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TMI Blog1984 (7) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) that the fees were paid to the Administrative Staff College of India for studying the working of the factory and giving suggestions for reorganisation of the stores department and the expenditure was of a revenue nature. The Commissioner (Appeals) agreed with the assessee. 2. In the revenue's appeal, it is contended that the above expenditure is capital in nature. By applying the usual tests for determining whether an expenditure is of capital or revenue nature, we have no hesitation in holding that the expenditure incurred by the assessee, in order to rationalize its working, is not capital in nature. We reject the ground raised by the revenue in this regard. 3. The next objection is to the direction of the Commissioner (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons urged on behalf of the assessee. He held as follows : " ...It appears to me that in the light of the contentions noted by the IAC himself, the conclusion to which he came is not justified. For instance, it has been noted that the shortages which were found during the year after physical verification had been exhaustively recorded in the register and this register was produced to auditors for verification and there was no adverse comments relating to these shortages. The IAC has also noted that the fact that shortages written of during the year were far in excess of the previous year, cannot be the sole reason for not admitting the entire amount of Rs. 6,71,376. It had been explained to him that the number of items being large, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions. We have to observe that the disallowance made by the ITO is on an ad hoc basis. Apparently, the ITO has no basis to say that the shortages relating to the earlier years could be Rs. 4 lakhs nor for the IAC to hold that such shortages amounted to Rs. 3,35,688. It is a fact that the accounting procedures in the factory were not perfect. If shortages are not determined at the end of each accounting year, there is also the possibility of the assessee having returned excess profits in the earlier years. The assessee being a company, the rates of taxation will be uniform. It cannot be said that the assessee was knowingly debiting such shortages in the earlier years and it had anything to gain by claiming all the shortages in one yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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