TaxTMI 
TaxTMI 
1985 (7) TMI 16
X X X X Extracts X X X X
X X X X Extracts X X X X
....ited company incorporated on February 5, 1973. The assessee is engaged in the manufacture of empty gelatine capsules at Alwar and went into production on March 15, 1976. In respect of the assessment year 1977-78, the company claimed deductions under section 80J of the Act and pre-production expenses incurred by the assessee were claimed as capital expenditure. A sum of Rs. 6,778 was claimed as business promotion expenses said to have been incurred by the company before it went into production, while a sum of Rs. 43,831 was claimed as training expenses, constituting a part of the actual cost of the machinery, being part of the installation charges. The Income-tax Officer took the view that the business promotion charges, even if incurred bef....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respect of one of the question relating to inauguration expenses incurred by the assessee and a reference was made in respect thereof to this court by the Income-tax Appellate Tribunal by its order dated February 2, 1982. However, as regards the other three questions sought to be referred, the Income-tax Appellate Tribunal rejected the request of the assessee in respect of question No. (ii) relating to deduction of borrowed moneys and debts on the ground that no referable question of law arose. As regards the expenditure incurred on business promotion and in respect of training expenses, the Tribunal held that the decision on those questions is based on pure findings of fact and no question of law arose. It was observed that the business p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r training, so that when the equipment arrival in India, those people may be ready to put the machine into operation at an early date. It was further provided in that letter that the training programme arranged for the plant engineer and the plant manager would enable them to spend three weeks in the factory of the supplier of the machinery and 9 weeks in a capsule plant, according to the training programme given in the enclosed document The training programme which was sent along with the aforesaid letter included review of machine specifications and drawings, preventive maintenance programme, observing assembly of components and final assembly of machine, witnessing mechanical cycling of machine and final testing machine adjustments and c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A. Industries Ltd. [1981] 129 ITR 373, the Delhi High Court observed that on a logical extension of the principle enunciated by their Lord ships of the Supreme Court in Challapalli, Sugar's case [1975] 98 ITR 167, the expenditure which would go into the cost of the assets will not only be expenditure which is directly and specifically referable to those assets, but also other expenditure incurred by the assessee prior to the commencement of business, which it would have been obliged to incur towards the cost of the assets. In CIT v. New Central Jute Mills [1982] 135 ITR 736, the Calcutta High Court held that expenses incurred for staff training, insurance and power and fuel for installing plant and machinery would form part of the actual c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erational processes or maintenance of the machinery. This matter cart only be gone into if it is held that the finding of fact arrived at by the Tribunal was vitiated on account of misreading of the two documents dated February 12, 1975. As regards the expenditure said to have been incurred on business promotion, the case of the assessee is that the expenditure, incurred prior to the factory of the assessee going into production would constitute part of the capital expenditure, being part of the cost of the machinery, while according to the Tribunal, the said expenditure was of the nature of entertainment expenditure and could not be said to be capital expenditure. The assessee has desired that the Tribunal may be directed to refer the fo....