ORDER
M.K. Chaturvedi, Vice-President
1. This appeal by the assessee is directed against the order dated 16-12-2002 passed by the Commissioner (Appeals)-XI, Chennai and relates to the assessment year 1998-99.
2. The first issue relates to the sustenance of disallowance of Rs. 6,35,640/- being the amount of advance written off as irrecoverable.
3. We have heard the rival submissions in the light of the material placed before us and the precedents relied upon. The assessee had placed an order on 3-2-1996 with Alps Engineering Services Pvt. Ltd. for the construction of a cold storage plant at its factory at Coimbatore. The assessee had advanced Rs. 7,89,500/- for the erection and commissioning of two numbers of Eurostat-1000 refrigeration machine and other installations at the Coimbatore plant. Works could not be executed due to some reasons. A sum of Rs. 2 lakhs was recovered. The balance amount of Rs. 5,89,500/- was claimed as a deduction from the total income.
4. It was contended before us that the advance given to the contractor was lost by the assessee. It was not an asset of enduring nature. The advance was made in the normal course of business. As such it is to be allowed either as bad debt or as business loss. To buttress the contention reliance was placed on various precedents.
5. The general conspectus of the main plank of the learned departmental representative’s argument was that the expenditure was incidental to commissioning of refrigeration machines and the other installations. It was not part of the cost of operating the profit earning apparatus. The expenditure was incidental to the acquisition of profit earning apparatus. As such it was clearly in the nature of capital expenditure and therefore the same cannot be allowed.
6. We now propose of discuss the precedents relied upon by the learned Counsel for the assessee. In the case of IBM World Trade Corporation v. CIT 186 ITR 412(Bom.) the assessee advanced money to the landlord for construction of a factory shed. The landlord leased that shed to the assessee. Thereafter the landlord became insolvent. The assessee written off the amount alongwith interest. The Hon’ble High Court has held that the loss in question was deductible. In the present case we find that the facts are different. The assessee made the payment for owning an asset and not just for acquiring jura in re aliena.
7. In the case of CIT v. Anjani Kumar Co. Ltd. 259 ITR 114(Raj) the loss was caused on account of breach of contract. The assessee did not acquire capital asset. The loss was allowed as a business loss. The court found that the new project was launched by the same management in relation to the same business. In the instant case the business of the assessee was running of cold storage and not setting up of a new cold storage.
8. In the case of CIT v. Crescent Films(P) Ltd. 248 ITR 670(Mad.) the assessee carried on the business of distribution of films. Loss was caused in relation to advance made to producer to complete film for which the assessee had acquired distribution rights. The loss was held to be deductible. The Hon’ble High Court has considered the factual details. It was noted that credit is an indispensable part of a business. It is not necessary that every business should register itself under the Money Lenders Act and make a claim in relation to any advance made by it only in the capacity of a person carrying on money lending business. In the present case the facts are different. As such the ratio of this decision is not applicable.
9. In the case of Alembic Chemical Works Co. Ltd. v. CIT 177 ITR 377(S.C.) the Hon’ble apex court diluted the enduring benefit theory taking into consideration the rapid advances in research in antibiotic medical microbiology. It was held that the know-how could not be said to bear the element of the requisite degree of durability and nonephemerelity to share the requirements and qualifications of an enduring capital asset.
10. The concept of capital and revenue created chaos in the judicial cosmos. Various theories were propounded to make distinction between capital expenditure and revenue expenditure. But no test can be applied blindly and mechanically. Each case is to be decided on its own facts. The general tests to be applied to distinguish capital expenditure or revenue expenditure have been enumerated in various decisions. There is no difficulty in enumerating those tests. But the difficulty arises when the courts are called upon to apply those tests to a given set of facts. Barring rare exceptions the facts of no two cases are similar.
11. It is necessary to see whether the expenditure was incurred in the capital field or revenue field and whether it is cost towards the profit earning apparatus or operating the profit earning apparatus. The learned departmental representative relied on the decision in the case of Empire Jute Co. Ltd. v. CIT 124 ITR 1(S.C). In this case it is laid down that what is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure, would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more efficiently while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. What the Hon’ble apex court expressed is nature of advantage. It is to be seen whether the advantage is in the capital field or in the revenue field.
12. In the case of Hasimara Industries Ltd. v. CIT 230 ITR 927(S.C.) the assessee deposited Rs. 20 lakhs with the licensor company for the purpose of securing the licence under which the assessee had acquired the right to work the licensor’s cotton mills. The deposit was made pursuant to a clause in the leave and licence agreement. Had a deposit as required by that clause not been made the assessee would not have secured the licence of the cotton mill. At that time the assessee was doing no business in cotton. The deposit was clearly made for the purpose of acquiring a profit making asset to carry on business in cotton. It cannot, therefore, be held that the deposit was made on the revenue account or that the loss thereof must be treated as business loss. The loss thereof was a loss suffered on the capital account and could not be deducted.
13. In the facts of the present case also we find that the assessee advanced money to secure a capital advantage. The expenditure was incurred towards the cost of acquiring the profit earning apparatus. On this factual matrix it cannot be said that the loss caused due to the non recovery of advance was in the revenue field. It was in the capital field only. As such it cannot be allowed as a revenue loss. Since it was not a debt, it cannot be allowed as bad debt. We have perused the reasonings adduced in the impugned order. In our opinion the Commissioner(Appeals) took a correct view in the matter and his order calls for no interference on this count. Accordingly we uphold the same.
14. The next issue relates to the allowability of PF and ESI contributions made at the end of the assessment year. We find that the assessee raised this issue in the grounds taken before the Commissioner(Appeals). This issue was not adjudicated. We, therefore, in the interest of justice restore this issue to the file of the Commissioner(Appeals) with a direction to decide the same In accordance with law after providing adequate opportunity to the assessee of being heard.
15. in the result the appeal of the assesses stands partly allowed.