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TMI Blog1984 (3) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is having its factory at Atladara in Baroda Taluka. The premises of this factory belonged to D.P.L. Under an agreement dt. 29th Sept., 1977 entered into between the assessee and the D.P.L. the assessee undertook to manufacture transmission line towers, sub-station structures etc. with a view to execute the orders obtained by DPL. The assessee was contemplating of expanding its business with a view to export its products. For this purpose, the assessee was contemplating of having another manufacturing unit at Nabipur in Broach District. With a view to explore the possibility of exporting transmission line towers and other products to the Middle East and African countries, the assessee approached one professional concern viz. Resea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Rs. 50,000 was only a part of advance on confirmation of the assignment to the payee-consultant 'RCMS' and ultimately the company had abandoned and idea of obtaining a full survey report from the consultants." 5. In appeal before the Commissioner (Appeals), the assessee once again urged that the ITO ought to have allowed its claim of deduction of Rs. 50,000 as well as its claim for weighted deduction under s. 35B(1)(a)(ii) of the Act, in respect of the said amount. The Commissioner (Appeals) met the aforesaid three reasonings of the ITO in the following manner: "3. I have very carefully considered the reasons given by the ITO. In regard to the reason given at (1) above, it is pertinent to note that the appellant company was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expansion of existing activity of manufacture of the transmission line towers, etc. Hence the reasons given at No. 1 above, by the ITO does not hold good. 4. Reasons given at No. 2 above, would hot hold us for long for the simple reason that any expenditure on advertisement or market survey, etc., is bound to result in some benefit over flowing to the period after the end of the relevant previous year; but that circumstances does not mean that the benefit sought was that of enduring nature so as to make expenditure as on capital A/c. Any advertisement or market survey will ensure benefits of sufficiently long periods but such expenses are always allowable as of revenue nature. 5. Coming to the reasons given at No. 3 above, it is ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Paper Book, he pointed out the accounting treatment given by the assessee in its books regarding payment of Rs. 50,000 to RCMS. Relying on the majority decision of the Tribunal in the case of Chemicoat Ltd. vs. ITO (1982) 2 ITD 584 (Ahd), the ld. Counsel for the assessee submitted that since the expenditure incurred by the assessee was for the expansion of the existing business, the Commissioner (Appeals) has rightly allowed the assessee claim for deduction of Rs. 50,000. He supported the action of the Commissioner (Appeals) allowing weighted deduction to the assessee under s. 35B of the Act. 7. We have carefully considered the rival submissions of the parties as well as the material placed before us and we do not find any infirmity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices to Dodsal Pvt. Ltd. Bombay. The company as discussed above proposed to erect a new factory building at Nabipur and the expenditure of Rs. 13,200 is in connection with the proposed Nabipur project. The expenditure is clearly in the nature of capital expenditure (not entitled to depreciation and) hence disallowed." As per Commissioner (Appeals) "7. The next ground of appeal is directed against disallowances of Rs. 13,200 being the payment made to the Gujarat Electricity Board in connection with the supply of power to the proposed Nabipur project. This item of expenditure is so intimately connected with and dependent upon the new project itself that it would be of capital nature. It may be noted that the first item of Rs. 50,000 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the disallowance of Rs. 13,200 made by the ITO. He, therefore, urged that Rs. 13,200 should be deleted from the total income of the assessee. The ld. Representative for the Department, on the other hand, relied on the orders of the IT authorities and justified their action. In this connection he made reference to the decision of the Hon'ble Supreme Court in the case of Sitalpur Sugar Works Ltd. vs. CIT (1963) 49 ITR 160 (SC) and of the Hon'ble Karnataka High Court in the case of Mysore State Road Transport Corporation vs. CIT (1975) 99 ITR 518 (Kar). 9. On due consideration of the rival submissions of the parties as well as the material placed before us (which was also made available to the IT authorities), we find force in the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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