COMMISSIONER OF INCOME-TAX Vs. MAJESTIC AUTO LTD

JUDGEMENT

(1.) THROUGH the instant appeal, the appellant has impugned the order dated January 23, 2007, passed by the Income -tax Appellate Tribunal, wherein the Income -tax Appellate Tribunal has accepted the contention advanced by the respondent -assessee that a sum of Rs. 1,62,93,000 incurred by the assessee in engaging M/s. Coopers and Lybrands for a system study of the respondent -assessee was a revenue expense, and as such, was liable to be included by the respondent -assessee while computing expenses at its hands. It is in view of the aforesaid conclusion drawn by the Income -tax Appellate Tribunal, that the instant appeal has been preferred by the Revenue, suggesting the following substantial questions of law: (i) Whether, on the facts and circumstances of the case, the Income -tax Appellate Tribunal was justified in law in holding that while payments made to M/s. Coopers and Lybrands for a study and report on reorganization of core business of the assessee -company and improving its market share and profitability resulted in a benefit derived by the assessee for a number of years, the same was not in the nature of capital expenditure ? (ii) Whether, on the facts and circumstances of the case, the Income -tax Appellate Tribunal was justified in law in holding that payments made to M/s. Coopers and Lybrands were revenue in nature even though a new line of business (scooter) was being set up and scope of study and advice by consultants, spread over three financial years, was not only for existing business ? (iii) Whether, on the facts and in law, the Income -tax Appellate Tribunal erred in not taking note of the provisions of Sections 35D(1)(ii) and 35D(2)(a)(iii) while treating the payment of Rs. 1,62,93,000 made to M/s. Coopers and Lybrands as revenue expenditure?

(2.) BEFORE delving upon the issue involved, it would be pertinent to mention that the respondent -assessee filed a return of its income on November 30, 1998, depicting losses to the tune of Rs. 10,36,61,189. In the assessment order passed on March 28, 2001, the Assessing Officer completed the assessment at a loss of Rs. 2,57,41,375. In the instant order, expenses to the tune of Rs. 1,62,93,000 allegedly incurred by the respondent -assessee as payments made to M/s. Coopers and Lybrands, for a study and report on reorganization of core business of the respondent -assessee and for improving its market share and profitability was treated as a capital expense, and as such, was ordered to be deducted from the losses depicted in the return dated November 30, 1998.

(3.) THE Revenue has preferred the instant appeal against the order rendered by the Income -tax Appellate Tribunal dated January 23, 2007.