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TMI Blog2009 (1) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that while payments made to M/s. Coopers and Lybrands for a study and report on reorganization of core business of assessee company and improving its market share and profitability resulted in a benefit derived by the assessee for a number of years, the same was not in the nature of capital expenditure? (ii) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that payments made to M/s. Coopers and Lybrands, were revenue in nature even though a new line of business (scooter) was being set up and scope of study and advice by consultants, spread over three financial years, was not only for existing business? (iii) Whether on the facts and in law, the Income Tax Appellate Tribunal erred in not taking note of provisions of Sections 35 (D)(1)(ii) and 35(D) (2)(a)(iii) while treating payment of Rs.1,62,93,000 made to M/s. Coopers and Lybrands as revenue expenditure?" 2. Before delving upon the issue involved, it would be pertinent to mention that the respondent - assessee filed a return of its income on 30.11.1998, depicting losses to the tune of Rs.10,36,61,189. In the assessment order passed on 28.3.2001, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esident in India, incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2)- (i) before the commencement of his business, or (ii) after the commencement of his business, in connection with the extension of his industrial undertaking or in connection with his setting up a new industrial unit, the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount equal to one- tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial unit commences production or operation: Provided that where an assessee incurs after the 31st day of March, 1998, any expenditure specified in sub-section (2), the provisions of this sub-section shall have effect as if for the words "an amount equal to one-tenth of such expenditure for each of the ten successive previous years", the words "an amount equal to one-fifth of such expenditure for each of the five successive previous years" had been substituted. (2) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) in a case referred to in clause (i) of sub- section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences; (ii) in a case referred to in clause (ii) of sub- section (1), the actual cost of the fixed assets, being land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the extension of the industrial undertaking is completed or, as the case may be, the new industrial unit commences production or operation, in so far as such fixed assets have been acquired or developed in connection with the extension of the industrial undertaking or the setting up of the new industrial unit of the assessee; (b) "capital employed in the business of the company" means- (i) in a case referred to in clause (i) of sub-section (1), the aggrega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g company for the previous year in which the amalgamation takes place; and (ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the amalgamation had not taken place. 5(A) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (i) is transferred, before the expiry of the period specified in sub-section (i), to another company under a scheme of demerger:- (i) no deduction shall be admissible under sub-section (i) in the case of demerged company for the previous year in which the demerger takes place, and (ii) the provisions of this section shall as far as may be, applied to the resulting company, as they would have applied to the demerged company, if the demerger had not taken place. (6) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure specified in sub-section (2), the expenditure in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year." 7. Based on sub-section (2)(a)(iii) extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his letter, a proposal was made on 4.9.1996 which has not been filed by the assessee. As per this letter the time scales for the individual parts of the assignments are as under: Assignment start 1.10.1996 Strategy document rendered by 25.11.1996 Agreement on strategy by 30.11.1996 Business plan complete by 31.01.1997 Implementation plan complete by 15.04.1997" 9. On the basis of the aforesaid contention, it is the submission of the learned counsel for the appellant, that the only material placed by the respondent-assessee before the Assessing Officer, was the letter dated 23.9.1996. It is submitted by the learned counsel, that inspite of the fact that the respondent-assessee only placed reliance on the aforesaid letter dated 23.9.1996, the appellate authorities took into consideration a host of other material. In this behalf, learned counsel invited our attention to material taken into consideration by the appellate authorities by referring to the observations recorded by the Commissioner of Income Tax (Appeals) in his order dated 10.1.2003, highlighting the following material relied upon by the respondent-assessee: "1. The assessee company had approached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax (Appeals) in his order dated 10.1.2003, had not been produced by the respondent-assessee before the Assessing Officer. Thus viewed, we find no merit in the second submission advanced by the learned counsel for the appellant. 11. The last contention advanced by the learned counsel for the appellant was to the effect, that the respondent-assessee is likely to have a long term benefit from the report submitted by M/s. Coopers and Lybrands. It is also the contention of the learned counsel for the appellant, that the Income Tax Appellate Tribunal overlooked the fact, that the scope of study was spread over a span of three years. It was also submitted, that heavy expenses were incurred by the respondent-assessee in engaging M/s. Coopers and Lybrands, for the project under reference. It is, therefore, the vehement contention of the learned counsel for the appellant, that the expenses incurred by the respondent-assessee should be treated as a capital expense and not as a revenue expense. 12. We have considered the last submission advanced by the learned counsel for the appellant, in the background of the conclusions drawn in the impugned order dated 23.1.2007 ren ..... X X X X Extracts X X X X X X X X Extracts X X X X
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