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TMI Blog2008 (10) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... rder made therein, this is what has been observed by the apex court (page 202): "Apart from the above question under section 36(1)(iii), the present civil appeals are filed by the Department against the decision of the High Court whereby the High Court has dismissed Civil Applications Nos.53 and 54 of 2001 filed by the Department. It may be noted that during the pendency of Tax Appeals Nos.449 and 450 of 2000, the Department had moved the above two civil applications for amendment of its memorandum of appeal raising substantial questions of law, namely:- (a) whether advertisement expenses incurred by the assessee to create a brand image with enduring benefit are allowable as revenue expenditure; (b) whether the Tribunal had erred in granting deduction under section 35D regarding short-term loan, in view of the Explanation to section 35D(3) which refers only to long-term borrowings; (c) whether the Tribunal had erred in directing deduction under sections 80HH and 80-I on the miscellaneous income of Rs.26,64,113 being income on sale of empty containers? Although the Department had moved the said Civil Applications Nos.53 and 54 of 2001 during the pendency of Tax Appeals Nos.44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting entries in the books of account was not determinative of the character and/or nature of the claim. That the expenditure in question did not bring into existence any tangible asset and merely because the expenditure may bring some benefit of an enduring nature to the assessee, that factor alone was not sufficient to treat the expenditure as capital expenditure. The Tribunal has relied on the two Apex Court decisions in the case of Empire Jute Co. Ltd. v. Commissioner of Income-Tax, (1980) 124 ITR 1 and Alembic Chemical Works Co. Ltd. v. Commissioner of Income-tax, Gujarat, (1989) 177 ITR 377. 6. Learned counsel appearing for the Revenue has submitted that once the Assessing Officer and Commissioner (Appeals) had concurrently come to the conclusion that the expenditure resulted in a benefit of enduring nature, the Tribunal could not have taken a different view of the matter as the finding recorded by Assessing Officer and Commissioner (Appeals) was a finding of fact. He, therefore, submitted that the Tribunal's order on this count was required to be reversed and question No.1 be answered in favour of the appellant. 7. On behalf of respondent-assessee, learned senior counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, as the same was not derived from the industrial undertaking. The Commissioner (Appeals) has not agreed with the Assessing Officer and in second appeal Tribunal has confirmed the order made by Commissioner (Appeals). Both the appellate authorities have held that the containers were acquired as part of purchases of raw materials which were used for the purpose of business of industrial undertaking and, therefore, income generated from sale of containers necessarily had to be treated as income from industrial undertaking in view of the decision of Supreme Court in the case of Cambay Electric supply Industrial Co. Ltd. v. C.I.T., [1978] 113 ITR 84. 12. On behalf of appellant-Revenue, it was submitted that there was distinction between the phrase derived from and the phrase attributable to as laid down by the Apex Court in various judgments. That, in the present case, income received on sale of containers cannot be stated to be derived from business of industrial undertaking, though the same may be attributable to such business. Therefore, according to the learned counsel, the issue was required to be answered in favour of the appellant-Revenue by reversing the order of Tribunal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute Co. Ltd. (1980) 124 ITR 1(SC) and Alembic Chemical Works Co. Ltd. (1989) 177 ITR 377 (SC) specifically lay down that the nature of advantage has to be considered in a commercial sense and the test of enduring benefit is not a certain or conclusive test and cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. The expression asset or advantage of an enduring nature has been evolved to emphasise the element of a sufficient degree of durability appropriate to the context. The idea of once for all payment and enduring benefit are not to be treated as something akin to statutory conditions. 16. Applying the aforesaid settled legal position to the facts of the case, it is not possible to agree with appellant-Revenue that the advertisement expenses incurred by respondent assessee at the time of installation of additional machinery in existing line of business resulted in any enduring benefit, so as to be treated as capital in nature. 17. Question No.1 is, therefore, answered in the affirmative, namely, advertisement expenses incurred by assessee to create brand image is allowable as revenue expenditure. 18. Insofar as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Explanation, clause (a) defines cost of project, clause (b) defines capital employed in the business of the company, and clause (c) defines long-term borrowings. In case of the assessee the factor of cost of project is not relevant and only capital employed in the business of the company is required to be considered, that also as defined in sub-clause (ii) of clause (b) of the Explanation which talks of aggregate of issued share capital, debentures and long-term borrowings as on the last day of the previous year. Long-term borrowings means under sub-clause (i) of clause (c) of the Explanation any money borrowed by the company from Government, or Industrial Finance Corporation of India or Industrial Credit and Investment Corporation of India or any other financial institution, which is for the time being approved by the Central Government or any banking institution. Therefore, on a plain reading it becomes apparent that the borrowing has to be from any of the four entities mentioned in sub-clause (i) of clause (c) of the Explanation. No time limit for the purpose of borrowing is laid down in the provision. This assumes significance when one compares the same with sub-clause (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X
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