D.C. AGRAWAL, A.M. ORDER In this appeal, Revenue raised following effective grounds : "1. On facts and in circumstances of case and in law, CIT(A) erred in cancelling penalty levied under s. 271(1)(c). As laid down in case of CIT vs. Jeevan Lal Sah (1994) 117 CTR (SC) 130 : (1994) 20 5 ITR 244 (SC), onus is on assessee to establish there were bona fide reasons to claim deductions but in absence of any reason, penalty has to be levied. 2. appellant prays that order of CIT(A) on above ground be set aside and that of AO be restored." 2. only grievance of Revenue is that CIT(A) had wrongly cancelled penalty of Rs. 69,87, 5levied under s. 271(l)(c). 3. facts giving rise to levy of penalty are as follows : (1) assessee-company was in business of purchase of frozen marine products and yellow soyabeen during financial year and in addition providing composite services, management services, etc. for which it was receiving fee from constituents during earlier financial year as well as in current year, as reflected from Sch. 1 5 service charges received showing services of Rs. 4,60,26,931 and Rs. 4,78,41,8 5received during earlier financial year and current year, respectively. corresponding figures of export sales were Rs. 6,98,44,880 and nil. Thus, it seems that one of business, i.e., export sales was not operative during this year. In addition, assessee was also deriving dividend income. During this year, i.e., period relevant to asst. yr. 1998-99, assessee purchased rights, titles and ownership of two magazines/periodicals namely Chemical products finder and Indian architect and builders owned by M/s Pan Music & Magazines Ltd. (for short PMM ), for which agreement was entered into between assessee and PMM on 1 5 th Oct., 1997. As per this agreement, agreed purchase price of these two titles from PMM was consideration of Rs. 2 crores and Rs. .1 5 crores totalling to Rs. 2.1 5 crores. agreement provided that seller is owner and publisher of titles, which are free from all charges, liens and encumbrances and assessee can after purchase, use title and information in course of its business. title over two periodicals would pass on to assessee on 1st Nov., 1997. Along with use of title, assessee would get technical knowledge, information for publishing two periodicals with right to get existing subscribers and advertisers of journals. All employees will also be transferred to assessee. Accordingly, MoU was acted upon. (2) return of income was filed by assessee on 30th Nov., 1997 declaring loss of Rs. 1, 5 2, 55 ,092 claiming Rs. 2.1 5 crores paid for acquiring titles of two magazines as revenue expenditure. return was processed on 30th March, 1999 under s. 143(1). Subsequently, case was taken up for scrutiny by issuing notice under s. 143(2). During course of assessment proceedings, two MoUs for purchase of business with titles of two periodicals as aforesaid, were submitted to AO. It was claimed by learned Authorised Representative of assessee that assessee has appended note No. 5 in computation of income sheet as under : "Note 5 . Expenses of Rs. 2,1 5 ,00,000 for purchase of publishing rights of journal is revenue expenditure, as it is incurred for acquiring right to get subscriber and advertisement customer for publishing journal and for use of trademark in view of Supreme Court decision in Alembic Chemical Works Co. Ltd. vs. CIT (1989) 77 CTR (SC) 1 : (1989) 177 ITR 377 (SC) and CIT vs. Aquapump Industries (1996) 132 CTR (Mad) 5 6 : (1996) 218 ITR 427 (Mad)." (3) Before AO it was claimed that consideration was paid for use of trademark of above journals and know-how for editorial content which i s very prime for journal. It was argued that amount was paid not for acquiring any patent, right or copyright covered under s. 3 5 and amount was paid for acquiring running business for use of trade name of journal with existing rights of subscribers and advertisers; which is revenue expenditure. AO, however, did not agree and by giving finding, as under, made addition of Rs. 2,1 5 ,00,000 in total income of assessee. "8. I have considered submissions of Authorised Representative and found that they are not acceptable. assessee paid consideration mainly for acquiring titles of monthly journals viz., Chemical Product Finder and Indian Architect and Builder. There was no transfer of technical know-how involved in process of acquisition of above title. It is only incidental that existing subscribers of journals and advertisers transferred to assessee-company. transfer of employees to assessee-company is only incidental. There is no binding obligation on part of subscribers, advertisers and employees to remain with assessee after transfer of title to assessee. So essentially what is paid towards consideration is mainly for purpose of acquiring titles of above two journals. In way assessee acquired trademark or copyright of above journals and assessee is squarely covered by provisions of s. 3 5 of IT Act. 9. consideration paid for acquiring titles of journals are in nature of capital expenditure since assessee gets enduring benefit over period of time. This is more akin to acquisition of goodwill and purchase of goodwill is capital expenditure as per provisions of IT Act. Therefore, assessee s case is covered under provisions of s. 3 5 and assessee gets deduction of 1/14th of consideration paid for purchase of title. 10. Authorised Representative relied upon decision of Hon ble Supreme Court in case of Alembic Chemical Works Co. Ltd. vs. CIT (1989) 77 CTR (SC) 1 : (1989) 177 ITR 377 (SC) in his favour. However, decision cited supra is mainly on acquisition of technical know-how. There is no such issue involved in instant case; hence decision cited supra is not applicable to facts of present case. 11. Authorised Representative also relied upon decision of Hon ble Madras High Court in case of CIT vs. Aquapump Industries (1996) 132 CTR (Mad) 5 6 : (1996) 218 ITR 427 (Mad). In this case, Court mainly dealt with transfer of technical know-how for period of 5 years and payment of royalties consideration thereof and Court held that expenditure was revenue in nature. However, in instant case, there is no such issue of transfer of technical know-how and payment of royalty, hence ratio of above-mentioned case has no bearing on facts of present case." (4) Thus, total income was assessed at Rs. 47,09,194 as against returned loss of Rs. 1, 5 2, 55 ,092. At end, he also initiated penalty proceedings under s. 271(1)(c) for furnishing inaccurate particulars. ( 5 ) above decision of AO to disallow claim of entire sum of Rs. 2.1 5 crores in one year and to allow only 1/14th thereof in year under consideration seems to have been accepted by assessee, as no appeal was filed against disallowance before CIT(A). This was also confirmed by learned counsel for assessee before us during course of hearing. (6) In penalty proceedings, AO after extensively discussing issue from paras 12 to 16 of penalty order levied penalty. (7) penalty was cancelled by CIT(A) by observing as under : "3.4 This fact is also borne out from letter dt. 5 th Jan., 2001 written by AO to appellant calling for certain information in which AO has acknowledged that in return amount of Rs. 2,1 5 ,00,000 has been claimed as incurred towards purchase of publishing rights of journal as revenue expenditure. It is different matter that in assessment order as well as in penalty order AO has not mentioned this fact creating impression as if fact of expenditure of Rs. 2,1 5 ,00,000 has been discovered by AO during assessment proceedings. This being so, it is clear that AO did not make any fresh discovery and what has been discussed in assessment order was only different interpretation of claim made by appellant. 