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Issues involved: Deduction of service charges for laying service lines claimed by the assessee u/s 33,228 during the assessment year 1973-74.
Summary: The High Court of Punjab and Haryana considered the case of an assessee-company involved in the business of growing and manufacturing tea, which claimed a deduction of Rs. 33,228 paid to the Assam Electricity Board against service charges for laying service lines. The Income Tax Officer (ITO) disallowed the claim, leading the assessee to appeal before the Appellate Authority Commissioner (AAC) and subsequently to the Income-tax Appellate Tribunal, Amritsar Bench. The Tribunal, relying on a Supreme Court judgment, accepted the appeal and allowed the deduction claimed by the assessee. The Commissioner of Income-tax, Amritsar, raised a question of law regarding the allowability of the sum paid by the assessee to the Assam Electricity Board as a revenue expenditure. In analyzing the case, the High Court referred to the judgment in Empire Jute Co. Ltd. v. CIT, where the Supreme Court emphasized that certain expenditures, even if enhancing productivity, could still be considered revenue expenditure if they are integral to the profit-earning process and not for acquiring permanent assets. The Court noted that the service lines laid by the Assam Electricity Board did not come to vest in the assessee, indicating that the expenditure was aimed at augmenting productivity rather than capital investment. Citing precedents such as CIT v. Kanodia Cold Storage and others, the Court affirmed that expenses incurred for improving electricity supply were considered revenue in nature. Based on the above analysis, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue.
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