COMMISSIONER OF INCOME TAX Vs. SAKTHI SOYAS LTD.

JUDGEMENT

(1.) THE appeal is filed by the Revenue under s. 260A of the IT Act, 1961 against the order of the Tribunal in ITA No. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that crop development expenditure of Rs. 20,36,157 and project launching expenses of Rs. 16,41,125 incurred by the assessee for the asst. yr. 1992 -93 were allowable as revenue expenditure - 18,952. Later, after notice under s. 143(2), the assessment was completed under s. 143(3). While completing the assessment, the AO disallowed the claim of expenditure to the extent of Rs. 20,36,157 towards crop development expenses on the ground that the same was not considered as a revenue expenditure by the assessee in its accounts. However, the assessee claimed it as revenue in the statement of computation of total income and also further disallowed the expenses incurred amounting to Rs. 16,41,125 towards advertisement in respect of soya products and sales promotional expenses. Against the order of assessment, an appeal to the CIT(A) was filed by the assessee. The CIT(A) allowed the claim of the assessee and directed the AO to allow the same as a deduction. Aggrieved by that order, the Revenue filed an appeal to the Tribunal. The Tribunal dismissed the appeal and allowed both the issues in favour of the assessee.

(2.) HEARD learned counsel appearing for the Revenue. The assessee had incurred expenditure to an extent of Rs. 20,36,157 towards crop development during the relevant period. Therefore, it had to ensure continuous availability of raw materials. Keeping that objective in mind, the assessee -company propagated a new crop among the local farmers for which it had incurred various expenses totalling to Rs. 20,36,157. All these expenses were by and large educative and advertisement in nature and that the participation of the farmers was ensured in developing the said crop. The assessee had incurred expenditure in making publicity through visual media as well as print media, distribution of seeds and fertilizers, for maintaining demonstrative plots, for conducting seminars for the local population, prize distribution to farmers, etc. These expenses were necessary and usually expendable in the event of launching a new project. All these expenses incurred by the assessee -company under this head were intimately connected with the activities carried on by the assessee in its business operations and therefore, it had necessarily to be held as business expenditure and the expenditure could not have resulted in enduring benefit to the assessee -company. Therefore, we do not find any justification in the argument of the Revenue that crop development expenses needed to be treated as capital expenditure ineligible for deduction.

(3.) IN respect of the project launching expenses amounting to Rs. 16,41,125 also, we find that the assessee had spent the money mainly for advertisement through visual and print media and also for designing and printing leaflets, brochures, etc., and hence these expenses were also in the nature of business expenditure entitled for deduction in computing the assessee's income.