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TMI Blog1965 (8) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... nes required the stowing of certain galleries near the pitmouth to be done before permission for working the colliery during the accounting year could be given, and, accordingly, the assessee expended the aforesaid amount on stowing for being able to work the colliery. In these circumstances, the assessee claimed that the aforesaid expenditure having been incurred for the purpose of its business was revenue expenditure and fell within section 10(2)(xv) of the Income-tax Act, 1922. The Income-tax Officer as well as the Appellate Assistant Commissioner on appeal by the assessee having held that the expenditure in question was in the nature of capital expenditure and was thus not a deductible allowance, the assessee preferred an appeal to the Income-tax Appellate Tribunal which allowed the appeal and held as follows: "Stowing is an operation carried out in the process of extraction of coal and unless it is carried out extraction of coal is not possible irrespective of the fact whether depillaring has been done or not in this year. This expenditure is, in our opinion, a revenue expenditure, as it is necessary for the purpose of extraction of coal." At the instance of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid, it should be held that the expenditure incurred on stowing in the present case was in the nature of capital expenditure and not revenue expenditure. According to the assessee, however, looking at the matter in the context of business necessity or expediency, as it must be, the expenditure in question, not having been incurred "with a view" to bringing into existence any asset or advantage for the enduring benefit or otherwise of the business, but having been incurred as an integral part of the profit-earning process by the assessee-company during the year and being really in the nature of operational expenses, was attributable to revenue, and not to capital. Now it is well settled that where the ultimate finding on an issue was by way of an inference to be drawn from the facts found, on the application of any principle of law, a mixed question of law and fact arises; the inference itself, in such a case, was a question of law and was open to review by this court. Whether a certain expenditure was of the nature of capital or revenue character has to be determined with reference to certain well-recognised tests as might be applicable to the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness point of view." It is, no doubt, true that the Supreme Court in that case approved of and applied the test contained in the aforesaid dictum of Lord Cave, but it will be seen that the facts of the case before the Supreme Court were quite dissimilar to those of the instant case and thus the fact that the same test was applied by the Supreme Court as was applied by the House of Lords as per the dictum of the Lord Chancellor is of no assistance to the department. In the case before the Supreme Court deduction was being claimed in respect of payment by the assessee-company, a lessee of lime-stone quarries, to the Government who were the lessors, in consideration of the Government entering into certain covenants which ensured elimination of competition in the lessee's field of operation for the whole of the period of the lease, that is, for 20 years. This claim of the assessee was rejected by the Supreme Court on the ground that the expenditure had been incurred with a view to bringing into existence an asset or advantage which was to ensure for the whole period of the lease, and thus came well within the test laid down by Viscount Cave. The case of Atherton v. British ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit-earning?" A distinction has been made in this Privy Council case between the acquisition of an income-earning asset and the process of the earning of the income. The present case falls in the latter category. The cases to which we have referred and many more have been all considered by the Supreme Court in the case of Assam Bengal Cement Company Ltd. [1955] 27 I.T.R. 34 (S.C.), from which we have set out above the relevant extracts and it follows that if the expense was not made with a view to acquiring an enduring material asset or advantage, it will not be a capital expense. Indeed, it should be remembered in connection with Viscount Cave's speech that the expenditure is attributable to capital if it be made "with a view to bringing an asset or advantage into existence." It is, however, not necessary, as was pointed out by Romer L.J. in the case of Anglo-Persian Oil Company v. Dale [1931] 16 Tax Cas. 253, 274, that the expenditure should have that result; it is the object alone that counts. Likewise, the mere fact that an essentially operational expense has in fact resulted in the coming into existence of some advantage which is going to ensure for several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, as also the aim and object with which it was incurred, we have no hesitation in holding that the sum of money spent on the stowing was by way of revenue disbursement and the question referred must be answered in favour of the assessee. A brief mention of the two cases, viz., that of the Supreme Court, Assam Bengal Cement Company Ltd. v. Commissioner of Income-tax [1955] 27 I.T.R. 34 (S.C.), and of the House of Lords, Atherton v. British Insulated and Helsby Cables Ltd.**, which were sought to be relied on by the department, has already been made and it has been shown how they are distinguishable from the present case. The same is the position with regard to the other cases cited by the learned counsel for the department. They may, however, be briefly noted. One of those is again a decision of the House of Lords in Bean (H.M. Inspector of Taxes) v. Doncaster Amalgamated Collieries Ltd. [1946] 27 Tax Cas. 296 In this case the colliery company had paid a contribution towards a capital scheme which was intended to counteract or remedy the subsidence caused by the company's workings. The test laid down by Viscount Cave in Atherton's case [1925] 10 Tax Cas. 155 was appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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