3. 5 While discussing facts of case in detailed penalty order under s. 271(1)(c) AO has dealt with issue in sufficient detail. However, what has actually emerged from this discussion in penalty order is that consideration paid for acquiring title for journals is not revenue expenditure as claimed by appellant but is purchase of goodwill, in nature of capital expenditure and, therefore, covered under provisions of s. 3 5 A. It is not clear as to how AO has reached conclusion that this is case of claiming wrong deduction on basis of furnishing inaccurate particulars of income. 3.6 After careful consideration of matter, I am inclined to agree with arguments advanced by appellant that this is not case where appellant has either concealed particulars of income or has furnished inaccurate particulars of income. On contrary, it is clearly case where genuineness of expenditure has not been doubted and there is only apparent difference of opinion between appellant s stand and stand of AO. fact that appellant accepted allowance of 1/14th of expenditure under s. 3 5 against its claim of entire amount as revenue and did not contest it in appeal certainly cannot be held against appellant. difference of opinion between AO and appellant by itself cannot lead to conclusion that appellant had concealed its income by furnishing inaccurate particulars of income. Vide for instance, CIT vs. Kishanchand Tarachand 1 5 1 Taxation 72 (MP)." (8) Thus, according to learned CIT(A), genuineness of expenditure was not doubted and there was difference of opinion between appellant s stand and that of AO. Merely because assessee accepted allowance of l/14th under s. 3 5 as against entire claim should not go against him. difference of opinion cannot lead to conclusion that assessee has concealed its income by furnishing inaccurate particulars. Department is now agitated against cancellation of penalty by impugned order of CIT(A). 4. Before us, learned Departmental Representative submitted that assessee has purchased rights and titles of two journals, expenditure for which is clearly capital expenditure and now covered under s. 3 5 A. Further, note given by assessee in computation of income sheet is wrong and misleading. agreement is for entire title and business and not for customers and advertisers. assessee did not furnish copy of agreement along with return so as to know exact nature of payment. Assessment was originally completed under s. 143(1). As returns were accepted under s. 143(1) and only limited scrutiny @ 2 per cent of total returns is being carried out, it is expected of assessee to make full and true disclosure. Had assessment not made under s. 143(3) by issuing notice under s. 143(2), AO would not have known true nature of claim. To dub expenditure as made for know-how so as to cover same under decision in Alembic Chemical Works Co. Ltd. vs. CIT (1989) 77 CTR (SC) 1 : (1989) 177 ITR 377 (SC) and CIT vs. Aquapump Industries (1996) 132 CTR (Mad) 5 6 : (1996) 218 ITR 427 (Mad) is misleading and tantamount to filing inaccurate particulars of claim. Further according to learned Departmental Representative question of two opinions does not arise as disallowance of claim was accepted by assessee as no appeal was filed. Had assessee declared in return that he has made payment for purchase of title and entire running business, question of claim as revenue expenditure would not have arisen as it was clearly capital expenditure. According to learned Departmental Representative, case of assessee is squarely covered by Expln. 1 to s. 271(1)(c), as assessee s claim of expenditure as revenue was not bona fide. He clearly wanted to get away under s. 143(1) by showing payment made for trademark in manner covered in decisions cited by assessee in footnote in computation of income sheet. learned Departmental Representative also pointed out that notwithstanding that expenditure is capital or revenue, auditors have pointed out that claim is deferred revenue expenditure only. One-third thereof was claimed in computation by auditors made and two-third was shown in balance sheet as deferred revenue expenditure . Thus, entire claim of Rs. 2.1 5 crores could not be allowed as revenue expenditure in one year even as per auditor s working and comments. 5 . On other hand, learned counsel for assessee defended order of CIT(A) and submitted that assessee had disclosed all facts by way of note below computation of income sheet and entire amount was shown. Further, assessee had formed opinion on basis of decision of Hon ble Supreme Court in Alembic Chemical Works Co. Ltd. s case (supra) and Aquapump Industries case (supra) that his claim is allowable in full as revenue expenditure. He drew our attention to p. 22 para 8 of assessment order, wherein it has been admitted by AO in way, that assessee has acquired trademark or copyright. Further, there is no finding of concealment in assessment order. assessee furnished reply to AO, which was placed on p. 2 5 of paper book. In this reply, it was clearly mentioned that said expenditure is allowable as revenue expenditure. Since, there are two possible opinions, assessee has adopted one opinion. issue is clearly debatable as to whether it is revenue expenditure or not. One view is that of assessee and other view is that of AO. On debatable issues, if addition is made, then no penalty can be levied. He has claimed expenditure under s. 37(1) and not under s. 3 5 A, which is clearly not applicable. Thus, there is clear debate as to whether expenditure is allowable under s. 3 5 or under s. 37(1). In fact, assessee has purchased license, which is revenue expenditure. It was w.e.f. 1st April, 2002 under s. 55 (2A) that trademark has been made capital asset, which means that prior to 1st April, 2002, expenditure incurred on trademark would be revenue expenditure. learned Authorised Representative of assessee also submitted that he did not prefer appeal because of saving money from litigation and not for reason that that assessee did not have case. learned counsel for assessee also relied on decision of Tribunal in Rupam Mercantile Ltd. vs. Dy. CIT (2004) 8 5 TTJ (Ahd)(TM) 609 : (2004) 91 ITD 237 (Ahd)(TM). 6. In his rejoinder, learned Departmental Representative submitted that if assessee s case was covered by decision of Hon ble Supreme Court in Alembic Chemical Works Co. Ltd. s case (supra), then it was more prudent for him to fight out. fact that no appeal was preferred even before CIT(A) shows that decision of Hon ble Supreme Court was not at all applicable on facts of case. learned Departmental Representative reiterated that note given in computation sheet of income was misleading and was not bona fide. assessee wanted, by giving inaccurate particulars by way of note, to get his return accepted under s. 143(1). fact that issue was not contested shows that there was no debate and no debatable issue was existing. 7 . We have heard rival submissions and considered facts and materials on record. main issues involved in this case are : (i) whether declaration made by assessee as footnote in computation sheet was complete, accurate and bona fide, (ii) whether there was any debatable issue and assessee has taken one stand, while AO had taken other, (iii) whether assessee has filed inaccurate particulars, and (iv) whether case of assessee is hit by Expln. 