TMI Blog2006 (4) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal originally filed before the Tribunal. This should not be an impediment to admitting the same as held by the Hon'ble Delhi High Court in Orissa Cement Ltd. vs. CIT (2001) 169 CTR (Del) 545 : (2001) 250 ITR 856 (Del). All the facts relating to the ground are already on record and no investigation is required. Further, the assessee has been allowed depreciation in respect of the amount spent by it as tooling advance. The relevant facts have been brought out in para 9 of the assessment order. Depreciation @ 25 per cent of the amount, which comes to Rs. 3,71,971 has been allowed. This ground has been raised by the assessee in the appeals in respect of some other years and, therefore, it appears to be only an inadvertent omission. In these circumstances, the ground is admitted for adjudication, as pronounced in the Court after hearing both the sides. 3. Coming to the merits of the claim, the brief facts are that the during the period under consideration as amount of Rs. 14,87,885 has been charged to the P L a/c as advance or development cost of tools under the head "Stores consumed" in Sch. IX to the balance sheet. The AO relying on the assessment proceedings for the asst. yr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on revenue account, even though the advantage may endure for an indefinite future. The test of enduring advantage is not a certain or conclusive test and should not be blindly or mechanically applied. In the case of Lakshmiji Sugar Mills Co. (P) Ltd. vs. CIT (1971) 82 ITR 376 (SC), certain amounts were contributed by the assessee in the construction and development of roads between sugar producing areas and the sugar factories of the assessee. The expenditure was incurred on roads which originally were the property of the Government and remained so even after the assessee incurred the expenditure. In these circumstances, it was held that the expenditure was incurred for the purpose of facilitating running of the motor vehicles and other means employed for transportation of sugarcane to the assessee's factory and hence revenue expenditure. A similar view was taken by the Supreme Court in L.H. Sugar Factory Oil Mills (P) Ltd. vs. CIT (1980) 19 CTR (SC) 185 : (1980) 125 ITR 293 (SC). There are also cases where expenditure incurred even on construction of building has been held to be revenue expenditure and a case of this type is reported CIT vs. Madras Auto Service (P) Ltd., Etc. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, we find that the moulds and dies are to remain the property of the vendors and not of the assessee. Thus, the assessee did not obtain any asset or advantage of enduring nature. By providing the moulds and dies to the vendors, the assessee is assured of the supply of components suitable to its requirement and on a continuous basis. Further, since the components are manufactured inside India, they were naturally cheaper than the imported components. This advantage was in the revenue field and it helped the assessee to run its business more efficiently and profitably. We, therefore, hold that the amount of Rs. 14,87,855 is allowable as revenue expenditure. The additional ground is thus allowed. 6. Turning to the first ground in the memorandum of appeal, it relates to the disallowance made under r. 6B of the Act. The first is an amount of Rs. 16,950 representing the gift made by the assessee through its marketing manager. Since the gifted article did not carry any logo of the assessee, it cannot be treated as advertisement expenditure under r. 6B. Respectfully following the judgment of the Delhi High Court in the case of CIT vs. Inman Aluminium Cables Ltd. (1989) 78 CT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts should be used during the course of providing after-sales services. It was contended that the after-sales service formed an integral part of the manufacturing activity. The contention was that the entire activity relating to procurement and sale and use of such spare parts cannot be segregated from the primary activity of manufacture. This contention was accepted by the CIT(A). However, with regard to the profits from the sale of gensets are concerned, the CIT(A) did not accept the assessee's claim that these profits were also derived from the industrial undertaking. He agreed with the assessee that there may be valid reasons to keep the stock of imported gensets and such activity would be commercially justifiable, but held that it cannot be said that the profits from sale of imported gensets can be stated to be derived from the industrial undertaking. He found no nexus of the activity with the industrial undertaking. He, therefore, rejected the assessee's claim. 11. While the assessee is in appeal before the Tribunal to claim the deduction in respect of the profits from the sale of imported gensets, the Department is in appeal to contest the decision of the CIT(A) allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spare parts, but was stated to carry only the critical stock which means that whatever was the minimum requirement was being carried. These spare parts are no doubt useful for the users of the gensets purchased from the assessee and it may also be true that they cannot buy the spare parts from any other manufacturer or dealer of gensets. Nevertheless, this is an activity which is carried on by the assessee more as a service and not as an industrial activity and the immediate source for the profits is the separate activity of after-sales service undertaken by the assessee. It may be true that the purchaser cannot obtain the spare parts from other person except the assessee, but so far as the assessee is concerned what is required to be seen is whether the immediate source for the profits is the industrial undertaking as held by the Supreme Court in the case of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) and Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99 : (2003) 262 ITR 278 (SC). The Tribunal's order in the case of Rollatainers Ltd. vs. Dy. CIT (2000) 69 TTJ (Del) 8 cited on behalf of the assessee covers the profits on the sale of raw material. