RAJENDRA, A.M.: As common points are involved in both these appeals by Revenue, they were heard together and are disposed of by consolidated order. Revenue is aggrieved against order of CIT (A) assessee is private limited company which started manufacturing polyester film/sheet from saturated polyester polymer chips at Aurangabad from 8th Jan., 1976. account year under consideration is ending on 30th Sept., 1976 relevant for asst. yr. 1977-78. For asst. yr. 1978-79, account year ended on 30th Sept., 1977. Grounds 1 & 4: Asst. year 1977-78, Ground 2: Asst. year 1978-79 Central excise liability of Rs. 6,03,392 in asst. yr. 1977-78 and Rs. 32,22,558 in asst. yr. 1978-79 allowability of assessee-company had claimed aforesaid liability on basis of Collector of Central Excise s order dt. 12th June, 1980 that excise duty on polyester film manufactured by assessee was payable @30 per cent as against 1 per cent paid by assessee. ITO in asst. yr. 1977-78 had rejected said claim on ground that liability had arisen much after close of relevant account year and that assessee had not made provision for said duty in its books of account and that assessee was disputing said demand. CIT(A), however, following Tribunal, Bombay Bench 'C s order in Garware Synthetic P. Ltd. for asst. yr. 1974-75 and Raza Buland Sigar Co. Ltd vs. CIT (1980) 122 ITR 817 (All), held that when competent authority passed order quantifying statutory liability, even if order is passed during assessment proceedings quantified amount is allowable as deduction and, therefore, passing of order by Central Excise Collector after end of account year was no bar to deduction of assessee s claim nor fact that assessee had not made any entries in its account books in view of Kedarnath Jute Mfg. Co. Ltd. CIT (1971) 82 ITR 363 (SC). Similarly, in asst. yr. 1978-79, CIT(A) allowed assessee s claim. Revenue is in appeal before us. It is pointed out that assessee had intimated to Central Excise Authorities, Aurangabad on 7th Jan., 1976 classification list under items T.I. 15A(2), namely, rigid polyester sheets and films, on which duty @30 per cent ad valorem was payable (PB 25). Collector of Central Excise, Pune (in his notice dt. 30th Nov., 1978 for review of Asstt. Collector s order), noted that aforesaid classification list was approved on 4th Feb., 1976 by Asstt. Collector, Central Excise, Pune. Assessee changed classification to 'other than rigid but excise duty payable was same as per declaration dt. 19th March, 1976 (PB 26). on 9th April, 1976, assessee made further revised classification claiming manufactured goods to be non-excisable (PB 27). However, on 11th Nov., 1976, assessee by further classification, claimed that 1 per cent duty was payable (PB 28). Asstt. Collector by order dt. 8th Dec., 1977 (PB 29) accepted assessee s claim. Thereafter Collector of Central Excise by notice dt. 30th Nov., 1978 (PB 30) sought to set aside under s. 35A(2) of Excise Act of 1944 Asstt. Collector s aforesaid order by directing that polyester film be classified under item No. 15A(2) of Central Excise Tariff, under which 30 per cent basic excise duty was payable. After hearing assessee, Collector passed order on 12th June, 1980 annulling Asstt. Collector s order dt. 8th Dec., 1944 and holding that polyester film manufactured by assessee was liable to excise duty under item 15A(2) of First Schedule to Central Excise & Salt Act, 1977. Collector directed Asstt. Collector to determine differential duty due on polyester film cleared by assessee at rates appropriate for tariff under item No. 68 and to raise demand for same, which would be payable by assessee. It is worth nothing that as per said Collector s order demand had to be determined and demand notice was to be issued. No interest or penalty was charged from date of payment of excise duty by assessee in earlier years under Asstt. Collector s order dt. 8th Dec., 1977. short question therefore, is whether demand raised as result of Collector s order was liability fastened on assessee as result of said order date 12th June, 1980 or whether said demand would become liability of assessee even during account years under consideration namely, account years closing on 30th Sept., 1975 for asst. yr. 1977-78 and account year closing on 30th Sept., 1977 for asst. yr. 1978-79. When similar matter had come up before Bombay High Court in CIT vs. Central Provinces Maganese Ore Co. Ltd. (1978) 112 ITR 734 (Bom) Bombay High Court held that liability was allowable when demand notice was served on assessee and it was immaterial that assessee was objecting to demand. Bombay High Court understood Kedarnath Jute Mfg. Co. Ltd s case (supra) as laying down that when