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Issues involved: Determination of whether the expenditure on barbed wire fencing is an allowable revenue expenditure and entitlement to depreciation on the cost incurred.
Issue 1 - Expenditure on Barbed Wire Fencing: The assessee, a company, claimed an expenditure of Rs. 20,246 for putting up barbed wire fencing at its factory premises. The Income-tax Officer initially disallowed the claim, deeming it of capital nature. However, the Appellate Assistant Commissioner accepted the claim, stating the fencing was necessary to prevent various issues such as entry of animals, theft, and disputes with neighbors. The Tribunal, on the other hand, viewed the expenditure as securing an enduring advantage, although not a capital asset. The assessee argued that the expenditure was on revenue account, citing the Supreme Court's decision in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, emphasizing that the fencing did not add value to capital assets. The court agreed with the assessee, concluding that the expenditure facilitated efficient business operations and was thus of revenue nature. Issue 2 - Entitlement to Depreciation: As the first issue was resolved in favor of the assessee, the question of entitlement to depreciation on the cost of the fencing did not need to be addressed, and thus remained unanswered. In conclusion, the court held that the expenditure on barbed wire fencing was of revenue nature, allowing the assessee's claim. The second issue regarding depreciation was not addressed due to the resolution of the first issue.
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