1 of s. 271(1)(c). 8. Before discussing these issues, it is important to thrash out some more facts, which are available on record and placed before us to which learned Departmental Representative has also referred. 9. auditors of assessee-company have given in notes forming part of account for year ended on 31st March, 1998 note No. 1 5 of Sch. 24 on p. 17 of paper book as under : "1 5 . During year company has paid compensation to M/s Pan Music and Magazines Ltd. of Rs. 5 crores for use of title for publishing journals named as Chemical Products Finder and Indian Architect and Builder along with right to get existing subscribers and advertisers of journals and for providing information for publishing above journals. expenditure incurred for purchase of above is debited to deferred revenue expenditure to be amortised over period of three years." 10. It shows that auditors had treated expenditure of Rs. 2.1 5 crores as deferred revenue expenditure to be amortised over period of 3 years and was accordingly debited to deferred revenue expenditure account . Accordingly, in Sch. 14 to balance sheet and P&L a/c as at 31st March, 1998 amount of Rs. 71,66,667 was written off and balance of Rs. 1,43,33,333 was shown as balance under head Deferred revenue expenditure . 11. It shows that in P&L a/c only claim of Rs. 71,66,667 was made as per auditors note. However, in computation of income, assessee added back Rs. 71,66,667 to declared loss and claimed entire sum as deduction. working of this Annex. I (p. 2 of paper book) is given as under : Annexure I Profit and gains from business or profession : Loss as per P&L a/c -- (1 5 ,69,804) considered separately Depreciation as per P&L 40,0 5 a/c ,870 Loss on asset discarded 8,0 5 ,421 Disallowance under s. 43B Bonus 49,642 Ex gratia 3,02,661 Employers and employees contribution to 1,06, 36 1 PF/Pension Employers and 14,102 employees contribution of ESIC Municipal tax Baroda 5 4,84 5 Purchase tax 5 ,484 Provision for gratuity 90,987 Publication expenses 71,66,667 1,26,02,040 considered separately 1,10,32,2 36 Less : Expenditure of publication rights 2,1 5 ,00,000 (refer note : 5 ) (1,04,67,764) 12. balance sum of Rs. 1,43,33,333 was taken in balance-sheet under head Miscellaneous expenditure (and became part of Rs. 1,43,69,161) stating this sum as deferred revenue expenditure . Thus, after adding said sum, assessee claimed in computation of income, entire sum of Rs. 2.1 5 crores as revenue expenditure in year under consideration. 1 3 . Now let us examine whether claim of assessee that entire expenditure be allowed in one year is in any way supported by decisions relied upon by assessee. In Alembic Chemical Works Co. Ltd. s case (supra), proposition laid down by Hon ble Supreme Court was that where payment is made for acquiring right which is not enduring, it has necessarily to be allowed as revenue expenditure. Hon ble Supreme Court observed as under in this case : "On 8th June, 1961, appellant, company engaged in manufacture of antibiotics and pharmaceuticals, was granted licence for manufacture of penicillin. By year 1963, it had already made outlay of more than Rs. 66 lakhs for setting up plant for production of penicillin. In initial years, appellant was able to achieve only moderate yields of penicillin. With view to increasing yield, appellant started negotiations in 1963, with Meiji, reputed Japanese enterprise engaged in manufacture of antibiotics, which culminated in agreement dt. 9th Oct., 1963, whereunder Meiji, in consideration of once for all payment of US $ 5 ,000 (equivalent then to Rs. 2,39,62 5 ), agreed to supply to appellant subcultures of Meiji s most suitable penicillin producing strains, in pilot plant, technical information, know-how and written description of Meiji s process for fermentation of penicillin along with flow-sheet of process in pilot plant, and design and specifications of main equipment in such pilot plant, and to arrange for training of appellant s representatives in Meiji s plant in Japan at appellant s expense and advise appellant in large scale manufacture of penicillin for period of two years. appellant was to keep technical know-how confidential and secret and was not to seek any patent for process. For asst. yr. 1964-6 5 , appellant claimed deduction of sum of Rs. 2,39,62 5 as revenue expenditure. Both Department and Tribunal rejected claim holding that expenditure was capital in nature. In coming to this conclusion, Tribunal held, on interpretation of agreement, (i) that appellant had to install larger plant modelled on pilot plant; (ii) that payment was not made in course of carrying out existing business but was for purpose of setting up new plant and new process; (iii) that outlay was incurred for complete replacement of equipment of business inasmuch as new process with new type of plant was to be put up in place of old process and old plant. On reference, High Court held that sum of Rs. 2,39,62 5 was not revenue expenditure. On appeal to Supreme Court : Held, reversing decision of High Court, (i) that there was no material before Tribunal to come to finding that appellant had obtained under agreement completely new plant with completely new process and completely new technical know-how from Meiji. business of appellant from commencement of its plant in 1961 was manufacture of penicillin. Even after agreement, product continued to be penicillin and agreement with Meiji stipulated supply of most suitable sub-cultures evolved by Meiji for purposes of augmentation of yield of penicillin. (ii) That there was no material for Tribunal to hold that area of improvisation was not part of existing business or that entire gamut of existing manufacturing operations for commercial production of penicillin in appellant s existing plant had become obsolete or inappropriate in relation to exploitation of new subcultures of high yielding strains supplied by Meiji. mere improvement in or updating of fermentation process would not necessarily be inconsistent with relevance and continuing utility of existing infrastructure, machinery and plant of appellant. (iii) That limitations placed in agreement on right of appellant in dealing with know-how and conditions as to non-partibility, confidentiality and secrecy of know-how, pertained more to use of know-how than to its exclusive acquisition. (iv) That improvisation in process and technology in some areas of enterprise was supplemental to existing business and there was no material to hold that it amounted to new or fresh venture. further circumstance that agreement pertained to product already in line of appellant s established business and not to new product indicated that what was stipulated was improvement in operations of existing business and its efficiency and profitability not removed from area of day-to-day business of appellant s established enterprise. financial outlay under agreement was for better conduct and improvement of existing business and was revenue in nature and was allowable as deduction in computing business profits of appellant. By Court : (i) It would be unrealistic to ignore rapid advances in research in antibiotic medical microbiology and to attribute degree of endurability and permanence to technical know-how at any particular stage i n this fast changing area of medical science. state-of-the-art in some of these areas of high priority research is constantly updated so that know-how could not be said to bear element of requisite