TMI Blog1987 (3) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... nal at the instance of the Commissioner of Income-tax and Misc. Civil Case No. 50 of 1982 is reference made by the Tribunal at the instance of the assessee. So, both these Misc. Civil Cases are being decided by a common order. In Misc. Civil Case No. 49 of 1982, the following question of law has been referred to this court for its opinion : " Whether, on the facts and in the circumstances of the case, expenditure incurred on huts, pipes and drain cuttings could be treated as revenue expenditure ? " In Misc. Civil Case No. 50 of 1982, the following questions of law have been referred to this court for its opinion: " 1. Whether, on the facts and in the circumstances of the case, expenditure incurred on tram line Rs. 8,307, pumping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure incurred by the assessee on the first three items was capital in nature; whereas the expenditure incurred on the last three items was revenue expenditure. Having heard the learned counsel for the parties, we are of the opinion that before answering the questions referred to above, it is necessary to keep in mind the broad guidelines laid down in various decisions for determining the question as to whether a particular expenditure comes under the category of capital expenditure or revenue expenditure. In CIT v. J. A. Trivedi Bros. [1979] 117 ITR 983 (Bom), it was held that the expenditure incurred by the assessee, whose business consisted of mining manganese and coal, on earth cutting operations amounted to revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id of by a lump sum payment is an annual business expense chargeable against the revenue, the lump sum payment should equally be regarded as a business expense, but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether. Thus, if labour saving machinery was acquired, the cost of such acquisition cannot be deducted out of the profits by claiming that it relieves the annual labour bill: the business has acquired a new asset, that is, machinery. Aggrieved by the judgment of the High Court in Kalyanji Mavji Co. [1973] 87 ITR 228 (Cal), the Commissioner of Income-tax, West Bengal, preferred an appeal to the Supreme Court. The appeal was dismissed by the Supreme Court, see [1980] 122 ITR 49, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant period only for carrying out the mining operations. In this connection, the assessee brought to our notice a decision of the Supreme Court in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, where it was held by the Supreme Court that there may be cases where expenditure even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principles laid down in this test. 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 disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining for stowing operation was allowable as business expenditure inasmuch as stowing was an operation carried out in the process of extraction of coal and unless it was carried out, extraction of coal was not possible irrespective of whether depillaring had been done or not and the expenditure on this item has to be treated as revenue expenditure. Fault-stone cutting, as pointed out above, is an operation for removing obstruction in the course of mining. Unless the obstruction is removed, it would not be possible to carry on the mining operations. In regard to the expenditure incurred on huts, we may point out that as is apparent from the statement of facts attached to the grounds of appeal, it appears that the expenditure was incurred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure may be said to be erroneous. In view of the aforesaid discussion, our answer to the question referred to us in Misc. Civil Case No. 49 of 1982 is that on the facts and in the circumstances of the case, the expenditure incurred on huts, pipes and drain cuttings was rightly treated as revenue expenditure. Our answer to question No. 2 referred to us in Misc. Civil Case No. 50 of 1982 is that on the facts and in the circumstances of the case, the expenditure incurred on tram line Rs. 8,307, and pumping set Rs. 9,911, has to be treated as capital expenditure and has rightly been so treated by the Tribunal. As regards the expenditure of Rs. 12,597 incurred on fault-stone cutting, we are of the opinion that the said expenditure, on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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