demand for payment of additional export duty was made assessee was entitled to claim deduction in that year. ld. counsel for assessee, however, urged that statutory liability to pay excise duty arose as soon as excisable goods were manufactured relying on Supreme Court s decisions in Kirloskar Bros. vs. Union of India where Supreme Court held that liability for excise duty would arise no sooner manufacture or production was completed and it was immaterial as to what machinery would be divised by Government for recovery of tax and that point of recovery or any restriction on removal will not be determining factor for grant of exemption in respect of goods manufactured during duty-free period. Applying ratio of aforesaid Supreme Court decision as well as that of Bombay High Court, position that emerges is that upto date of Collector s order dt. 12th June, 1980 both assessee and excise Department were agreed that excise duty only @1 per cent on polyester film manufactured by assessee was liviable and assessee had paid same without any objection by Excise Department and had debited said amount in its accounts and was allowed deduction of same. Thus position as it stood in relevant accounting year was that statutory duty was only @1 per cent. It is only on 12th June, 1980 that statutory duty came to be determined at 30 per cent. It is true that assessee challenged said order in High Court by filing writ on 18th July, 1980 and also got interim stay by order dt. 5th Aug., 1980 and there is no further progress in case so far. However, fact of assessee challenging Collector s order and getting stay from High Court becomes irrelevant in view of observations of Supreme Court in Kedarnath Jute Mfg. Co. Ltd. s case (supra) which was followed by Bombay High Court in Central Provinces Manganese Ore Co. Ltd. s case (supra). However, upshot of above decisions is that only acknowledged/accepted statutory excise duty liability is allowable in year of manufacture but where some extra demand is raised in subsequent year, then said extra demand is statutory liability of that subsequent year as was held by Bombay High Court in Central Provinces Manganese Ore Co. Ltd. s case (supra). Under Sales Tax Act when similar problems have arisen, namely, extra demand is raised by Sales-tax authorities, it has been held that liability arises only on completion of sales-tax assessment Banwari Lal Madan Mohan vs. CIT 1978 CTR (All) 26: (1978) 118 ITR 562 (All) where it was held that quantification of sales-tax liability took place in financial year in which sales-tax appellate order was passed (asst. yr. 1962-63) which related to asst. yrs. 1954-55 to 1957-58. Allahabad High Court had followed its earlier decision in CIT vs. Banwari Lal Madan Mohan 1977 CTR (All) 21: 110 ITR 868 (All). Gauhati High Court in CIT vs. Nathmal Tolaram (1973) 88 ITR 234 (Asr) held that sales-tax in respect of earlier years was allowable in year in which demand notice was received by assessee. In view of aforesaid discussion we hold that additional excise duty leavied as result of Collector of Customs order dt. 12th June, 1980 was not allowable in asst. yrs. 1977-78 and 1978-79. We accordingly vacate CIT(A) s orders allowing deduction of Rs. 6,03,392 for asst. yr. 1977-78 and Rs. 32,22,558 for asst. yr. 1978-79. Grounds 2-3 Asst. yr. 1977-78 ITO disallowed legal charges of Rs. 16,503 and consultancy charges of Rs. 10,350 for valuation of property belonging to Garware Plastics Ltd. which company had amalgamated with assessee company. ITO held vide para 1 0 that both these items were capital expenditure relating to framework of assessee-company. CIT(A) accepted assessee s contention that said expenditure was for expansion of assessee s business and there was no benefit of enduring nature. Supreme Court in Assam Bengal Cement Co. Ltd. vs. CIT (1955) 27 ITR 34 (SC) approved Full Bench decision of Lahore High Court in Benarsidas Jagannathi In re (1947) 15 ITR 185 (Lah) (FB) where it was held that "Outlay is deemed to be capital when it is made for initiation of business, for expansion of business , vide Lord Sands in IRC vs. Granite City Stemaship Co. (1927) 13 TC 1 at page 14". Calcutta High Court in Bengal Assam Investors Ltd. vs. CIT (1983) 142 ITR 156 (Cal) held that where expenditure makes basic alterations in profit-earning structure of company or very structure of company that could be considered to be bringing into existence asset of enduring nature, then expenditure was capital expenditure, as it altered framework of structure under which assessee was carrying on business. Counsel for assessee, however, relied on four Madras decisions namely, Addl. CIT. vs. W.A. Beardsell & Co. (P) Ltd. (1981) ITR 159 (Mad) where it was held that amalgamation expenses related to carrying on or conduct of business and was therefore, integral part of profit-earning process. Similar view was taken in CIT vs. Kisenchand Chellaram (India) (P) Ltd. (1 81) 16 CTR (Mad) 248: (1981) 130 ITR 385 (Mad) where fee paid to Registrar of Companies for raising capital of company was held to be revenue expenditure on ground that without capital company cannot carry on its business and therefore, expenses incurred for increasing capital was bound up with functioning and financing of business. Madras High Court had followed aforesaid two decisions in W. A. Beardsell & Co. (P) Ltd s case (supra) and Kisenchand Chellaram (India) (P) Ltd s case (supra) in CIT vs Bush Boake Allen (India) Ltd. (1982) 30 CTR(Mad) 6: (1982) 135 ITR 306 (Mad) and in Madras Race Club vs. CIT (1983) 44 CTR (Mad) 189: (1985) 151 ITR 675 (Mad). However, Bombay High Court in Bombay Burmah Trading Corporation Ltd. vs. CIT (1983) 32 CTR (Bom) 306: (1984) 145 ITR 793 (Bom) has dissented -from Madras High Court s view in Kisenchand Chellaram and has fallen in line with Upper Doab Sugar Mills Ltd. vs. CIT 1978 CTR (All) 65: (1979) 116 ITR 928 (All), Mohan Meakin Breweries Ltd. vs. CIT (1979) 117 ITR 505 (HP) and Hindusthan Gas & Industries Ltd. vs. CIT (1979) 117 ITR 549 (Cal). Bombay High Court held that fee paid to Registrar of Companies for Enhancement of capital was capital expenditure. In view of above discussion we would follow Calcutta High Court s view in Bengal & Assam Investors Ltd. s case ((supra) which is in conformity with Supreme Court s view in Assam Bangal Cement Co. s case (supra) and that of Bombay High Court in Bombay Burmah Trading Corporation Ltd. s case (supra). In result, we vacate CIT(A) s order and restore that of ITO disallowing Rs. 16,500 and Rs. 10,350. In result, Revenue s appeal for asst. yr. 1977-78 is allowed. Ground 1 Asst. yr. 1978-79 In asst. yr. 1978-79, first ground is regarding addition of Rs. 32,000 which was received on 22nd Dec., 1971 as deposit from M/s Cema Pvt. Ltd. for supply of plastic moulds by assessee-company. As mould manufactured by assessee-company was not lifted by said depositor ITO treated said amount as part of assessee s income in asst. yr. 1978-79 (account year ending 30th Sept., 1977). As per assessee s account books, said credit in account of aforesaid creditor is earried forward till 1st July, 1985. On these facts crucial question is how does Revenue treat this amount as assessee s income for asst. yr./ 1978-79. limitation period of three years had expired much earlier. ITO (vide para 9), however, assessed said amount in asst. yr. 1978-79 because creditor had not claimed amount after six years. While we see some merit in Revenue s contention based on CIT vs. Batliboi & Co. (P) Ltd. (1984) 41 CTR (Bom) 388: (1984) 149 ITR 604 (Bom) fact remains that assessee had not treated this amount as its own by transferring same to P & L account and, therefore, there is nothing in year under consideration to support Revenue s case for assessing same. We accordingly confirm CIT(A) s order on this point. Ground 3 Asst. yr. 1978-79 Amount of Rs. 2,44,655 was deferred revenue expenditure brought forward Amount of Rs. 2,44,655 was deferred revenue expenditure brought forward from asst. yr. 1977-78 and claimed as deduction in this year. ITO (vide para 11, page 7 of his order) noted assessee s claim that said amount was cost of raw material consumed in initial period of trial production in asst. yr. 1977-78. ITO held (and rightly so) that said amount was not expenditure of asst. yr. 1978-79. CIT(A) (pages 8 & 9) purported to follow Mysore Tobacco Co. Ltd. vs. CIT (1978) 115 ITR 698, 699 (Kar) which held that only expenditure relating to relevant accounting year was allowable. However, he still came to finding that in essence expenditure of Rs. 2,44,655 related to manufacturing results of asst. yr. 1978-79. With respect, we have not been able to follow this logic. We accordingly vacate CIT(A) s order on this point and restore that of ITO because it is clear that raw material in shape of polyester chips was consumed in asst. yr. 1977-78 and did not appear as part of closing stock or goods in process in that year and balance- sheet only showed at page 6 deferred revenue expenditure of Rs. 2,44,655. We have not been able to understand how consumption of raw material in particular year can be said to be deferred expenditure of subsequent year. In result CIT(A) s order on this point is vacated and addition of Rs. 2,44,655 is restored. In result, Revenue s appeal is partly allowed. *** INCOME TAX OFFICER v. GARWARE PLASTICS & PLOYESTERS (P) LTD.