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TMI Blog1971 (8) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961, at the instance of the revenue. The question of law referred is: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was legally justified in allowing the expenditure of Rs. 26,100 being the respondent's contribution to Government for constructing a road as a permissible deduction under section 37(1) of the Income-tax Act, 1961 ? " The assessment year in question is 1964-65, the accounting period being the financial year ended March 31, 1964. The assessee is a public limited company engaged in the manufacture of chemicals. The assessee along with three other public undertakings, namely, the Fertilisers and Chemicals Travancore Ltd., the Indian Rare Earths Ltd. and the Hindustan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is expenditure only considerable saving in the cost of transport was effected. The Appellate Assistant Commissioner held that the company derived a benefit which was not of a temporary nature, and the Income-tax Officer was, therefore, right in disallowing the claim for deduction. The assessee then filed an appeal before the Appellate Tribunal and contended on the basis of Commissioner of Income-tax v. Hindusthan Motors Ltd. that the claim was an allowable deduction in that it was commercially expedient for the assessee to incur the same for several reasons. The Tribunal held that the assessee was entitled to deduct the amount contributed for the construction of the road as revenue expenditure. In Bombay Steam Navigation Co. (1953) Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 19,220, being the amount contributed by the assessee to a co-operative society for the purpose of development of the roads giving access to the factories of the assessee as well as other sugar mills of the locality. The roads were constructed by the co-operative society partly on land owned by the assessee, but were meant for common use by the cane growers as well as for transport purposes of the factory owners. The question was whether the assessee can claim deduction of the amount under section 10(2)(vi) of the Act of 1922. The court held that the amount was capital expenditure. The court distinguished its earlier decision in Commissioner of Income-tax v. Hindusthan Motors Ltd. In that case the assessee, which was manufacturing motors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontributions made by the assessee brought into existence an advantage of an enduring nature. The learned judges distinguished the decision of the Calcutta High Court in Commissioner of Income-tax v. Hindusthan Motors Ltd., by saying that the amount there was spent for repair of an approach road which was different from the case where a new road is laid out for the purpose of the business of the assessee. In Lakshmi Sugar Oil Mills Ltd. v. Commissioner of Income-tax, it was held that a payment made to Government in pursuance of a scheme for development of roads in cane-growing rural areas, and for improving transport facilities, brought into existence an advantage of an enduring nature, and was, therefore, capital expenditure. In H. R. Sug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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