TMI Blog2016 (7) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... and interest expenses are concerned, it can only be allowed to the extent it has nexus to the unit claiming the deduction. The grievance of the revenue before us is that the aforesaid decision would have no application to the present facts as it is distinguishable. However, besides stating the above nothing has been pointed out in support of its submission that the Zandu Pharmaceuticals Works Ltd. (supra) has no application. In the above view, as the impugned order of the Tribunal has followed the binding decision of this Court, no substantial question of law. Expenditure termination of a contract - Held that:- The view taken by the Tribunal on facts before it that the expenditure was incurred on account of the commercial expediency and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial question of law. Appeal admitted on question no.6. - Whether on facts and in circumstances of the case and in law the Tribunal was justified in directing to delete the disallowance of expenditure under Section 40(a)(ia) r.w.s. 194C(2) made by the Assessing Officer on account of short deduction of tax ? - INCOME TAX APPEAL NO.1873 OF 2013 - - - Dated:- 26-7-2016 - M. S. SANKLECHA AND A.K. MENON , JJ. For The Appellant : Mr. Arvind Pinto For The Respondent : Mr. Nishant Thakkar with Mr. Rajesh Poojary i/b Mulla Mulla and CBC P.C. : 1. This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 10th December, 2012 passed by the Income Tax Appellate Tribunal (the Tribunal). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on facts and in circumstances of the case the Tribunal was right in holding that expenses in respect of payment made by assessee of ₹ 4.6 crores made to the suppliers (Maxson Nutritional Food (P) Ltd. (MNFPL) in terms of termination of a contract, were revenue in nature ? 5. Whether on facts and in circumstances of the case and in law the Tribunal was right in holding that expenses of 4.50 Cr. paid to Prima Health Care Products and ₹ 0.25 Cr.paid to MUL Dentpro Pvt. Ltd. in respect of payment made by assessee in terms of termination of a contract, were revenue in nature ? 6. Whether on facts and in circumstances of the case and in law the Tribunal was justified in directing to delete the disallowance of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law arises. Thus not entertained. 4. Regarding question No.2 and 3 : (a) We find that the impugned order of the Tribunal allowed the respondent assessee's appeal before it by following a decision of this Court in Zandu Pharmaceuticals Works Ltd. V. CIT 350 ITR 366. The Tribunal while following the principle in this Court's order in Zandu Pharmaceuticals Works Ltd. (supra) held that so far as research and interest expenses are concerned, it can only be allowed to the extent it has nexus to the unit claiming the deduction. The grievance of the revenue before us is that the aforesaid decision would have no application to the present facts as it is distinguishable. However, besides stating the above nothing has been point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Revenue field. (iv) The principles which emerge from the reading of above decisions are :- (a) the test of the advantage of enduring benefit is not the sole criteria to decide whether an expenditure is capital or revenue. This test would break down if expenditure is in the revenue field incurred for running the business effectively or removing an obstruction/disadvantage in the revenue field; and (b) a lump sum payment to get rid of annual revenue expenditure, would also be on revenue account. (v) On application of the above principles, the Tribunal holds that lumpsum payment made to terminate a contract would be in the revenue account as it results in removal of disability/obstruction in running the business. Besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment Year 1997-98 upto Assessment Year 2001-02 could be allowed to be set off, if it was still unabsorbed on 1st April, 2001. The above decision also placed upon the CBDT circular No.14 of 2001 dated 22nd November, 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of Section 32(2) of the Act as amended by the Finance Act of 2001. Moreover, the Circular No.14 of 2001 issued by the CBDT clarifies that restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with. Consequently, unabsorbed depreciation for the intervening periods between assessment 1997-98 upto 2001-02, if available in the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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