COMMISSIONER OF INCOME TAX Vs. SALORA INTERNATIONAL LTD.

JUDGEMENT

(1.) THIS is an application for condonation of delay in filing the appeal. Apparently there is a delay of about 12 days in filing the appeal, although the application mentions only 9 days delay. The reason given for the delay is that the Chief CIT had Chief CIT -III. However, the said Chief CIT was taken ill and unfortunately, he passed away shortly thereafter. The file of any intentional or unavoidable delay on the part of the appellant.

(2.) AFTER hearing the counsel for the parties, we feel that this is a case in which the delay is fully explained and ought to be condoned. The delay is condoned. This application is allowed and it stands disposed of accordingly.

(3.) THE first issue that is sought to be raised in this appeal pertains to advertising expenditure of approx. Rs. 3.08 crores. According to the AO, the expenditures was incurred for launching of its products. The AO was of the view that such expenditure was of an enduring nature and, therefore, treated one -third as "capital expenditure" and only allowed the two -thirds of the said amount as "expenditure, to the assessee". The CIT(A) allowed the entire amount after treating the expenditure as "revenue expenditure". The findings of the CIT(A) were confirmed by the Tribunal by virtue of the impugned order. Particularly, the Tribunal held that there was a direct nexus between the advertising expenditure and the business of the assessee and that the assessee had to incur such expenditure to meet the competition in the Indian market for selling its products in India. A finding was returned that unless the assessee made its products known to the market, its business would suffer. Consequently, the Tribunal held the entire expenditure on advertising to be of a revenue nature and allowed the same. The Tribunal also noted the decision of the Supreme Court in the case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 : (1980) 124 ITR 1 (SC) wherein the Supreme Court held that there could be cases where the expenditure even if it was incurred for obtaining of a benefit of an enduring nature may, nevertheless, be on the revenue account and, in such cases, the test of "enduring benefit" may breakdown.