degree of durability and non-ephemerality to share requirements and qualifications of enduring capital asset. rapid strides in science and technology in field should make us little slow and circumspect in too readily pigeonholing outlay, such as this, as capital. (ii) In infinite variety of situational diversities in which concept of what is capital expenditure and what is revenue arises, it is well-nigh impossible to formulate any general rule, even in generality of cases, sufficiently accurate and reasonably comprehensive, to draw any clear line of demaraction. However, some broad and general tests have been suggested from time to time to ascertain on which side of line outlay in any particular case might reasonably be held to fall. These tests are generally efficacious and serve as useful servants; but as masters they tend to be over-exacting. (iii) question in each case would necessarily be whether tests relevant and significant in one set of circumstances are relevant and significant in case on hand also. Judicial metaphors are narrowly to be watched, for, starting as devices to liberate thought, they end often by enslaving it. idea of once for all payment and enduring benefit are not to be treated as something akin to statutory conditions; nor are notions of capital or revenue judicial fetish. What is capital expenditure and what is revenue are not eternal verities but must needs to be flexible so as to respond to changing economic realities of business. expression asset or advantage of enduring nature was evolved to emphasise element of sufficient degree of durability appropriate to context. There is also no single definitive criterion which, by itself, is determinative whether particular outlay is capital or revenue. once for all payment test is also inconclusive. What is relevant is purpose of outlay and its intended object and effect, considered in commonsense way having regard to business realities. In given case, test of enduring benefit might break down." 14. In this case facts and inferences therefrom are that (i) assessee is doing business in manufacturing penicillin. It was achieving only moderate yield. By making one time payment of 5 ,000 US $ appellant received sub-culture of most suitable penicillin producing strains along with flow sheet. Thus, what assessee received was substance to augment its production in its own line of business. (ii) appellant was required to keep process, technical know-how confidential and secret and non-partibility and was not to seek any patent for process. Thus, assessee did not become owner of any process or technical know-how in its own right. expenditure was thus for use and not for acquisition. (iii) product pertained to line of business and was not for new product. 1 5 . As contrast to this in case of present assessee facts are that (i) assessee acquired entirely new line of business, running business for which payment of Rs. 2.1 5 crores was made. (ii) It acquired it to exclusion of previous owner i.e., seller. (iii) assessee was not required to follow any instruction, guidelines about secrecy, confidentiality or partibility. (iv) No technical know-how or process was involved in acquisition made by assessee. It was only two titles and right to publish two magazines as exclusive owner, for which entire payment was made. This clearly shows that case of Alembic Chemical Works Co. Ltd. (supra) is applicable but in contrast i.e., where assessee gets enduring benefit it will be capital expenditure as in case of this assessee whereas if expenditure is incurred to obtain benefit, which is not enduring, it will be revenue expenditure. Thus, where expenditure is incurred to improve existing product line and to acquire know- how, expenditure will only be revenue. It was also so held in CIT vs. South India Exports Co. Ltd. (1999) 1 55 CTR (Mad) 192 : (2000) 242 ITR 1 5(Mad). On other hand, if there was initial contribution by way of purchasing technical know-how, amount attributable to such know-how as initial contribution would not be expenditure much less revenue expenditure under s. 37(1). It is so held in Eimco KCP Ltd. vs. CIT (2000) 1 5 9 CTR (SC) 137 : (2000) 242 ITR 6 5 9 (SC). While making claim of entire sum as revenue expenditure, assessee had also relied on decision in CIT vs. Aquapump Industries (supra). In this case, facts and decision of Hon ble Madras High Court are as under : "There is no single definitive criterion which, by itself, is determinative as to whether particular expenditure is capital or revenue. "once for all" payment test is also inconclusive. What is relevant is purpose of expenditure and its intended object and effect, considered in commonsense way having regard to business realities. In given case, test of "enduring benefit" might break down. Expenditure to acquire knowledge cannot be disallowed merely because knowledge dies hard. It is only where expenditure bears on fixed capital or other capital structure of assessee that it can be regarded as capital in nature. Where expenditure, although enduring in character has its impact on running of business, there can be no doubt that it is revenue expenditure. There was agreement between assessee and T under which T agreed to allow assessee to use its brand name for production, manufacture and sale of specified products. In consideration of royalties T had agreed to allow assessee to manufacture articles for five years. T had agreed to furnish technical information pertaining to such manufacture. ITO disallowed royalty payments in asst. yrs. 1978-79, 1979-80 and 1980-81 but Tribunal allowed them. On reference : Held, that expenditure incurred although it might be enduring in character, would have impact only on running of assessee s business. It could not be said that technical know-how given in present case could not become outdated. Tribunal was right in holding that expenditure in asst. yrs. 1978-79, 1979-80 and 1980-81, incurred by assessee as royalty payments to T under agreement between assessee and T were revenue expenditure." 1 6 . Thus, in above case, technical know-how was provided to manufacture specified product and was allowed to be used only for five years. Royalty payments against such expenditure was finally allowed as revenue expenditure. Thus, facts of Aquapump Industries case (supra) are entirely different with that of case on hand. As stated earlier, present assessee acquired entire business, which was new line for assessee, it acquired, in process, right to publish two magazines. In fact, it was not expenditure but it was investment. Thus, assessee s reliance on decision and then claiming entire amount paid in purchasing new business as revenue expenditure was misplaced and incorrect. 