COMMISSIONER OF INCOME TAX Vs. AVON CYCLES LTD.

JUDGEMENT

(1.) THE following questions of law have been referred for opinion of this Court arising out of the order passed by the Income -tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, "the Tribunal"), in ITA No. 1049/Chandi/1995

(2.) BRIEFLY , the facts as mentioned in the statement of case are that the assessee company derives income from manufacture and sale of cycles and its spare parts. For the assessment year in question, the assessee paid a sum of Rs. The expenditure was disallowed by the AO for the reason that the assessee was not engaged in the manufacture of freewheels. The order was upheld by the Commissioner of Income -tax (Appeals) [for short, "the CIT(A)"]. The Tribunal accepted the plea of the assessee and allowed the expenditure as revenue during the year in question. The Tribunal while accepting the plea of the assessee observed that the expenditure of Rs. 4,81,000 made on research and development of multi -speed freewheels was with a view to explore the export market and in fact during the next year these freewheels were purchased from the sister concern M/s Avery Freewheels (P) Ltd. and exported.

(3.) WE have heard Shri S. K. Garg Narwana, advocate, for the Revenue and Shri. Akshay Bhan, advocate, for the assessee.