TMI Blog2002 (8) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in deleting addition amounting to Rs. 28,117 disregarding the fact that the object of expenditure incurred on account of stamp duty related to acquisition of asset and is assessable under capital head". 3. The assessee-company is a trader in footwear and leather products like shoes, hand-bags, etc. The assessee-company has various sales outlets throughout the country. It markets its shoes and other leather items at a selling price which includes a gross profit of 35 per cent. The sales outlets belong to different parties who are not connected with the assessee. These sales outlets are known as franchise shops, which get a commission of 20.5 per cent on the sales effected by them. If the shop owners make their own arrangements for their franchise shops, furniture and fixture, only then they are entitled for 20.5 per cent sales commission. If the assessee, i.e. , Metro Shoes P. Ltd., invests in franchise shops, with furniture and fixture, the franchise shop owners are entitled for a commission of 17.5 per cent. This percentage varies in different shops. For example, in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 TTJ (Ahd.) 259 (I.T.A. No. 3385/Ahd. of 1987) has held that the expenditure on the production of advertisement film is a revenue expenditure." 6. The learned Assessing Officer vide the assessment order held : Normally, the expenditure incurred on advertisement is of revenue nature and is allowable if it does not fall within any specific statutory provision. But if a capital asset is purchased which is employed for advertisement purpose, it is a capital expenditure. In CIT v. Patel International Film Ltd. [1976] 102 ITR 219 (Bom.), the assessee, a movie processing and printing concern, purchased a film which was processed in its own laboratory and used it to serve as a model for exhibition by way of advertisement. It was held that the expenditure was of capital nature. Under the circumstances, the expenditure of Rs. 2,80,000 incurred for production of tele film is considered as a capital expenditure and not allowed as a revenue expenditure. The depreciation as per the rate applicable is allowed. 7. It is this addition which forms the basis of the first ground of appeal. 8. In the appeal before the Commissioner of Income-tax (Appeals), the assessee alleged, int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y making up the film, no new asset of durable nature or rights has been created. In the present world, fashion changes rapidly. So, any advertisement, may it be by any mode, including by way of an advertisement film, such advertisement loses value quickly at the most within 6 to 9 months of its release. It has thus been averred that the cost of production of the advertisement film of the assessee should not be capitalised. 13. An alternative argument has also been raised by the assessee to the effect that even under section 37(3) of the Income-tax Act, this expense deserves complete deduction. 14. Distinguishing the judgment of the Bombay High Court in the case of Patel International Film Ltd. ( supra ), it has been stated that the facts of that case were entirely different from those attending here. There, it was a case of full length feature film processing, the purchase of a capital asset was involved. Contrary, the assessee here is not in the business of advertisement. So, it has been insisted that reliance on the said judgment has wrongly been placed by the Assessing Officer to the detriment of the assessee. 15. The assessee has, then, placed reliance on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the bills after certain dates. Stamp duty amounting to Rs. 28,117 was affixed on these bills of exchange. The assessee s lease agreement could not come through and, therefore, the bills of exchange became redundant. The assessee-company tried to recover the money of the stamp duty from the stamp duty authority during the period 1987 to March 1991. But, ultimately, the company received a final reply from the Stamp Authorities in March 1991, stating that the stamp duty paid amounting to Rs. 28,117 cannot be refunded. Therefore, the assessee claimed this expenditure in the profit and loss account for the assessment year 1991-92. The Assessing Officer held that this expenditure is not an allowable business expenditure. Since the stamp duty is incurred in connection with the acquisition of a capital asset that the stamp duty formed a part of the capital expenditure and hence it cannot allowed as a revenue expenditure; and that also once the assessee incurred the amount of Rs. 28,117 in February, 1987, which falls in the assessment year 1987-88; the assessee should have claimed this expenditure in that year. Thus, this stamp duty of Rs. 28,117 was dis-allowed and added back to the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable under these provisions irrespective of the object with which the loan was obtained [ Orissa Cement Ltd. v. CIT [1969] 73 ITR 14 , 19 (Delhi)]. Expenses on overdraft facilities - In India Cements Ltd. v. CIT [1966] 60 ITR 52, the Supreme Court held that the expenditure incurred by the assessee for obtaining a loan from the Industrial Finance Corporation, secured by a charge on its fixed assets was an admissible allowance, because the act of borrowing the money was incidental to the carrying on of business and that it was irrelevant to consider the object with which the loan was obtained. In Jeewanlal [1929] Ltd. v. CIT [1969] 74 ITR 753 , the Supreme Court applied those principles to hold that the expenditure incurred to secure overdraft facilities with bank for the purpose of the assessee s business was of a revenue nature and allowable under these provisions irrespective of the period for which it was granted or the terms whereon it was obtained. [also see Ishwari Khetan Sugar Mills P. Ltd. v. CIT [1967] 63 ITR 376 (All.); Orissa Cement Ltd. v. CIT [1969] 73 ITR 14 (Delhi)]." 20. The learned Commissioner of Income-tax (Appeals) deleted the additi ..... 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