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by considering the subsequent fluctuations in the rate of exchange and for this purpose, he placed reliance on the judgment of the Gujarat High Court in the case of CIT vs. Windsor Foods Ltd. (1998) 146 CTR (Guj) 207 : (1999) 235 ITR 249 (Guj). 15. The assessee is in further appeal. We cannot straightaway say that the judgment of the Division Bench of the Gujarat High Court cited above has been overruled by a Full Bench judgment of the Gujarat High Court in CIT vs. Gujarat State Fertilizer Co. Ltd. (2003) 179 CTR (Guj)(FB) 266 : (2003) 259 ITR 526 (Guj)(FB). In this judgment, it was held that once s. 43(1) comes into play and the increase in the liability is taken as the actual cost of the asset within the meaning of s. 43(1), the effect is that the adjusted actual cost has to be taken for all purposes except development rebate and all allowances including investment allowance have to be allowed on the basis of the adjusted cost. In case, the adjusted cost represents an increase over the actual cost, the investment allowance is allowable on the enhanced adjusted cost. 16. In the case of Hero Honda Motors Ltd., Delhi Bench of the Tribunal by order dt. 29th June, 2005 in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the factory premises. The assessee has been consistently following the method of valuing closing stock of uncleared goods lying in factory without including excise duty payable thereon at the time of removal of such goods. This was being accepted by the Department in the assessment, but for the first time for the year under appeal, the method of valuation was disturbed and an addition was made. The CIT(A) held that excise duty is payable only on removal of the goods from the factory premises and, therefore, the view of the AO that the finished goods lying in the factory premises and, therefore, the view of the AO that the finished goods lying in the factory even though not cleared, have to be valued by including the excise duty components was not correct. He, therefore, directed the AO to exclude the same from the value of closing stock. 20. The Department is in appeal and we have considered the facts and the rival contentions. There is no dispute that the method of valuation of stock adopted by the assessee consistently over a period of years has been accepted by the IT authorities. In that case; there is no justification for disturbing the method for the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1(v) is that the CIT(A) erred in allowing Rs. 17,87,797 being increased claim of depreciation due to foreign exchange fluctuation. The AO had reduced the depreciation allowance by the aforesaid amount claimed by the assessee on account of loss on foreign exchange fluctuations on restatement of the liability at the end of the year. According to the AO, this was only a notional loss. In the appellate order for the asst. yr. 1991-92, the CIT(A) had deleted the disallowance of the loss. Consequently, the CIT(A) in the impugned order has deleted the disallowance of the depreciation on the amount of the loss. The order of the CIT(A) for the asst. yr. 1991-92 was confirmed by the Tribunal. The Tribunal having confirmed that the increase in the liability on account of foreign exchange fluctuation formed part of the cost of the asset, depreciation is consequently allowable on the enhanced cost. We, therefore, confirm the decision of the CIT(A) and dismiss the ground. We may also note that s. 43A was amended by the Finance Act, 2002 w.e.f. 1st April, 2003. The new section provides that adjustment in respect of fluctuation of foreign exchange shall be allowed only in the year of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were filed highlighting the services rendered by Siel. Attention of the CIT(A) was drawn to the assessee's letter dt. 12th March, 1998 and the notes filed before the AO in which the nature of the services rendered by Siel was explained in full. In short, it was pointed out that Siel had qualified and experienced professionals in various departments in its corporate office to provide assistance and consultancy services in various areas and that is the reason why the assessee approached Siel. Attention of the CIT(A) was also drawn to the documentary evidence compiled in pp. 76-136 of the paper book and to several notes and written explanations compiled in the paper book. 27. The CIT(A) noted the submission and quoted elaborately from the assessee's paper book to show the nature of services rendered by Siel. This is in para 10.2 of his order and the same is not reproduced here for the sake of brevity. After quoting from the assessee's submissions, the CIT(A) felt that the AO had not tackled the issue in a comprehensive manner. The written submissions sent to the AO by the CIT(A) for comments were not also commented upon by him. The CIT(A) further held that had the assessee built i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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