Commissioner of Income Tax vs Gillete Group India (P) Ltd.

The revenue is aggrieved by an order dated 24-2-2006 passed by the Tribunal, Delhi Bench ''E'' in ITA Nos. 1957 and 1958 /Del/2002 relevant for the assessment years 1997-98 and 1998-99.

Two issues have been raised by learned Counsel for the revenue. The first relates to payment of an amount of Rs. 8,80,500 paid by the assessee towards consultancy charges to one Pradeep Pant.

The Tribunal has noted that an agreement dated 10-1-1995 was entered into between the assessee and Pradeep Pant and it relates to advice on business strategy, marketing and sales planning, possibilities of joint venture and acquisition etc.etc. The assessee, as mentioned in the assessment order, is set up to establish the business of the Gillette Group of Companies. It merely carries out advisory functions and is not in the business of manufacturing nor is it an industrial undertaking.

The question urged is whether the consultancy charges paid to Pradeep Pant would fall within the purview of Section 35D of the Income Tax Act, 1961.The Tribunal found that the assessee has already commenced its business and, therefore, the first part of Section 35D of the Act would not be applicable. There is no dispute on this.

It is also not in dispute that the assessee does not have any industrial undertaking and, therefore, the second part of Section 35D of the Act, 1961 would also not be applicable. Moreover, the Tribunal has found that the expenses incurred towards consultancy charges are for the purposes of carrying out the existing business more efficiently.

In view of these findings, we are of the view that the provisions of Section 35D of the Act would not be applicable and, therefore, no error can be found in the view taken by the Tribunal.

The second issue relates to the applicability of Section 43A of the Act with regard to additional liability incurred on account of fluctuations in the foreign exchange rate. The Tribunal held that the additional liability was not for the purpose of the business of the assessee or in relation to a capital expense. On this basis, the Tribunal allowed a deduction of the enhanced liability of the assessee. This conclusion is based on a finding of fact and we find no perversity therein.

We may note that a similar view has been expressed by this Court in Commissioner of Income Tax Vs. Woodward Governor India Pvt. Ltd.,

We have also relied upon the decision of this case while dismissing the revenue''s appeal in the case of the same assessee in IT Appeal No. 25 of 2005 decided on 14-9-2007.

We find that no substantial question of law arises.