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TMI Blog1991 (11) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... ue worked out by the IAC on the basis of the actual expenses incurred by the assessee though that rule is for quantifying addition in the hands of employees and not employer. Here again, we find that the order of the CIT(A) is not supported by the decision of the Bombay High Court reported in Bombay Burmah Trading Corpn. vs. CIT (1983) 32 CTR (Bom) 306 : (1984) 145 ITR 793 (Bom). We, in the circumstances, shall reverse the same and restore that of the ITO. 5. The next ground of appeal is that the CIT(A) erred in holding that the assessee is entitled for weighted deduction under s. 35B of the Act though there was nothing which was to be exported by the assessee as the assessee is a company running a hotel in India and was not entitled for weighted deduction under s. 35B of the Act. We find that an identical issue had come up before the Tribunal in assessee's own case for the asst. yr. 1982-83. The claim has been allowed by the Tribunal in respect of foreign travel expenses, foreign advertisement expenses and subscription of foreign journals. We find that for this year the CIT(A) admitted the claim of the assessee except in regard to a sum of Rs. 55,050 which is the foreign travell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n enduring nature in the capital field. It is only when such is the case the same could be disallowed. Where the expenditure is in the nature of repairs and replacements and the same has been incurred to restore the efficiency of the plant and machinery to its original level, the expenditure incurred cannot be considered as capital expenditure. The concept, that current repairs would take within their folds only repairs of petty nature, has been discarded long ago. The Courts have been consistently taking the view that the real test whether an expenditure is in the nature of capital expenditure or revenue expenditure, is whether, as observed earlier, the same has resulted in the creation of an advantage of an enduring nature in the capital field or not. The quantum of expenditure is totally irrelevant. Even if the outlay is of a very large amount, the same will be regarded as revenue expenditure if it is in the nature of repairs and/or replacements. On going through the details filed by the assessee, we find that assessee has not secured and advantage of enduring nature. What has happened is replacement of worn out. parts and re-routing of cables. We may in this connection refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee-company or the employees of sister-concern. Several items of plant and machinery were still under installation and, therefore, according to the AO it was inconceivable that the hotel could be opened for public. He for that reason, disallowed the claim. 11. When the matter was carried in appeal, the CIT(A) observed that a unit could not be said to have been set up unless it was ready to discharge the functions for which it was being set up. It was only when the unit had been put into such a shape that it could start functioning as a business or a manufacturing organisation that it could be said that the unit had been set up. These observations of the CIT(A) were based on the decision reported in (1967) 63 ITR 678 (sic). He further relied on the decision reported in CIT vs. Suhrid Geigy Ltd. (1981) 25 CTR (Guj) 280 : (1982) 133 ITR 884 (Guj) wherein the Court had held that the word "ready to commence" would not necessarily mean that all the integrated activities were fully carried out or wholly complied with. On the basis of the evidence produced before him, he came to the conclusion that the test laid down by the Courts in the matter of determining whether a business ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 114 ITR 783 (Bom); (iv) CIT vs. Jiwaji Rao Sugar Co. Ltd. (1969) 71 ITR 319 (MP); and (v) CIT vs. Suhrid Geigy Ltd. (1981) 25 CTR (Guj) 280 : (1982) 133 ITR 884 (Guj). In particular our attention was invited to the decision reported in CIT vs. Saurashtra Cement & Chemical Industries Ltd. (1973) 90 ITR 318 (Guj) where the Gujarat High Court had held that a business could be said to be ready to discharge the function for which it was established only after the machinery necessary for that purpose was installed. In that connection, the Court, according to the Departmental Representative, observed that obtaining land on lease, placing orders for machinery and raw materials were merely operations for the setting up of the business. In the light of this decision, there cannot be any doubt that assessee's business was in the process of being set up. Again adverting to the decision reported in CIT vs. Jiwaji Rao Sugar Co. Ltd. (1969) 71 ITR 319 (MP), the Departmental Representative contends, that depreciation should result as a consequence of the machinery being actually used or employed in the earning of income. Our attention in particular is invited to the observations of the Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring to the requirements of the customers and the staff members. It is then contended that the assessee had produced before the AO a special notice received by it under s. 112 of the Karnataka Municipal Corporation Act, 1976, dt. 4th March, 1983, fixing the assessment of the newly constructed building of the hotel. Usual remission has been allowed in respect of the property tax upto 23rd Feb., 1983 only being the initial setting-up stage. It is then submitted that on 21st March, 1983 the management performed a Pooja and in support of it several documents including the travelling bills of the two Pandits were produced before the AO. A copy of the hierarchy chart which would go to indicate that assessee had sufficient men-power in the month of March was also made available to the AO. When such were the facts, there was absolutely no justification for the AO to reject the contention of the assessee. It was in these circumstances the CIT(A) thought it necessary to intervene. Assessee in this connection relies on several decisions which are as under: (i) 49 ITR 171 (sic); (ii) Whittle Anderson Ltd. vs. CIT (1971) 79 ITR 613 (Bom); (iii) Western India Vegetable Products Ltd. vs. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. The CIT(A) who granted the relief had examined the evidence produced in an objective manner and it was only thereafter the relief was granted. 14. We have heard the parties to the dispute. At the very outset it appears to us that the controversy raised by the parties to the dispute at this stage would be of an academic nature because the assessment relates to the year 1983-84 and even if the depreciation is not to be allowed in that year but in the subsequent year as on today there would be no impact to the Revenue since the assets on which the depreciation was claimed in 1983-84 must have been almost totally depreciated long ago. The cumulative effect can hardly be substantial. Be that as it may, we are of the view that the order passed by the CIT(A) deserves to be upheld. The short question for decision is whether the business was set up, in December, 1988 (sic) as has been claimed by the assessee, or not. The arguments advanced by the Department to demolish assessee's case rest on a slippery ground. It has been submitted by the learned Departmental Representative that there was no advertisement in the paper and that there was no inaugural ceremony to mark the advent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Departmental Representative do in fact, as has been pointed out by the assessee, support the case of the assessee. In the light of the evidence produced before us, we have no hesitation to hold that the business has in fact been set up and we, for that reason, shall uphold the order of the CIT(A). 15. That takes us to the appeal for the year 1982-83. The only ground raised herein is that the CIT(A) erred in holding that the amount of Rs. 3,45,000 was part of Rs. 10,60,000 and further that is was allowable as revenue expenditure in the asst. yr. 1982-83. 16. The facts have been set out by the CIT(A) in para 3 of his order. In brief, assessee had initially claimed a deduction of Rs. 7,15,000 as development expenses. Before the assessment was finalised this claim was revised to Rs. 10,60,000. The AO did not allow any part of this expenditure and the assessee filed an appeal before the CIT(A). The CIT(A) has dealt with the claim of the assessee in his order. He has stated therein that the grievance related to the non-allowance of a deduction of Rs. 10,60,000. After considering the merits of the case, the CIT(A) allowed the claim of the assessee. However, while giving effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not used by these two employees for personal purposes. It is in these circumstances that the CIT(A) directed that the perquisite value of the cars may be taken by applying the IT Rule made in this regard. We have no material to dispute his findings. 19. The next cross-objection is against the disallowance of travelling expenses of Shri Dastur, Shri Sampat Kumar, Shri Das and Shri Traver D'Souza of Rs. 55,050 under s. 35B of the Act. There is absolutely no material except a bald statement on behalf of the assessee that tour of persons involved among other things preparation of items of Indian cuisine which would be exposed to the tourist and this in a way would help promotion of exports. We find that there is not much substance in what the assessee contends. As rightly pointed out by the CIT(A) in a short stay there is no scope for exposing the talents of the persons in foreign countries so as to attract customers in India. The foreign tour, to our mind, appears to be a study tour and we for that reason shall uphold the order of the CIT(A). 20. The next cross-objection is against the disallowance of investment allowance of Rs. 47,61,129 under s. 32A of the Act. Parties to the di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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