17. MoU signed with PMM states as under : "Whereas seller owns and publishes periodical entitled Indian Architect & Builder (hereinafter referred to as title ) as described in Sch. I to MoU. seller is exclusive owner of said titles which are free from all charges, liens and encumbrances, with seller having right to sell same. Now seller has agreed to sell to purchaser said title as described above while purchaser have agreed to purchase said title from seller and use title and information in course of its business on terms and conditions hereinafter appearing. Now this MoU witnesseth and it is hereby agreed, recorded, confirmed and acknowledged by and between parties as under : buyer agrees to purchase and seller agrees to sell said title for price aggregating Rs. 1 5 lakhs (Rupees fifteen lakhs only) (shall hereinafter be called "purchase price"), free from all charges, liens and encumbrances, together with all rights and benefits attached thereto w.e.f. all charges, liens and encumbrances, together with all rights and benefits attached thereto w.e.f. first day of November, 1977. total purchase price shall be paid for use of title for publishing this journal and to provide technical knowledge and information for publishing same with right to get existing subscribers and advertisers of journal and for running of existing business. purchaser shall pay to seller total purchase price for purchase of title referred to above aggregating Rs. 1 5 lakhs (Rupees fifteen lakhs only) in following manner : sum of Rs. 4 lakhs (Rupees four lakhs only) towards advance payment o f total purchase price from date hereof upon signing of agreement, receipt of which seller hereby acknowledges. sum of Rs. 11 lakhs (Rupees eleven lakhs and fifty-four thousand only) as full and final payments towards total purchase price on 1 5 th Dec., 1997 upon buyer being satisfied about ownership of said title being free of all charges, liens and encumbrances and has right to transfer same. On signing of this MoU : (a) seller shall cease to have any proprietarial stake in said titles and it will be exclusive property of buyer, its nominee or assignee. (b) seller shall handover all relevant artworks, print blocks, all previous editions available with seller and other relevant documents, registers, computer floppies, data, etc. to buyer. (c) seller shall provide to buyer detailed list of all subscribers both present and past with their addresses within 7 days from date of execution of agreement and would pay to buyer pre-paid unfulfilled portion of subscription amount received by them so as to enable buyer to continue circulation of said title from first day of November, 1997. (d) seller shall provide to buyer detailed list of all advertiser both present and past with their addresses within 7 days from date of execution of agreement and would pay to buyer pre-paid unfulfilled portion of amount collected by them towards fulfilment of contracts pertaining to publication of advertisement with regard to issues of November, 1997 and onwards. (e) seller shall provide to buyer list of employees as detailed in Sch. II with regard to said title and all relevant details pertaining to employees. (f) employees relating to said title as detailed in Sch. II would cease to be in employment of seller w.e.f. mid-night of 31st Oct., 1997 and it would be responsibility of seller to settle all financial dues (including recovery of temporary and long-term loans) relating to said employees. (g) employees relating to said titles would be absorbed by buyer after mid-night of 31st Oct., 1997 at gross remuneration as detailed in Sch. II. buyer reserves right to re-designate such employees having regard to their existing organisation and are free to assign duties as per their requirement. buyer would not be responsible for any financial liabilities of employees pertaining to period prior to mid-night of 31st Oct., 1997. (h) seller would enter into rental contract with buyer with regard to space occupied by employees related to titles being transferred at same terms and conditions, which are presently enjoyed by title. contract would be renewed at end of three years from date hereof subject to mutual consent with 1 5 per cent increase in rental terms. seller states that there are no disputed/pending liabilities with regard to said titles prior to date hereof and undertakes to indemnify buyer all liabilities, which may arise with regard to said title pertaining to prior period to date hereof. seller would be responsible for publication of title for months of November, 1997, December, 1997 and January, 1998 at no cost basis with view to maintain continuity and provide enough time for buyer to take charge of entire operation of publication of journal." 18. From above, it is clear that assessee purchased : (i) running business, (ii) right to publish two titles, (iii) on complete and exclusive ownership basis along with all rights and benefits attached thereto. As ancillary to purchase of titles and running business, assessee also got detailed list of subscribers, advertisers and employees, who want to continue with assessee after takeover and also space on rent. Thus i n addition to title, assessee also purchased something akin to goodwill. Same customers and advertisers will remain attached to titles. 19. These facts are nowhere near to facts of cases relied upon by assessee and referred/discussed above for claim that entire outgoing is revenue expenditure. On other hand, in following cases it has been held that where entire running business is purchased outgoing will only be investment or capital expenditure : (i) Minoo F. Mehta vs. CIT (199 5 ) 127 CTR (Bom) 19 : (1996) 217 ITR 5 78 (Bom). Under s. 37(1) of IT Act, 1961, any expenditure incurred wholly and exclusively for purpose of business or profession is allowed in computing income chargeable under head Profits and gains of business or profession , provided it is not in nature of capital expenditure or personal expenses of assessee. line that divides revenue expenditure from capital expenditure is often very thin and hazy. None of tests evolved from time to time to determine what is attributable to capital and what to revenue is either exhaustive or of universal application. Each case depends on its own facts. To decide, therefore, on which side of line expenditure falls, it is necessary to look at nature of business, nature of expenditure and nature of right acquired. If it is incurred by assessee for purpose of creating, curing or completing his title to capital, it must be regarded as capital expenditure. But if it is for purpose of protecting his business, it would be considered as revenue expenditure. Moreover, it is true nature of expenditure that is relevant and not description given to it by assessee in his books of account or other documents. (ii) CIT vs. Madras Auto Service (P) Ltd. (1998) 148 CTR (SC) 398 : (1998) 233 ITR 468 (SC) general principles applicable in determining whether particular expenditure is capital or revenue expenditure are as follows : (1) Outlay is deemed to be capital when it is made for initiation of business, for extension of business, or for substantial replacement of equipment; (2) Expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with view to bringing into existence asset or advantage for enduring benefit of trade. If what is got rid of by lump sum payment is annual business expense chargeable against revenue, lump sum payment should equally be regarded as business expense, but if lump sum payment brings in capital asset, then that puts business on another footing altogether; (3) Whether for purpose of expenditure, any capital was withdrawn, or, in other words, whether object of incurring expenditure was to employ what was taken in as capital of business. Again, it is to be seen whether expenditure incurred was part of fixed capital of business or part of its circulating capital. (iii) CIT vs. W.S. Insulators of India Ltd. (2000) 243 ITR 348 (Mad) "The assessee entered into agreement with Swiss company for manufacture of insulators, lightning arrestors, coupling capacitors, capacitive voltage transformers and line traps. Under agreement, know-how was acquired for manufacture and which had to be provided by Swiss company which also granted licence to assessee to