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2016 (7) TMI 1085 - ITAT BANGALORE

2016 (7) TMI 1085 - ITAT BANGALORE - TMI - Expenses incurred towards Capacity Builder - revenue or capital expenditure - nature of expenditure - Held that:- As per para-7(1) of the agreement, the main responsibility of capacity builder was to provide a handbook to each MSPC containing various information and also to provide information for readymade mixes. Considering these facts, in our considered opinion, whatever benefit is accruing to the assessee from the capacity builder cannot be consider .....

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s appeal directed against the order of the ld. Prl. CIT-II, Belagavi, dated 27-03-2015 passed by him u/s 263 of the IT Act, 1961. 2. The assessee has raised the following grounds; 1. The impugned Order is illegal, improper, unjust & much against all known canons of law. 2. The learned Commissioner of Income Tax has seriously erred in holding that, expenses. incurred towards Capacity Builder is Capital in nature. 3. Presumably, the Commissioner & others have assumed the expenditure incurr .....

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on individual raw materials in a phased manner. Further, as per the terms of the agreement, the Capacity Builder shall supply the blend of processed materials during the initial period of two years in other words, the nature of the Capacity Builder is like a packer and at no stretch of imagination, this process of packer cannot be equated to that of a machinery, plant or building. And consequently, this expenditure cannot be termed as capital in nature. Copy of the impugned Agreement entered in .....

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sions of sec.263: Income Tax Appellate Tribunal, Delhi bench 'G', New Delhi between Satya Prakash Gupta Vs Assessee, vide ITA No.2730/De1/2013 dated 07/03/2014. A copy of the said Order is enclosed for ready reference. 3. This appeal is filed late by assessee and the delay is of 33 days. The assessee has moved an application for condonation of delay alongwith an affidavit of Mrs Mahadevi Kamble, President of the assessee society. It is submitted in the affidavit filed that because of the .....

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agreement which defines the responsibility of M/s Christy Fried Gram Industries to establish 137 MSPCs and the duties of the capacity builder are reproduced. Hence, various paras from page no.5 to 7 of the order of the ld.CIT are reproduced herein below for the sake of ready reference: As per para no. 7(1) of the agreement , the responsibi l i ty of M/s Christy Fried Gram Industries to establish 137 MSPCs and the duties of the Capacity Builder will be: The Capacity builder will provide a handboo .....

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ts in appropriate proportion c) Process and place of purchase of raw-materials. d) Quality checks to recognize good quality rawmaterials to be procured by the MSPC members e) Storage instructions and place of storage. f) Seasonal var iat ions in pr ices of ingredients and how to benef i t by procuring during low price season. g) Personal hygiene to be taken care of by the members while processing energy food. h) Processing norms of each of the ingredients." Under this agreement, in the firs .....

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y Fried Gram Industries is to be paid a consideration at the rate of Re.1 per kg of food supplied for a period of 5years against the supplies made by the respective MSPCs to ICDS projects as stated in the Agreement. 4. Accordingly, the assessee and MSPC, has debited ₹ 10,84,967/- during the A.Y. 2010-11 which is the first year of Capacity Building as per the agreement with M/s Christy Fried Grain Industries. M/s Christy Fried Gram Industries has provided capacity building services as liste .....

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yment to M/s Christy Fried Gram Industries are of the nature of expenses that have been laid out to bring into existence the MSPC as an independent viable unit capable of producing the energy food. The payment is made to M/s Christy - Fried Gram Industries brings an advantage of an enduring benefit to the assessee MSPC as the technical knowledge, to prepare energy food, training on how to handle machinery, training on the entire manufacturing process, in short how to produce the energy food and .....

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