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TMI Blog2009 (7) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-tax (Appeals) and held that the Assessing Officer was not justified in disallowing the deduction on account of expenditure incurred by the assessee for establishing a separate cell for developing import substitute components. 2. The facts of the case are that the assessee-company is engaged in the business of manufacture of auto electrical parts for which it was importing several components. The assessee-company considered that, instead of importing the components, it would be more beneficial to have the components locally procured and indigenously manufactured, and for this purpose a separate cell was set up for developing import substitute components. The object of this special cell was to identify local manufacturers for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure. (iii) Expenditure incurred for the purpose of running a business efficiently cannot for that reason be labelled as capital expenditure. (iv) The treatment of the expenditure in the books account/financial statements is not relevant for determining whether or not the expenditure is of capital or revenue nature. (v) Heavy revenue expenditure incurred in one year cannot have the effect of converting it into capital expenditure. For example, expenditure incurred on advertisement. (vi) The Assessing Officer did not dispute the fact that the expenditure was incurred or question the quantum. His main problem was that the company had, in its financial statement, chosen to treat the expenditure as deferred revenue expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003] 260 ITR 102 (Bom) and CIT v. Kanyakumari Dist. Co-op. Spg. Mills Ltd. [2003] 264 ITR 684 (Mad) for the same purpose. 6. The counsel for the respondent-assessee has however placed reliance upon Madras Industrial Investment Corporation Ltd. v. CIT [1997] 225 ITR 802 (SC) CIT v. Print pack Machinery [2001] 248 ITR 684 (Delhi), Empire Jute Company v. CIT [1980] 124 ITR 1 (SC), CIT V. I. K. Synthetics Ltd.[2009] 309 ITR 371 (Delhi) and CIT v. Usha Iron Ferro Metal CorporationLtd. [2008] 296 ITR 140 (Delhi) to contend that the expenditure is of evenue nature only. The counsel for the respondent has further contended that the concurrent findings of facts of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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