9911796707
TMI Blog1968 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... of the statement of the case, wherein the facts are stated : " The assessee owns a brick-kiln. For the purpose of extracting earth for the manufacture of bricks, the assessee took on lease certain pieces of land for a period of ten years. An English translation of one of the lease deeds along with supplement thereof is annexed herewith as annexure ' A ' and forms part of the case. We are told that the other leases were also on the same terms. The lease money of Rs. 5,934 was debited in the trading account and was claimed as a revenue expense incurred wholly and exclusively for the purposes of the business. The Income-tax Officer allowed one-tenth of the claim and disallowed the balance in the view that proportionate expenses of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 to Namani 2028 without any interference on my part. During this period I shall have no concern with this land." The object of the lease was either to dig 5 ft. deep for manufacturing bricks or for cultivation purposes. The period of the lease was 10 years. After the expiry of the period of 10 years, the land was to revert back to the owner. The Income-tax Officer allowed one-tenth of the expenditure of the lease as revenue expense and the remaining nine-tenth was to be distributed in the remaining nine years. On the assessee's appeal, the Appellate Assistant Commissioner came to the conclusion that the Income-tax Officer was wrong in allowing one-tenth as revenue expenditure. According to the Appellate Assistant Commissioner, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truly enunciates the principles which emerge from the authorities. In cases where the expenditure is made for the initial outlay or for the extension of a business or a substantial replacement of the equipment, there is no doubt that it is capital expenditure. A capital asset of the business is either acquired or extended or substantially replaced and that outlay whatever be its source whether it is drawn from the capital or the income of the concern is certainly in the nature of capital expenditure. The question, however, arises for consideration where expenditure is incurred while the business is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment. Such expenditure can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of revenue expenditure. These tests are thus mutually exclusive and have to be applied to the facts of each particular case in the manner above indicated. It has been rightly observed that in the great diversity of human affairs and the complicated nature of business operations it is difficult to lay down a test which would apply to all situations. One has therefore got to apply these criteria one after the other from the business point of view and come to the conclusion whether on a fair appreciation of the whole situation the expenditure incurred in a particular case is of the nature of capital expenditure or revenue expenditure in which latter event only it would be a deductible allowance under section 10(2)(xv) of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the items mentioned in the question referred relate to those agreements as well. We do not know I the nature of the agreements, but the question can be answered by saying that expenses incurred during the year of assessment for purchase of earth on basis of agreements of the nature mentioned in the case of Benarsidas or of the nature like exhibit T. E. are admissible deductions, while sums spent for obtaining leases for a substantially long period varying from 10 to 20 years cannot be held to be valid deductions if they amount to an acquisition of an asset of an enduring advantage to the lessee. ' It appears that the Full Bench was persuaded to this view from two considerations. The first was that what was acquired was earth with no in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to raise at this stage. Neither before the Income-tax Officer, the Appellate Assistant Commissioner nor the Tribunal, this was the department's case. It was precisely for this reason that we set out the statement of the case. The entire controversy proceeded on one single footing, namely, that the land was solely obtained on lease for the purpose of manufacturing bricks by the assessees; and the question was, whether such a lease, which was for a period of ten years, was an asset of an enduring nature, and, therefore, a capital asset, or it was an acquisition of raw material for the purpose of manufacturing bricks and thus a revenue expense. As we have already said, the matter stands concluded by the decision of the Supreme Court in Pingle ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
