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TMI Blog2013 (12) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. CIT(A) erred in law and facts in upholding disallowance of Rs. 42,63,150/out of consultancy charges and Rs. 10,00,111/- out of traveling expenses on the ground that expenses are of capital in nature. The reasons given by him for doing so are wrong, contrary to the facts of the case, against the provisions of law and contradictory. 2. The Ld. CIT(A) erred in law and facts in upholding expenses incurred after setting up the business and for developing existing business of the assessee as capital in nature on wrong appreciation of facts. The disallowance of Rs. 52,63,261/- is required to be deleted." 2. Facts in brief:- The assessee company is mainly engaged in the business of trading in telecom and security equipment and providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Company in identifying the prospective customers I clients for the Fleet management operations and has added customers like WIPRO, GE Capital, Delloite, Convergys etc. I-fe has developed the vendors for various products of the Product & Security segment. He has also been instrumental in providing support & training to the sales team along with the Business heads. xxxxxxx xxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxx In the present case, the assessee has hired the services of Stephen Cas in order to boost the business of the company. Services of the ocnsultant has helped the assessee to generate business and also provided assistance in identifying vendors for sourcing of security products." In the said submission itself, the assessee has rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court in s Delhi Safe Deposit Co. Ltd. (supra) cannot be relied upon and was distinguished on facts and also on the ratio laid down by the Hon'ble Supreme Court. It was further submitted that the assessee was mainly engaged in the service industries and the fixed assets was only to the tune of Rs. 29.34 lakhs which for basic assets only and was not having any plant and machinery for the purpose of manufacturing industries as held by the Assessing Officer. Hence, capitalization of expenditure to the tune of Rs. 52.63 lakhs to the fixed assets of Rs. 29.33 lakhs is not possible. Thus, the Assessing Officer has completely misunderstood the facts. It was further contended that the assessee has incurred the said expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods. He held that consultancy fees paid to Mr. Stephen H. Cass, is for the purpose of new line of business which has not yet commenced. He held that such a consulting fee can neither be capitalized nor allowed as revenue expenditure. It is clear cut case of capital expenditure not allowable under section 37(1). In support of his conclusion, he has strongly relied and referred to the decision of Andhra Pradesh High Court in Vazir Sultan Tobacco Co. Ltd. v. CIT 175 ITR 55 and the decision of Gujarat High Cuort in CIT v. Shri Digvijay Cement Co. Ltd., 159 ITR 253. 6. We have heard the rival contention, perused the relevant findings of the Assessing Officer and the learned Commissioner (Appeals) as well as the material available on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lutions. For the purpose of this service industry, the assessee has entered into a consultancy agreement. It is not a case of the department that there is no continuity of business with common management and fund. If there is continuity of business with common management and fund, then even if the assessee has started a new line of business in this year, the payment made for carrying out such running of new business, is nothing but a business expenditure which has to be allowed in the year in which it has been incurred. The expenditure incurred in the form of consultancy charges though may be for enduring benefit of service industry started by the assessee, however, falls in revenue field and cannot be held to be capital in nature. For deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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