TMI Blog2002 (11) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ous products of HP inIndia. In order to ensure its monopoly status and eliminate any competition in its business, the assessee company entered into an agreement with M/s. BSL on7-8-1989. The assessee has filed a copy of the said agreement during the course of hearing before us. The relevant extract from the said agreement are reproduced hereunder : " Whereas : 1. Blue Star is engaged in the selling, distribution and marketing of various products which inter alia include Test and Measurement product range. 2. HP India is also engaged/proposing to engage in the manufacture, selling and distribution of some products similar to those dealt with by Blue Star. 3. The parties desire to avoid competition with each other by limiting Blue Star from entering into any new business activities in respect of products directly competitive with the Test and Measurement (T M) product range manufactured or distributed by HP India, (such competitive products hereinafter called "said products") as of 1st November, 1989 (hereinafter referred to as the "Effective Date") on mutually agreed terms and conditions. 4. At the request of HP India, Blue Star has released its employees solely engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gujarat High Court in the case of Gujarat Mineral Development Corpn. Ltd. v. CIT [1983] 143 ITR 822. 3. In appeal, the Ld. CIT(A) endorsed the reasoning and conclusion of the Assessing Officer and held that payments made to M/s. BSL for the purpose of eliminating competition over a period of two years resulted in the benefit of enduring nature to the assessee and represented capital expenditure. 4. The assessee is aggrieved and hence the appeal. Shri C.S. Aggarwal, Advocate assailed the impugned order of Ld. CIT(A) on the issue and submitted brief synopsis of judicial authorities in support of his contention that the payments made to the competitor in the same line of business cannot be treated as capital expenditure and constitutes deductible business expenditure under section 37(1) of the I.T. Act. The array of rulings cited by the Ld. counsel are as under : (a) Coal Shipments (P.) Ltd.'s case (b) Followed in, (i) Devidas Vithaldas Co. v. CIT [1972] 84 ITR 277 (SC) (ii) Gujarat Mineral Development Corpn's case (iii) Coramandel Fertilizers Ltd v. CIT [1984] 148 ITR 546 (AP) (c) Imperial Chemical Industries (India) Ltd., In re [1935] 3 ITR 21 (Cal.). (d) R.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts have applied in different cases different tests. Nonetheless, it is recognized that none of them by itself is recognized and the determination, one way or the other has to be made on the facts and circumstances of each case. 7. One of the tests so applied is whether the expenditure in question was for bringing into existence an asset or an advantage of "an enduring nature" and is made once and for all meaning thereby an expenditure made once for all for procuring and enduring benefit. The expressions "during benefit" and "rights of a permanent nature" are only descriptive and not definitive and are related in meaning not synonymous with perpetual or everlasting. In Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd. [1965] 58 ITR 241 (PC), the assessee company, together with two other companies, namely, Bancroft and Rhokana Corporation formed a group carrying on the business of copper mines, each company being independent of the others but with overlapping directorates. There was a common sales department for handling the disposal of their output, the copper itself not being sold as the specific product of anyone of the three mines. Following steepfall in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said products. We find substance in the contention of the Ld. DR that even though the period of two years is mentioned in the agreement, the predominant intention and purpose, as discernible from the stipulations in the agreement, as reproduced hereinbefore, clearly indicate that the assessee company has obtained the monopoly rights on a permanent basis and M/s. BSL went out of its business of dealing in test and measurement products of HP. During the course of hearing, a specific query was raised by the bench as to whether M/s. BSL continued to operate any distribution agreement with HP, a foreign company for marketing its products in India after the period of two years of its agreement with HP India but the learned counsel expressed his inability to furnish any information. 9. In CIT v. Kalinga Otto (P.) Ltd. [1983] 139 ITR 710 (Cal.) cited before us, the High Court after a detailed review of the entire gamut of judicial authorities on the issue observed, "Expenditure incurred for bringing into existence as asset or advantage of enduring benefit would be of a capital nature. However, the expression "enduring or abiding benefit" is not a static expression. An asset or advanta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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