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TMI Blog1972 (6) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... e highest bidders. The assessee paid sums totalling Rs. 21,600 to sixteen individuals who were prospective bidders at the auction in order to prevent them from competing with the petitioners at the auction. In their return for the assessment year 1964-65 (accounting period April 1, 1963, to March 31, 1964) the assessee claimed the sum of Rs. 21,600 referred to above as a deduction on the ground that the amount was paid for shutting out the other bidders. The Income-tax Officer held that this deduction was not admissible. This view was confirmed by the Appellate Assistant Commissioner on appeal. On further appeal the Tribunal held that a sum of Rs. 2,000 was paid on May 8, 1964, beyond the accounting year and, therefore, the assessee cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure is business expenditure or a capital expenditure. One test propounded is that capital expenditure is a thing that is going to be spent once and for all and revenue expenditure is a thing which is going to recur every year : Vide Vallambrosa Rubber Company v. Farmer. Another test which has been laid down in Atherton v. British Insulated and Helsby Cables Ltd. and followed in a number of decisions is " when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness by reducing the lease amount payable to the Government for operating the ferry. It was thus an amount paid for the purpose of the business. It cannot be said as contended by the learned counsel for the income-tax department that it was paid for the purpose of acquiring the business and not for the purpose of running it. A number of decisions were cited before us, especially those relating to lump sum amounts paid for the purpose of buying off competition and it was argued on the strength of those decisions that the expenditure incurred is in the nature of capital expenditure. In particular, reference was made to the decision of the Supreme Court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax. There, a lease of certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, so that the expenditure has to be regarded as revenue expenditure. It was not contended and it cannot be contended in view of the decisions that the lease amount paid for obtaining the right to operate the ferry is not in the nature of a revenue expenditure and was not deductible. We do not see any difference in the present case between the lease amount and the amount paid to the other intended bidders in order to prevent them from competing and thus reduce the lease amount so that ultimately the assessee may derive more profits. A case very near in point is that of Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd. The assessee-company which was carrying on the business of copper mining together with two other companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to persuade them not to compete in an auction of a coupe held by the forest department. It was held that the amount paid was allowable. As pointed out by the Supreme Court in Bombay Steam Navigation Co. (1953) Private Ltd. v. Commissioner of Income-tax, the question whether a particular expenditure is revenue expenditure incurred for the purposes of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. Viewing the expenditure incurred in this case in such a context we are of the view that the expenditure was in the nature of a revenue expenditure and we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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