9911796707
TMI Blog1980 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate granted by the High Court at Calcutta under s. 66A(2) of the Indian I.T. Act, 1922, is directed against the judgment dated August 5, 1971, of that High Court disposing of an income-tax reference. The respondent-assessee is a registered firm and owns several collieries in West Bengal and Bihar. One of the collieries is known as the South Samla Colliery. The South Samla Colliery was under military occupation from 1942 and was released in 1955. During the period of military occupation the assessee incurred expenditure on account of minimum royalty payable in respect of the colliery, the surface rent and salaries for the watch and ward employees. The expenditure was allowed in income-tax proceedings as a business expenditure. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e colliery. He continued, however, carrying on his business in coal and working other collieries during that period. While the South Samla Colliery remained under military occupation the assessee incurred expenditure on payment of surface rent and minimum royalty in respect of that colliery and also on account of salary for the watch and ward staff. The expenditure had been claimed and allowed as business expenditure of the assessee. After the colliery was handed over to the assessee upon derequisition, the assessee incurred, during the relevant period, an expenditure of Rs. 1,61,742 in renovating the building, reconditioning the machinery and clearing the land of debris accumulated over a number of years. The expenditure of Rs. 1,61,742 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the nature of the expenditure is vitiated. The contention is without substance. The facts on which the High Court has relied are admitted between the parties or are facts found by the I.T. authorities. We have no hesitation in rejecting the first contention. The second contention is that the claim of the assessee must be considered with reference to s. l0(2)(v) and not s. 10(2)(xv) of the Act. It is urged that if s.10(2)(v) is the relevant clause, being the specific provision in respect of expenditure on current repairs to buildings and machinery, there is no justification for relying on s. 10(2)(xv). Section 10(2)(xv) is a residuary clause, and deals with expenditure not being an allowance of the nature described in any of the preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies that repairs, other than current repairs, will not qualify for the benefit of that principle. We must remember that on accepted commercial practice and trading principles an item of business expenditure must be deducted in order to arrive at the true figure of profits and gains for tax purposes. The rule was held by the Privy Council in CIT v. Chitnavis [1932] 2 Comp Cas 464 ; LR 59 IA 290 ; AIR 1932 PC 178 to be applicable in the case of losses, and it has been applied by the courts in India to business expenditure incurred by an assessee. Motipur Sugar Factory Ltd. v. CIT [1955] 28 ITR 128 (Pat) and Devi Films Ltd. v. CIT [1970] 75 ITR 301 (Mad). The principle found favour with this court in Badridas Daga v. CIT [1958] 34 ITR 10, 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach case. We need not refer to all of them. On the facts of the present case, it seems sufficient to mention the tests laid down by this court in Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34. The business of the assessee in the present case was coal-mining, and it was carried on by the operation of a network of collieries. Each colliery was a unit of production. While the several units of production continued to be employed and the business continued to be carried on, one alone of the units, the South Samla Colliery was compelled to suspend production. The suspension was expected to be of temporary duration, because the property was merely requisitioned for military use, it was not acquired. As soon as the property was de-requisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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