TMI Blog2008 (2) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... s in or provides in the course of his business u/s 35B - Mere withdrawal of the court cases and submitting the disputes to arbitration would, in no case, amount to cessation of liability, which is the pre-requisite condition, for applying the provisions of section 41 of the Act. The Tribunal has rightly come to the conclusion that in the absence of cessation of liability section 41 of the Act cannot be made applicable - 82 of 1996 - - - Dated:- 11-2-2008 - D. A. MEHTA and Z. K. SAIYED JJ. Manish R. Bhatt for the Commissioner. J. S. Yadav for the assessee. JUDGMENT The judgment of the court was delivered by D. A. MEHTA J. - The Income-tax Appellate Tribunal, Ahmedabad Bench "A", has referred the following five questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to issue of debentures were claimed as revenue expenses. These issues have been referred by way of questions Nos. 1 and 4 and hence they are taken up together. The case of the assessee was that the expenses were relatable to working capital and, hence, being revenue expenditure, were allowable as a deduction in the light of the Supreme Court decision in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52. In the assessment order the claim was disallowed on the ground that the expenses in question were liable to be amortized in the light of the provisions of section 35D of the Act. The Commissioner (Appeals) confirmed the disallowance. However, the Tribunal has allowed the deduction by referring to the decision of the apex c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, the Tribunal has recorded, and there is no dispute on this count, that the expenditure in question is for the purposes of working capital in course of modernisation of the existing plant and machinery. Therefore, this is not a case which can fall within clause (i) of sub-section (1) of section 35D of the Act, nor are the conditions stipulated by clause (ii) of sub-section (1) of section 35D of the Act fulfilled. There is no finding that this expenditure was for extension of the existing industrial undertaking or setting up a new unit after commencement of the business. A faint suggestion was made on behalf of the Revenue that in the absence of such a finding the question should not be answered and the matter be left open s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curs expenditure for an advertisement or publicity outside India, the assessee will not be entitled to any deduction unless the assessee can establish that the advertisement or publicity was being done outside India for and on behalf of the assessee and in respect of goods the assessee deals in or provides in the course of his business. Likewise, if the State Trading Corporation maintains a branch office or agency for the promotion of sale outside India, the assessee cannot claim any deduction on account of maintenance of such branch office or agency but if such branch office or agency is maintained by the assessee himself for the promotion of sale outside India of his goods, services or facilities, then the assessee will be entitled to a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 41 of the Act. The Tribunal has rightly come to the conclusion that in the absence of cessation of liability section 41 of the Act cannot be made applicable. 12. Accordingly, question No. 3 is answered in the affirmative, that is, in favour of the assessee and against the Revenue. 13. In so far as question No. 5 is concerned, the same pertains to disallowance under section 435 of the Act in relation to the municipal tax and education cess. Mr. Bhatt has very fairly pointed out that section 43B of the Act has been made applicable with effect from April 1, 1984, and hence cannot be made applicable for the assessment year 1983-84. Hence, in the absence of any infirmity in the impugned order of the Tribunal, question No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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