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TMI Blog2009 (1) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue expense, and as such, was liable to be included by the respondent-assessee while computing expenses at its hands. It is in view of the aforesaid conclusion drawn by the Income Tax Appellate Tribunal, that the instant appeal has been preferred by the Revenue, suggesting the following substantial questions of law: - "(i) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that while payments made to M/s. Coopers and Lybrands for a study and report on reorganization of core business of assessee company and improving its market share and profitability resulted in a benefit derived by the assessee for a number of years, the same was not in the nature of capital expenditure? (ii) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that payments made to M/s. Coopers and Lybrands, were revenue in nature even though a new line of business (scooter) was being set up and scope of study and advice by consultants, spread over three financial years, was not only for existing business? (iii) Whether on the facts and in law, the Income Tax Appellate Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the learned counsel for the appellant is based on Section 35 (D) of the Income Tax Act, 1961 (hereinafter referred to as the 1961 Act). Pointed reference was made by the learned counsel for the appellant to sub-section (2) (a) (iii) thereof. Section 35 D of the 1961 Act is being extracted hereunder: "35D. Amortisation of certain preliminary expenses. - (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, incurs, after the 31 st day of March, 1970, any expenditure specified in sub-section (2)- (i) before the commencement of his business, or (ii) after the commencement of his business, in connection with the extension of his industrial undertaking or in connection with his setting up a new industrial unit, the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount equal to one- tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of the company, the excess shall be ignored for the purpose of computing the deduction allowable under sub-section (1). Provided that where the aggregate amount of expenditure referred to in sub-section(2) is incurred after the 31 st day of March, 1998, the provisions of this sub-section shall have effect as if for the words "two and one-half percent", the words "five percent" had been substituted. Explanation.- In this sub-section,- (a) "cost of the project" means- (i) in a case referred to in clause (i) of sub- section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences; (ii) in a case referred to in clause (ii) of sub- section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is claimed, the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. (5) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period of ten years specified in subsection (1), to another Indian company in a scheme of amalgamation,- (i) no deduction shall be admissible under sub-section (1) in the case of the amalgamating company for the previous year in which the amalgamation takes place; and (ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the amalgamation had not taken place. 5(A) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (i) is transferred, before the expiry of the period specified in sub-section (i), to another company under a scheme of demerger:- (i) no deduction shall be admissible under sub-section (i) in the case of demerged company for the previous year in which the demerger takes place, and (ii) the provisions of this section sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the order passed by the Assessing Officer dated 28.3.2001, allowed the respondent -assessee to adduce additional evidence. In order to substantiate the instant contention, learned counsel for the appellant has placed reliance on the order passed by the Assessing Officer, wherein the following observations were recorded: "The assessee was required to produce proposal dated 23.10.1996 entered into with M/s. Coopers Lybrands. In response, the assessee has filed letter dated 23.9.1996. According to this letter, a proposal was made on 4.9.1996 which has not been filed by the assessee. As per this letter the time scales for the individual parts of the assignments are as under: Assignment start 1.10.1996 Strategy document rendered by 25.11.1996 Agreement on strategy by 30.11.1996 Business plan complete by 31.01.1997 Implementation plan complete by 15.04.1997" 9. On the basis of the aforesaid contention, it is the submission of the learned counsel for the appellant, that the only material placed by the respondent-assessee before the Assessing Officer, was the letter dated 23.9.1996. It is sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant submission) cannot lead to the conclusion that no other material was placed by the respondent-assessee before the Assessing Officer, besides the letter dated 23.9.1996. In the extract reproduced above, the Assessing Officer merely notices, that in response to a direction issued by the Assessing Officer to the respondent-assessee to produce the proposal dated 23.10.1996, entered into with M/s. Coopers and Lybrands, the respondent-assessee produced a letter dated 23.9.1996. That, in our view, cannot by itself lead to the inference, that the material referred to by the Commissioner of Income Tax (Appeals) in his order dated 10.1.2003, had not been produced by the respondent-assessee before the Assessing Officer. Thus viewed, we find no merit in the second submission advanced by the learned counsel for the appellant. 11. The last contention advanced by the learned counsel for the appellant was to the effect, that the respondent-assessee is likely to have a long term benefit from the report submitted by M/s. Coopers and Lybrands. It is also the contention of the learned counsel for the appellant, that the Income Tax Appellate Tribunal overlooked the fact, that the scope of stu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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