COMMISSIONER OF INCOME TAX Vs. ARVIND MILLS LIMITED

JUDGEMENT

(1.) IN the case of the present assessee for the asst. year 1978 79, the following question of law under s. 256(1) of the IT Act, 1961, have been referred to us for answer :

(2.) LEARNED counsel appearing for the Department [sic Assessee] and the Department submit that question No. 1 has been squarely covered by the decision of this Court in the case of CIT vs. Ashoka Mills (1996) 131 CTR (Guj) 1 : (1996) 218 ITR 526 (Guj) : TC S16.1736. It was held that the process employed under the trade name 'Tebilized' conferring an anti crease property on the cloth for the purpose of making the cloth more marketable and profitable did not create any asset. Since it enabled the assessee to confer on the product the advantage of better quality and marketability, as revenue expenditure, it is deductible under S. 43A (sic) of the Act. Relying on the aforesaid decision in case of Ashoka Mills (supra), the question is answered in favour of the assessee.

(3.) THE third question is said to have been squarely covered by the decision of this Court in CIT vs. Gaekwar Mills Ltd. (1991) 99 CTR (Guj) 19 : (1992) 193 ITR 734 (Guj) : TC 17R.1468. The question with regard to deletion of disallowance of Rs. 8,969 in respect of guest house expenditure, etc. has to be answered in favour of the assessee. But so far as allowance of depreciation on dead stock and furniture is concerned, relying on the same judgment (supra), the question has to be answered against the assessee. In the case of Gaekwar Mills (supra), it has been held that residential accommodation maintained in the nature of guest house was covered within the meaning of cl. (i) of S. 37(4) of the Act. The expenditure has not been incurred for maintenance of residential accommodation but for the guest house and therefore, no part of such expenditure can be disallowed under S. 37(4)(i) of the Act. The guest house expenses, therefore, have to be allowed to the assessee.