manufacture products then based on its drawings and market same in India and in consultation with Swiss firm also export products so manufactured. products were entirely new products. Held : that what was done by assessee in this case was to acquire information and drawings required for setting up completely new plant with completely new process for manufacture of completely new product. payments made in agreement towards revenue and capital expenditure had been categorised by parties themselves, revenue part being characterised as royalty and capital part being provided for as payment in lumpsum for know-how and information. Such know-how and information having been provided only after receipt of that payment. Hence, out of technical know-how fee of Rs. 1,92,14 5 paid by assessee to Swiss company under agreement dt. 18th Jan., 1973, during asst. yrs. 1977-78 and 1978-79, twenty per cent of that amount was allowable as revenue expenditure and balance of 80 per cent of that amount should be disallowed as capital expenditure." (iv) Eimco KCP Ltd. vs. CIT (2000) 1 5 9 CTR (SC) 137 : (2000) 242 ITR 6 5 9 (SC) "A plain reading of s. 37 of IT Act, 1961, makes it clear that it is residuary provision and allows expenditure, not covered, under ss. 30 to 36 in computing income chargeable under head Profits and gains of business or profession , on fulfilment of other requirements, namely, (i) expenditure should not be in nature of capital expenditure or personal expenses of assessee; (ii) it should have been laid out or expended wholly and exclusively for purposes of business or profession; (iii) it should have been expended in previous year. appellant-assessee was company registered under Indian Companies Act. It was incorporated in year 196 5 . Two companies, Eimco, American company, and K.C.P. Ltd., Indian company, promoted appellant-company. authorised capital of appellant was Rs. 1,00,00,000 consisting of 10,00,000 equity shares of Rs. 10 each. Each of them agreed to subscribe Rs. 4,70,000, out of which each would have to pay initially sum of Rs. 2,80,000 towards its contribution. Towards its share, Eimco contributed technical know-how. It valued know-how, etc., at sum of Rs. 2,3 5 ,000 and paid balance in cash as its contribution. board o f directors of appellant allotted equity shares of Rs. 2,3 5 ,000 being o f directors of appellant allotted equity shares of Rs. 2,3 5 ,000 being value of know-how, to Eimco by resolution passed on 29th April, 1968. In asst. yr. 1969-70, appellant claimed deduction of Rs. 2,3 5 ,000 as revenue expenditure paid to Eimco towards consideration for supply of technical know- how. ITO treated that amount as capital expenditure and allowed 1/14th of said amount as allowable expenditure under s. 3 5 of Act. appellant challenged that order before AAC on ground that whole expenditure ought to have been allowed as revenue expenditure. What in effect was done by appellant in allotting equity shares of Rs. 2,80,000 to Eimco, was to reimburse contribution by Eimco by way of know- how, which could never be treated as expenditure, much less expenditure laid out wholly and exclusively for purposes of business of appellant. It was not case where after incorporation, appellant-company in course of carrying on its business, spent said amount for acquiring any asset. High Court had rightly concluded that allotment of equity shares by appellant to Eimco, in circumstances of case, could not be termed as expenditure, much less revenue expenditure." 20. In all above cases, tests, which have been laid down to come to conclusion that expenditure is capital in nature are : (i) expenditure incurred to set up business or acquiring new business or another business in same line. (ii) To commence business. (iii) To acquire benefit of enduring nature or for perpetuity. (iv) To acquire asset. (v) To acquire source of generating income. All tests lead to one inescapable conclusion that what assessee had spent was for acquiring new business/new assets enduring benefit and source of income. From all tests, expenditure incurred could not have been considered under s. 37(1) for which claim was made. One of essential conditions for allowability of claim under s. 37(1) is that expenditure should not be of nature of capital expenditure. Hence, claim of assessee for Rs. 2.1 5 crores made in return was not at all admissible as it was clearly capital expenditure incurred for acquiring new business, advantage of enduring benefit, source of income and acquisition of disposable rights in title. 21. Now let us see whether issue is debatable. As already held above that decisions in cases of Alembic Chemical Works Co. Ltd. (supra) and Aquapump Industries (supra) are not even remotely connected with assessee s case. issue on which Tribunal have expressed opinion in favour of assessee or which has been regarded as debatable by any Court would certainly be debatable on which there can be another opinion. There cannot be second opinion, and has not been, on facts of assessee s case, that expenditure incurred on acquiring new business, source of income, asset and benefit of enduring nature could be revenue in nature. 22. In one of cases relied upon by assessee i.e., Rupam Mercantile Ltd. vs. Dy. CIT (supra) decided by Third Member, question involved was whether penalty under s. 271(1)(c) can be imposed where assessee had claimed entire interest expenditure in one year on issue of debentures whereas such expenditure was held to be deferred and allowable in six years, on basis of decision of Hon ble Supreme Court in Madras Industrial Investment Corpn. Ltd. vs. CIT (1997) 139 CTR (SC) 555 : (1997) 22 5 ITR 802 (SC). assessee contested case and lost in Tribunal. Penalty was levied for wrong claim for filing inaccurate particulars of income. Hon ble JM confirmed penalty but Hon ble Vice President/AM cancelled penalty and Hon ble President as Third Member concurred with Hon ble Vice President. penalty was finally cancelled on basis of facts of that case. assessee-company in that case had agreed as per contract to give upfront discount of Rs. 62 per debenture and secondly, Hon ble Gujarat High Court had admitted appeal of assessee under s. 260A on quantum that substantial question of law arises in this case. Hon ble President, Tribunal as Third Member, held that contractual agreement entered before decision of Hon ble Supreme Court in case of Madras Industrial Investment Corpn. Ltd. (supra) was to be acted upon and contractual liability can be always be claimed in return of income. para 3 contractual liability can be always be claimed in return of income. para 3 5 of this order is as under : "3 5 . plea or claim which is held by Hon ble High Court to give rise to substantial question of law, cannot be treated to be frivolous or mala fide as to attract levy of penalty under s. 271(1)(c) of IT Act. What has assessee concealed. assessee agreed to pay Rs. 62, i.e., entire interest on debenture of face value of Rs. 100 on date of issue of debentures. interest paid is supported by agreement and there is no dispute on this. interest paid was subjected to deduction of tax at source and tax deducted was duly deposited in Treasury as required by statutory provision. Thus agreement was carried in letter and in spirit and there is no avoidance of payment of tax as far as assessee is concerned. Information about interest paid is duly disclosed in return of income and in statement of account, appropriate note was made to draw attention of Revenue authorities to deduction claimed. Evidently no attempt was made by assessee to conceal any income or furnish inaccurate particulars of income. It is nobody s case that deduction of interest was not supported by contract or such contract was not filed during course of assessment proceedings. It is, therefore, difficult to conclude that assessee failed to substantiate its claim during course of assessment proceedings and, therefore, Expln. 