TMI Blog2008 (10) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before Supreme Court of India and appeals against the judgment rendered in both the tax appeals and order made in both the civil applications were admitted by Supreme Court. Vide judgment rendered on 8-2-2008 ( Deputy CIT v. Core Health Care Ltd [2008] 298 ITR 194 (SC)), the apex court dismissed civil appeals of Revenue against judgment rendered in the two tax appeals. However, in relation to the two civil applications and the order made therein, this is what has been observed by the apex court (page 202): "Apart from the above question under section 36(1)(iii), the present civil appeals are filed by the Department against the decision of the High Court whereby the High Court has dismissed Civil Applications Nos.53 and 54 of 2001 filed by the Department. It may be noted that during the pendency of Tax Appeals Nos.449 and 450 of 2000, the Department had moved the above two civil applications for amendment of its memorandum of appeal raising substantial questions of law, namely:- (a) whether advertisement expenses incurred by the assessee to create a brand image with enduring benefit are allowable as revenue expenditure; (b) whether the Tribunal had erred in granting d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried the matter further in appeal before Tribunal and succeeded. The Tribunal has held that allowability or otherwise of the expenditure had to be tested as per the requirements of provisions of Section 37(1) of the Income Tax Act, 1961 ("the Act"), that the expenditure in question was not of personal nature and the only test which was then required to be applied was whether the expenditure was capital in nature. The Tribunal held that making of accounting entries in the books of account was not determinative of the character and/or nature of the claim. That the expenditure in question did not bring into existence any tangible asset and merely because the expenditure may bring some benefit of an enduring nature to the assessee, that factor alone was not sufficient to treat the expenditure as capital expenditure. The Tribunal has relied on the two Apex Court decisions in the case of Empire Jute Co. Ltd. v. Commissioner of Income-Tax, (1980) 124 ITR 1 and Alembic Chemical Works Co. Ltd. v. Commissioner of Income-tax, Gujarat, (1989) 177 ITR 377. 6. Learned counsel appearing for the Revenue has submitted that once the Assessing Officer and Commissioner (Appeals) had conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of respondent-assessee it was pointed out that both Commissioner (Appeals) and Tribunal had correctly read the provisions and the order on this count made by the Tribunal was not required to be disturbed. 11. In relation to question No.3, the Assessing Officer was of the view that while computing relief under Sections 80HH and 80-I of the Act, amount of Rs.26,64,113, being miscellaneous income on sale of containers, had to be excluded as being ineligible for deduction under the said provisions, as the same was not derived from the industrial undertaking. The Commissioner (Appeals) has not agreed with the Assessing Officer and in second appeal Tribunal has confirmed the order made by Commissioner (Appeals). Both the appellate authorities have held that the containers were acquired as part of purchases of raw materials which were used for the purpose of business of industrial undertaking and, therefore, income generated from sale of containers necessarily had to be treated as income from industrial undertaking in view of the decision of Supreme Court in the case of Cambay Electric supply Industrial Co. Ltd. v. C.I.T., [1978] 113 ITR 84. 12. On behalf of appellant-Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng business. In the case before Allahabad High Court in Hindustan Commercial Bank Ltd., In re (1952) 21 ITR 353, the expenditure on advertisement had been incurred at the point of time when new branches of the Bank had to be opened and inaugurated. It has been held by Allahabad High Court that there is no proposition that the amount spent in a special campaign of advertisement must necessarily be capital expenditure. 15. The Apex Court decisions on which reliance has been placed by the Tribunal, namely, Empire Jute Co. Ltd. (1980) 124 ITR 1(SC) and Alembic Chemical Works Co. Ltd. (1989) 177 ITR 377 (SC) specifically lay down that the nature of advantage has to be considered in a commercial sense and the test of enduring benefit is not a certain or conclusive test and cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. The expression asset or advantage of an enduring nature has been evolved to emphasise the element of a sufficient degree of durability appropriate to the context. The idea of once for all payment and enduring benefit are not to be treated as something akin to statutory conditions. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r financial institution which is for the time being approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36 or any banking institution (not being a financial institution referred to above), or (ii) any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase outside India of capital plant and machinery, where the terms under which such moneys are borrowed or the debt is incurred provide for the repayment thereof during a period of not less than seven years." 19. Under the Explanation, clause (a) defines cost of project, clause (b) defines capital employed in the business of the company, and clause (c) defines long-term borrowings. In case of the assessee the factor of cost of project is not relevant and only capital employed in the business of the company is required to be considered, that also as defined in sub-clause (ii) of clause (b) of the Explanation which talks of aggregate of issued share capital, debentures and long-term borrowings as on the last day of the previous year. Long-term borrowings means under sub-clause (i) of clause (c) of the Explanation any money borrowed by the company from Go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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