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Issues Involved:
The judgment involves determining the permissibility of deductions claimed as revenue expenditure for the assessment years 1973-74 and 1972-73. Assessment Year 1973-74: The assessee claimed expenses for labour welfare fund quarters, which the Income-tax Officer rejected as being part of the cost of construction. The Appellate Assistant Commissioner, relying on precedent, deleted the additions. The Appellate Tribunal upheld this decision, emphasizing the absence of asset acquisition by the assessee due to statutory obligations. The Revenue argued that the expenditure represented a capital expense due to the cost of construction, but the court disagreed. Citing the Ministry of Labour's low-cost housing scheme, it determined the expenditure was not on capital account as it did not result in asset creation. The Madras High Court case of CIT v. T. V. Sundaram Iyengar and Sons was referenced to support this view. Assessment Year 1972-73: Similar to the previous year, the deduction claimed for labour welfare expenses was contested by the Revenue. The court reiterated that when a trader incurs expenditure due to statutory obligations for trade continuation, resulting in no asset creation for the trader, it qualifies as revenue expenditure. The decision in CIT v. Amalgamated Development Ltd. was cited to emphasize that revenue expenditure is not limited to trade operations directly. The court held that the expenditure contributed to the welfare of the assessee's labor force, making it a valid claim under labour welfare account. Conclusion: Both questions regarding the permissibility of deductions for the assessment years 1973-74 and 1972-73 were answered in favor of the assessee. The court emphasized that when statutory obligations compel expenditure for trade continuation without asset creation, such expenditure qualifies as revenue expenditure. No costs were awarded in this matter.
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