1 to s. 271(1)(c) of IT Act was attracted in this case. said Explanation had no application for above short reasons apart from elaborated reasons given by learned Vice President in his proposed order." 23. Thus, in Rupam Mercantile Ltd. s case (supra) that assessee had case at time of filing of return that entire expenditure on discount can be claimed in one year, by virtue of contractual agreement to pay upfront discount of Rs. 62 per issue. This fact was also recognized by Hon ble Gujarat High Court by admitting appeal on substantial question of law. However, in present case there is no scope of any debate. assessee did not consider that it has any case for even not filing appeal before CIT(A). Merely because assessee holds view contrary to establish legal views and decisions, would not lead to belief that there is also second opinion possible and assessee had acted bona fide thereon. opinion based on incorrect application of provisions of Act or of judicial pronouncements cannot become basis of claim and deduction and computation of income. If that is so, then correct computation of income and allowance of claims/deduction in accordance with law can only be done when assessment is undertaken by issue of notice under s. 143(2). taxpayer will, before that, be at liberty to make claims of allowance and deduction as they think on basis of opinion they form by incorrect appreciation and application of law and decisions. Such attempts will, if become common, have serious repercussions on revenue administration. In environment where legislature has bestowed faith on taxpayer by enacting provisions of s. 143(1) and revenue administration has declared policy to accept 100 per cent returns and scrutinise only 2 per cent thereafter, duty is cast on taxpayers to claim deduction/allowances in accordance with provisions of law and on basis of pronounced judgments fitting on facts of case. It will not be proper if claims are made by distorting/or not disclosing full facts and on basis of incorrect application of Court decisions. Where assessments are likely to be accepted under s. 143(1), 98 per cent probability is that such wrong claim will be accepted. And only if by chance, fall in 2 per cent category of scrutiny, they will surrender or not contest claim. It has to be necessarily examined whether claim was bona fide so as not to attract charge of concealment. 24. In this background, it has to be seen whether assessee has disclosed all material facts relating to claim. We have already reproduced, note 5 given in computation sheet of income. Audit report was also annexed with return. facts missing from return filed are : (i) To whom payment of Rs. 2.1 5 crores was made, when and how ? (ii) Copies of agreements with PMM (which were given at time of scrutiny assessment under s. 143(3) only). (iii) That assessee is purchasing new business. (iv) names of journals and me fact that titles were purchased exclusive ownership for all time to come along with all paraphernalia of employees and space on rent. 2 5 . Now it has to be seen as to whether claim of assessee is bona fide. We feel it is not. reasons are as under : (a) assessee declared only half truth that it is purchasing "publishing rights of journal, right to customers and subscribers, use of trademark." other half as shown above viz., (1) to whom payment was made and when, (2) copies of agreements/MoU, (3) that assessee is purchasing new business, (4) that it is purchasing ownership of titles along with incidental paraphernalia were kept withheld, ( 5 ) period for which such rights were purchased. (b) claim was against explicit opinion of auditors according to which only 1/3rd could be claimed this year. Hence, assessee was apparently conscious of wrong claim. If claim would have been restricted to one-third as per auditor s advice, there could be some semblance of bona fide even though opinion of auditors is not according to law as entire expenditure is prima facie disallowable. (c) Even on basis of facts declared by assessee, expenditure would only be capital as note below "computation sheet of income" does not show period and nature and does not indicate that there was acquisition of absolute rights and not merely use of right. (d) Facts were shown half and distorted so as to make them appear that they fit into decisions in Alembic Chemical Works Co. Ltd. s case (supra) and Aquapump Industries case (supra). Had note mentioned in return that it is purchasing new running business, above decision would not have any application and it could not have been claimed as revenue expenditure. (e) There is fair probability that return would pass through summary assessment. 26. Now let us see, whether case of assessee is covered under Explanation to s. 271(1)(c). section and Explanation read as under : "271. (1) If Assessing Officer or CIT(A) in course of any proceedings under this Act is satisfied that any person (a) and (b)** (c) has concealed particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, Explanation 1. Where in respect of any facts material to computation of total income of any person under this Act, (A) such person fails to offer explanation or offers explanation which is found by Assessing Officer or CIT(A) to be false, or (B) such person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to same and material to computation of his total income have been disclosed by him, then, amount added or disallowed in computing total income of such person as result thereof shall, for purposes of cl. (c) of this sub- section, be deemed to represent income in respect of which particulars have been concealed." 2 7 . Thus, it has to be seen as to whether assessee has furnished (i) inaccurate particulars and submitted explanation and (ii) whether such explanation is bona fide and (iii) all facts relating to computation of income have been disclosed by assessee. facts, which are not accurate, will be inaccurate. Accurate facts are those to which if further facts are supplemented would not alter decision. Facts disclosed would be inaccurate if on further supplementing facts, decision would be reversed. Accurate facts also mean full and true facts, which have material bearing on making computation of income. According to us, facts disclosed by assessee were half truth and hence not accurate i.e., inaccurate. It is already held that claim is not bona fide. 28. On basis of facts disclosed in return, claim was not tenable unless it is assumed by AO on basis of note appended to computation sheet that titles were purchased for limited period and would revert back to owner after lapse of that period. assessee made Revenue to believe that purchase of titles was for limited period and not in perpetuity. This is conscious act because assessee made Revenue to believe that by relying on Alembic Chemical Works Co. Ltd. s case (supra), titles in journals were acquired for use only for limited period and would revert back to original owner as facts were in Alembic Chemical Works Co. Ltd. s case (supra). Had assessee disclosed that rights in journal were purchased in perpetuity as absolute owner to exclusion of previous owner, ratio of Alembic Chemical Works Co. Ltd. s case (supra) could not have been applied. claim is made on basis of filing inaccurate particulars and against advice of auditors. When full particulars of claim are brought on record, no debatable issue would arise. No two views were possible and, hence assessee chose not to contest treatment that it is capital expenditure. 