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Issues: Whether the contribution made by the assessee for building a new bridge is capital or revenue expenditure.
Summary: The High Court of Madras considered the issue of whether the contribution made by the assessee for building a new bridge should be classified as capital or revenue expenditure. The Revenue contended that the contribution was capital expenditure, while the Tribunal held it to be revenue expenditure. The court referred to the Supreme Court case of L. H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT [1980] 125 ITR 293, which established that certain constructions, like roads, that facilitate business operations do not result in the acquisition of tangible or intangible assets and are not capital in nature. The court noted that the bridge in question was built by the Government, and the assessee did not gain ownership rights over it. The payment made by the assessee was considered an outgo without any addition to its assets' value. The court found that the contribution towards the bridge was akin to the situation in the L. H. Sugar Factory case, where such expenses were treated as revenue expenditure. Therefore, the court upheld the Tribunal's decision that the amount should be treated as revenue expenditure for the assessment year 1991-92, and dismissed the petitions without the need for a reference.
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