- (1.) This is a departmental appeal against the order of the Commissioner (Appeals) passed on 9-12-1994. The facts of the case are rather somewhat peculiar.
(2.) The assessing officer passed the assessment order under section 143 (3) of the Income Tax Act, 1961 for this year on 27-3-1989 (this order will henceforth be called the first assessment order). The Commissioner (Appeals) decided the appeal against this order along with another appeal for the assessment year 1986-87 by his common order dated 4-1-1990 (this Commissioner (Appeals) and his order will henceforth be called the first Commissioner (Appeals) and the first Commissioner (Appeals) s order). In the said order the first Commissioner (Appeals) set aside certain issues and remitted the same back to the file of the assessing officer for fresh examination after the Commissioner (Appeals) himself having taken certain positive decisions with regard to the issues raised before him. The order passed by the assessing officer in giving effect to the first order of the Commissioner (Appeals), as mentioned above, dealt with the issues remitted to him in certain manners. This order was again appealed against by the assessee and the Commissioner (Appeals) passed a fresh order on 23-3-1992 (this Commissioner (Appeals) and his order in this regard will henceforth be called as the second Commissioner (Appeals) and the order of the second Commissioner (Appeals) respectively). Thereafter, the assessing officer passed a fresh order under section 143 (3), read with section 250 on 22-3-1993 (this order of the assessing officer will be called henceforth the third order passed by the assessing officer). As against the said order, the Commissioner (Appeals) came up with another order dated 9-12-1994 which is being impugned before us by the department (this Commissioner (Appeals) and this order of the Commissioner (Appeals) are henceforth being called respectively as the third Commissioner and the third order of the Commissioner (Appeals) ) .
(3.) In this appeal against the order of the third Commissioner (Appeals), the first issue, which has been raised by the department, relates to the deletion of the addition of Rs. 48,07,733 made on account of expenditure towards consultancy services. In the first order passed by the assessing officer, the matter was discussed in detail to the effect that a payment of Rs. 49,17,000 was made by the assessee to M/s. T.M. & M.C. (P.) Ltd. (hereinafter referred to as TMMC) during the relevant year. The payment was stated to have been made in terms of the agreement dated 26-7-1983 with that concern. The payment was again stated to be consisting of two different elements viz. (i) for rendering the consultancy services for the tea season of 1983 and (ii) for restraining TMMC not to undertake any consultancy services regarding the techniques used by the company in plantation in the States of Assam, West Bengal, Kerala, Tamil Nadu and Tripura for a period of five years commencing from 1-4-1983. The assessing officer held that the portion of payments towards restraining TMMC not to undertake any consultancy services for a period of five years resulted in a benefit of enduring nature to the assessee-company being for preventing competition. He thus held that this portion of the payment should be treated as capital expenditure. The assessing officer also discussed that TMMC while appearing before him furnished the detailed bifurcation regarding the quantum of payment pertaining to the two different aspects and that while an amount of Rs. 1,09,267 had been paid for the services actually rendered, the other amount of Rs. 48,07,733 pertained to restrictive clause under the agreement. The assessing officer thus allowed the amount of Rs. 1,09,267 as revenue expenditure and disallowed the balance amount of Rs. 48,07,733 as capital expenditure.;