1984 (7) TMI 102

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....ministrative Staff College of India for studying the working of the factory and giving suggestions for reorganisation of the stores Department and the expenditure was of a revenue natures. The CIT(A) agreed with the assessee. 2. In the Revenue's appeal, it is contended that the above expenditure is capital in nature. By applying the usual tests for determining whether an expenditure is of capital or revenue nature, we have no hesitation holding that the expenditure incurred by the assessee, in order to rationalise its working, is not capital in nature. We reject the ground raised by the Revenue in this regard. 3. The next objection is to the direction of the CIT(A), deleting the addition of Rs. 3,35,688 made by the ITO under shortages....

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....the contentions noted by the IAC him self, the conclusion to which he came is not justified. For instance, it has been noted that the shortages which were found during the year after physical verification had been exhaustively recorded in register and this register was produced to auditors for verification and there was no adverse comments relating to these shortages. The IAC has also noted that the fact that shortages written of during the year were far in excess of the previous year, cannot be the sole reason for not admitting the entire amount of Rs. 6,71,376. It had been explained to him that the number of items being large, it was not possible to undertake verification each year and, therefore, items were physically verified on selecti....

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....to say that the shortages relating to the earlier years could be Rs. 4 lakhs nor for the IAC to hold that such shortages amounted to Rs. 3,35,681. It is a fact that the accounting procedures in the factory were not perfect. If shortages are not determined at the end or each accounting year, there is also the possibility of the assessee having returned excess profits in the earlier years. The assessee being a company, the rates of taxation will be uniform. It cannot be said that the assessee was knowingly debiting such shortages in the earlier years and it had anything to gain by claiming all the shortages in one year. In fact, it was submitted by the counsel for the assessee that the shortage were determined periodically as the number of it....