional expenditure incurred in payment of instalments of foreign loan liability due to exchange fluctuation is capital expenditure ? 4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the filing fees paid to the Registrar of Companies for increasing the authorised share capital of the company amounting to Rs. 37,500 is a capital expenditure ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the fees paid to the Controller of Capital Issues for seeking permission for issue of bonus shares amounting to Rs. 1,500 is capital expenditure? 6. Whether, on the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision, we answer the fifth question in the negative and in favour of the assessee. The sixth question is also concluded by the decision of this court in the case of CIT v. Upper Ganges Sugar Mills Ltd. [1985] 154 ITR 308. Following the said decision, we answer the sixth question in the affirmative and in favour of the Revenue. The facts relating to the first question at the instance of the Revenue are as follows : The assessee incurred a total expenditure of Rs. 1,60,193 which was inclusive of Rs. 89,129 being the expenditure incurred on maintenance of transit bungalows located at various places where the assessee's rayon, spun pipes and cement units were located. It was also inclusive of another sum of Rs. 71,064 representing guest house expenses incurred in the assessee's cement unit. The assessee claimed deduction of both the sums under section 37 of the Act which was disallowed by the Income-tax Officer. The Commissioner of Income-tax (Appeals) upheld the disallowances by following his orders for the assessment years 1973-74 and 1974-75. On further appeal by the assessee, the Tribunal found that the additions made on this account for the assessment years 1973-74 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther appeal by the Revenue, the Tribunal sustained the order of the Commissioner of Income-tax (Appeals) by observing that the assessee did not set up new cement factory in Rajasthan during the relevant previous year. The expenses were incurred for exploring the possibility of starting a new cement project in addition to the assessee's existing cement unit in Andhra Pradesh. The Tribunal held that the ratio of the Gujarat High Court decision in CIT v. Alembic Glass Industries Ltd. [1976] 103 ITR 715, relied upon by the Commissioner of Income-tax (Appeals), was applicable to the present case. Before us, the contentions raised before the Tribunal have been reiterated. The contention of learned counsel for the assessee is that the assessee carried on business in manufacture of cement, rayon, cellophane paper, cast iron spun pipes, etc., and incurred certain expenditure in connection with the setting up of a proposed cement unit at Rajasthan. The assessee's existing cement unit during the year under appeal was located at Basant Nagar (Andhra Pradesh). The expenses so incurred were of revenue nature as, according to him, it is the case of an existing business having the project of a ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... woollen yarn, incurred registration charges for obtaining a loan for the purpose of starting a new venture, viz., manufacture of vanaspati ghee, and claimed the amount as business expenditure. The Income-tax Officer disallowed the claim on the ground that the new unit had not been set up during the relevant accounting period but the Tribunal allowed the claim. On a reference, the Punjab and Haryana High Court held that the loan was not an asset or advantage of an enduring nature and the objects with which it was raised were wholly irrelevant. Even if the unit of manufacturing vanaspati ghee had not been set up, the registration expenses for obtaining the loan would be a business expenditure and not of a capital nature. Moreover, the assessee was already a running concern and the endeavour was to set up a new vanaspati ghee unit. Therefore, the registration expenses were allowable as business expenditure. In CIT v. Shah Theatres (P.) Ltd. [1988] 169 ITR 499 (Raj), the assessee who carried on the business of exhibition of motion pictures started construction of a cinema theatre. The assessee claimed deduction of certain amount in respect of travelling expenses incurred in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year relevant to the assessment year, this fact, in our view, is not a relevant factor in determining whether the deduction is allowable or not. The expenses in this case are miscellaneous expenses and legal charges for the proposed cement factory project. This expenditure is not related to the setting up of a new factory, it pertains to exploring the feasibility of expanding or extending the existing business by setting up a new factory in the same line of business. The assessee, during the course of its business, may incur expenditure for obtaining a project report or legal opinion regarding the viability of such project. This cannot, in our view, be considered as capital expenditure as, in that case, any legal expenses incurred by an assessee for taking any opinion on the desirability or feasibility of expansion of the business will not be allowable as deduction. Stich expenditure is unmistakably connected with the running of the business. Our attention has been drawn to a decision of this court in CIT v. Ashoka Marketing Ltd. [1990] 181 ITR 493. In that case, one of the questions was whether the expenditure incurred by the assessee for legal expenses pertaining to tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Sugauli Sugar Works P. Ltd. [1983] 140 ITR 286. He has submitted that a subsequent decision of this court in the case of CIT v. Agarpara Co. Ltd. [1986] 158 ITR 78, is distinguishable as, in that case, the bonus was not claimed, which, after the statutory period, could not be recovered. But that is not the case with unclaimed wages. Since the facts are not very apparent from the statement of the case, we directed Dr. Pal to give us the particulars regarding the amount of Rs. 68,849 stated to have been written back in the accounts. Such particulars have been furnished which, by consent of the parties, have been kept as part of the records. From the said statement submitted to the court, the following facts would appear in respect of the said sum of Rs. 68,849 stated to be the unclaimed wages written back by the assessee in the profit and loss account: Accounting year 1971-72 Rs. P. Unpaid wages, bonus and casual leave Balance as on April 1, 1974 69,800.28 Add : Unpaid during the year (remaining unpaid at the time of fortnightly payment) - --------------- Total 69,800.28 Less : Paid during the accounting year 1974-75 1,597.47 --------------- Balance as at Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an excess provision. No longer was there any liability. It is always possible that a creditor, if lie so chooses, may agree to accept a smaller amount in full discharge of the whole amount due to him. An employee, casual or regular, who is entitled to wages or salary, will not allow his claim to remain unsatisfied. If the employer does not pay, he can move the authorities under the Payment of Wages Act. In his own interest, he will not permit the employer to withhold the wages, if it is due to him. When an assessee has obtained a benefit of deduction of a trading liability, it is for the assessee to establish whether such trading liability has been fully discharged or not. This court has laid down in CIT v. Agarpara Co. Ltd. [1986] 158 ITR 78, that if there be any excess over the requirement of the assessee in respect of liability claimed and allowed, such liability must be deemed to have ceased. It has also been laid down that it may be inferred from the surrounding circumstances that there has been a cessation or remission of the liability of the assessee. It has also been laid down that if unclaimed bonus being a portion of the bonus allowed as deduction in computing the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was due to be made. It is, therefore, evident that no employee whose wages have not been paid, can recover the unpaid wages after 12 months or after three years as no records of non-payment will be available. Accordingly, such employees who have not collected their wages, nor initiated any proceedings, shall be deemed to have abandoned their wages. To prevent the employer from dealing with unpaid accumulations, the West Bengal Labour Welfare Fund Act, 1974, was enacted which came into force in September, 1976. All such unpaid accumulations have to be paid to the West Bengal Labour Welfare Board constituted under the said Act. As a matter of fact, says Dr. Pal, the unpaid wages are being deposited with the Welfare Commissioner, West Bengal, and since August, 1976, the liability, if any, of the employer in respect of unpaid accumulations will stand discharged upon transfer of the amount to the Board. This question does not arise for consideration this year. As indicated earlier, in this case, accumulations of unpaid wages, bonus and casual leave pay prior to April 1, 1974, were forfeited on March 31, 1975. To the extent the amount has been forfeited by the assessee, the same will be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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