TMI Blog2005 (6) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... owed a sum of ₹ 1,46,980 claimed by the assessee to have been incurred for the issue of ISO-9002 certificate, as according to the Assessing Officer, this amount was in the nature of capital expenditure. On appeal, the Id. CIT(A) relying on the decision of Apex Court in the case of CIT v. Madras Auto Services (P.) Ltd. [1998] 233 ITR 468, deleted the impugned addition made by the Assessing Officer holding that this amount has been incurred by the assessee for the purposes of facilitating the business of the assessee thereby making it more efficient and profitable business because procurement of such certificate not only ensured certified level of the quality of the product but also boosted the sales of the assessee. 3. At the outset of the appellate proceedings before us, the ld. A.R. for the assessee referring to the decision of ITAT, Chandigarh Bench in assessee s own case in I.T.A. No. 890/Chandi/2000 for assessment year 1997-98, dated 11-10-2004, submitted that identical issue on identical facts as involved in the instant case of the assessee also came up for consideration before the Tribunal and the Tribunal decided this issue against the revenue and in favour of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent entity and the expenses constituted preoperative expenses and were in no way linked with the existing business of the assessee and so disallowing the expenditure claimed by the assessee he made the impugned addition of ₹ 4,50,000 to the total income of the assessee. 7. Aggrieved with the order of the Assessing Officer, the assessee filed an appeal before the CIT(A) and reiterated the submissions before Assessing Officer. It was further contended that in order to ensure the regular supply of electricity for the smooth and uninterrupted production of the assessee-company, it thought of raising a project in partnership with other reputed concerns of Ludhiana to produce the electricity and its supply to all the collaborators in that project to overcome the power shortage. Had the project been a success the profits of the assessee-company would have been increased to a great extent because of the regular supply of power free from fluctuations since the expenses had been incurred by the company on the new project in the interest of the business exclusively for the business needs, the same should have been allowed by the Assessing Officer as permissible under law. The additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into existence and so this was an expenditure incurred by the assessee for running of its business and so the assessee was entitled to deduction of the same and the CIT(A) has rightly allowed deduction claimed by the assessee. He has also placed reliance on the following decisions:- (i) Hindustan Times Ltd. v. CIT [1980] 122 ITR 977 Where, their Lordships held, that the assessee s business had been in existence for quite some time and it was obtaining direct current electricity, and the expenditure was incurred only to change the nature of the supply of electricity from direct current to alternating current. The expenditure could not be said to be laid out either to acquire an asset or to acquire any advantage of an enduring nature. The expenditure did not constitute capital expenditure but was allowable as business expenditure in computing the assessee s profits. (ii) Bikaner Gypsums Ltd. v. CIT [1991] 187 ITR 39 (SC) Where their Lordships held, reversing the decision of the High Court, that the amount was spent on the removal of a restriction which obstructed the carrying on of the business of mining within a particular area in respect of which the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this expenditure incurred by the assessee was linked to the existing business of the assessee-company or that by incurring this expenditure, the assessee would have benefited in the existing business. On the contrary, we find that from pages 13 and 17 of the paper book, it is evident that the assessee wanted to launch a new project and so, for that new project, the assessee incurred the impugned expenditure of ₹ 4,50,000 under the head new project expenses . This means that in fact the assessee-company has incurred this expenditure in M/s. Ludhiana Industrial Power Ltd. to meet the uninterrupted power requirement for this new project of the assessee. Further, that in the beginning the assessee has incurred this expenditure to meet the uninterrupted power supply for its new industrial project but when this new project was abandoned by M/s. Ludhiana Industrial Power Ltd. for generating 65 MP Captive Power Plant, the assessee in order to obtain the deduction for this expenditure in the existing company took a plea that its existing business unit was going to benefit from the uninterrupted power supply and the assessee was entitled to deduction as a revenue expenditure, is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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