29. assessee had offered explanation that his claim is covered by decisions of Alembic Chemical Works Co. Ltd. s case (supra) and Aquapump Industries case (supra). Such explanation is not substantiated during scrutiny assessment inasmuch as he could not prove that facts of Alembic Chemical Works Co. Ltd. s case (supra) and Aquapump Industries case (supra) are similar to his own case. Secondly, claim was not found bona fide as mentioned in preceding paras. Further, it is also mentioned earlier that all facts relating to claim were not disclosed with return. In this regard, our view is that it is not sufficient that all facts are disclosed only when called for to do so when notice is issued under s. 143(2). In fact assessee is duty bound to disclose relevant facts with return. In present case, assessee had withheld vital facts, which had bearing on taking decision that entire claim was capital in nature and was not allowable in one year. claim in return would have been bona fide, had additional facts discovered on scrutiny were not in knowledge of assessee. This is however not so. 30. In CIT vs. Chemiequip Ltd. (2003) 182 CTR (Bom) 144 : (2004) 26 5 ITR 26 5 (Bom) claim of deduction under s. 80HHC was withdrawn when ITR 26 5 (Bom) claim of deduction under s. 80HHC was withdrawn when assessee was asked to file return under s. 148. It was held to be case of filing inaccurate particulars. Though in final analysis loss was reduced from loss declared in original return, Hon ble Bombay High Court confirmed penalty. 31. It is held in KC Builders vs. Asstt. CIT (2004) 186 CTR (SC) 721 : (2004) 26 5 ITR 5 62 (SC) that word concealment carries element of mens rea. Therefore, mere fact that figure of some particulars have been disclosed, even if it takes out case from purview of non-disclosure, it may not by itself take out case from purview by furnishing inaccurate particulars. It is in same manner that mere mention of item of receipt neither amounts to concealment nor deliberate furnishing of inaccurate particulars of income unless and until, there is some evidence to show or some circumstances found from which, it can be gathered that non-disclosure was attributable to him to intentional desire on part of assessee to hide or conceal income so as imposition of tax thereon. In instant case, it is prima facie, clear that in order to avoid treatment of expenses as capital, assessee withheld from Department from its return of income that it is purchasing entire business and rights in title in perpetuity to exclusion of previous owner. 32. In Electrical Agencies Corpn. vs. CIT (2001) 171 CTR (Del) 5 21 : (2002) 2 5 3 ITR 619 (Del) Hon ble Delhi High Court held that Tribunal had taken note of factual aspects and noted that claim for deduction was not tenable and genuine. Therefore, assessee could not be said to have reverted presumption, which arose against it in light of Explanation to s. 271(1)(c) of IT Act, 1961. penalty for concealment was held to be valid. 33. In CIT vs. Coromandel Indag Products (P) Ltd. (2003) 183 CTR (Mad) 90 : (2004) 26 5 ITR 611 (Mad) claim under s. 3 5 (1)(iv) was made which was found to be incorrect, hence, levy of penalty was justified. 34. In Addl. CIT vs. Jeevan Lal Sah (1994) 117 CTR (SC) 130 : (1994) 20 5 ITR 244 (SC) on which Revenue has relied in grounds of appeal, it has been held that burden of proof has been shifted on assessee to prove that failure to return correct income did not arise from fraud or gross or wilful neglect. In present case, it cannot be said that burden is discharged. 3 5 . In CIT vs. Smt. Vilasben Hasmukhlal Shah (1991) 99 CTR (Guj) 1 5 1 : (1991) 192 ITR 214 (Guj) it has been held that where income is shown in Part IV of return and claimed to be exempt as prize money in cross-word competition, it does not amount to rebutting presumption that assessee furnished inaccurate particulars of income. 36 . Now coming to point that AO has allowed 1/14th of expenditure under s. 3 5 A, hence there was element of allowability and hence bona fide of assessee. We are of view that if ITO has in his wisdom covered case under s. 3 5 A, treating claim as that of copyright, it does not change nature of expenditure which is basically capital. Only for this reason claim does not become bona fide. For deduction to be bona fide made, it should be supported by express provisions of law or by accounting standards or by decisions of High Court/Hon ble Supreme Court, if facts matrix is similar. If claim is made by stating half truth thereon and not disclosing relevant and material facts, disclosure would not be bona fide. 37. Explanation used in cl. (c) of s. 271(1) is has concealed particulars of his income or furnished inaccurate particulars of such income . Thus, both in case of concealment and inaccuracy, phrase particulars of income has been used. legislature has not used words concealed his income . From this it would be apparent that penal provision would operate when there is failure to disclose fully or truly all particulars. words particulars of income refer to facts which lead to correct computation of income in accordance with Act. So when any fact material to determination of item as income or material to correct computation is not filed or that which is filed is not accurate then assessee would be liable to penalty under s. 271(1)(c). There are two aspects of guilt. One is mens rea and other is actus rea . In former, mental element of guilt is involved and in other, there is act of commission or omission leading to breach of duty with or without guilty mind. When one has to prove offence for purposes of prosecution, mental element of guilt has to be established. This is necessary when there is n offence against State. But when there is disregard to statutory provision, or there is avoidance of civil liability, it is enough if AO is able to establish that facts which were required to be disclosed fully and truly for determination of tax liability has been disclosed either in part or are not accurate in sense that if remaining part of facts i.e., accurate and full facts are brought on record then decision arrived at by assessee about claim or about taxability of item would go against assessee. In present case, assessee disclosed those parts of total facts, which would justify its claim and bring some semblance with Alembic Chemical Works Co. Ltd. s case (supra). It clearly showed actus rea , if not complete mens rea . If case of assessee does not fit completely in first part i.e., concealed particulars of income which embraces within its scope some element of mens rea as word concealed has been used in that part in cl. (c) of s. 271(1) his case would certainly fall within domain of actus rea as he has filed inaccurate and incomplete particulars . 38. Thus, we hold that assessee has filed inaccurate particulars for claiming deduction and explanation furnished was not bona fide. We therefore, uphold levy of penalty and reverse order of CIT(A). 39. In result, appeal of Revenue is allowed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. JASUBHAI BUSINESS SERVICE (P) LTD.