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2008] 300 ITR 56 [2007] 165 TAXMAN 577 (DELHI) HIGH COURT OF DELHI Commissioner of Income-tax v. Honda Siel Power Products Ltd. MADAN B. LOKUR AND DR. S. MURALIDHAR, JJ. INCOME-TAX APPEAL NO. 26 OF 2007 AUGUST 30, 2007 Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1992-93 - Assessee-company was engaged in manu-facturing portable generator sets - Assessee made advances to manufacturer of tools and dies for components of generator sets - Assessee contending that payment made as advance was non-recoverable and ownership of tools and dies remained with manufacturer claimed payment of advance as revenue expenditure - Assessing Officer disallowed assessee's claim on ground that assessee though not owning asset in question, was deriving an enduring benefit - Tribunal held that since tooling advance was for facilitating trading operations of assessee, enduring advantage obtained by assessee was only in revenue field and not in capital field - Whether Tribunal was justified - Held, yes FACTS The assessee-company was engaged in manufacturing portable generator sets. The assessee made advances to the manufacturer of tools and dies for components of generator sets. The assessee contended that payment made as advance was non-recoverable and ownership of tools and dies remained with the manufacturer and claimed payment of advance as revenue expenditure. The Assessing Officer disallowed the assessee's claim on the ground that the assessee though not owning asset in question, was deriving an enduring benefit from it. On appeal, the Commissioner (Appeals) concurred with the Assessing Officer. On further appeal, the Tribunal held that the tooling advance was for facilitating the trading operations of the assessee, that the tools and dies continued to remain the property of the manufacturer and expenditure in question was revenue expenditure. HELD The assessee was right in his submission that at no point of time such expenditure was claimed as a capital expenditure by the assessee. That being the position, there was no justification for the Assessing Officer to disallow the deduction of the tooling advance on the ground that…

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