TMI Blog2004 (8) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, Allahabad, has referred the following questions of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion to this court: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the expenditure incurred by the assessee before the commencement of the actual production was allowable as a revenue expenditure and not as a capital expenditure?" Briefly stated, the facts giving rise to the present reference are as follows: The reference relates to the assessment year 1977-78. The relevant previous year ended on March 31, 1977. For the assessment year in question, the respondent filed its return of income declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. However, he remanded the matter for recomputation of loss. The Tribunal has upheld the order passed by the Commissioner of Income-tax (Appeals). We have heard Sri A.N. Mahajan, learned counsel for the Revenue. Nobody has appeared on behalf of the respondent. Sri Mahajan, learned counsel, submitted that admittedly the respondent had not commenced its production during the previous year relevant to the assessment year in question as it had commenced the production only on November 4, 1978, which fell in the assessment year 1979-80 and, therefore, in the absence of any business, the expenses could not be claimed as a deduction. He referred to the express provision of section 37 of the Act. It is not in dispute that the respondent had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely for the purposes of the business or profession; (iii) it should have been expended in the previous year." It has held as follows: "What in effect was done by the appellant in allotting equity shares of Rs. 2,80,000 to Eimco, was to reimburse the contribution of Eimco by way of know-how, which can never be treated as expenditure, much less an expenditure laid out wholly and exclusively for purposes of the business of the appellant. It is not a case where after the incorporation, the appellant company in the course of carrying on its business, spent the said amount for acquiring any asset." The aforesaid decision has subsequently been followed by the Delhi High Court in the case of CIT v. Reinz Talbros Pvt. Ltd. [2001] 252 ITR 63 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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