1975 (7) TMI 6 - HC - Income Tax

Summary

Issues involved: Assessment of deductions claimed by Amalgamated Jambad Syndicate Pvt. Ltd. for expenses incurred for removal of overburden for the assessment years 1958-59, 1959-60, and 1960-61.

1958-59 Assessment Year: The Income-tax Appellate Tribunal held that the expenditure for removal of overburden was a revenue expenditure, disagreeing with the ITO's view that it represented capital expenditure. The Tribunal emphasized that in open quarry working, the total expenditure on removing overburden and coal represented the actual cost of recovering coal. The Tribunal's decision was based on established principles in open quarry operations.

1959-60 Assessment Year: The Tribunal again ruled in favor of the assessee, holding that the expenses for removal of overburden were revenue expenditure and not capital expenditure. The Tribunal rejected the ITO's analogy of overburden removal to sinking pits, emphasizing that the removal of overburden was necessary for raising coal and did not provide an enduring advantage.

1960-61 Assessment Year: The Tribunal maintained its stance that the expenses for removal of overburden were revenue expenditure and not capital expenditure. The Tribunal agreed with the findings of the AAC that the expenditure was necessary for raising coal and did not confer a lasting benefit akin to sinking pits.

The High Court considered English legal precedents cited by the revenue's counsel, Mr. Suhas Sen, to argue for treating the expenditure as capital. However, the Court disagreed with this contention. It held that the removal of overburden and coal extraction were continuous processes, not comparable to opening new pits. The Court distinguished between capital and revenue expenditure based on whether the expense aimed at acquiring an enduring asset or was for running the business to generate profits, citing the Supreme Court's decision in Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34.

In conclusion, the High Court answered all questions in favor of the assessee, affirming that the expenses for removal of overburden were revenue expenditure. No appearance was made on behalf of the assessee, and no costs were awarded in the case. Judge Deb concurred with the judgment.