AVERY INDIA LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal has referred the following questions of law under S. 256(1) of the IT Act, 1961 ('the Act'):

(2.) IN this proceeding the assessee year involved is 1977-78 for which the relevant year of account is the year ended on 31st Dec., 1976

(3.) THE Tribunal considered all aspects of the case and came to the conclusion we have duly considered the rival submissions. Sec. 30 deals with rent, rates, taxes, etc., of the premises used for the purpose of business or profession, whereas S. 37(1) which is in the nature of an omnibus clause specifically excludes expenditure which is in the nature of capital expenditure from its purview. The minutes of the meetings cited would show that the object was to erect a factory and godown for the purpose of future expansion. It also shows that the assessee insisted on obtaining the right of sub-leasing the land. During the year of under consideration neither a factory nor a godown had been constructed, though it had been decided to set up a factory and an administrative block. Therefore, the expenditure incurred by the assessee for the proposed expansion of the business is not a revenue expenditure but an expenditure in the nature of preliminery expenditure and consequently it should be disallowed as capital expenditure. Accordingly we reverse the decision of the CIT (A) and restore the decision of the ITO on this point.