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TMI Blog1960 (11) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... hinery... 61,632 2.Transport, including railway freight... 10,906 3.Cost of refitting machine at Garaul... 2,17,847 4.Transporting charges of machine-set... 17,599 5.Miscellaneous, including traffic... 11,782 Total... 3,19,766 For the assessment year 1952-53 the assessee claimed the amount of ₹ 3,19,766 as expenditure wholly and exclusively laid out for the purpose of the business and as a permissible deduction under section 10(2)(xv) of the Income-tax Act. The assessee claimed in the alternative that, if the expenditure was considered to be a capital expenditure, the assessee should be given depreciation under section 10(2)(vi) of the Income-tax Act. The Income-tax Officer rejected the claim of the assessee and held that the amount of ₹ 3,19,766 was capita] expenditure and cannot be deducted from the profits of the assessee. As regards the claim for depreciation, the Income-tax Officer held that there was no addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report Viscount Cave has observed as follows in the course of his speech : But 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, I think 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 revenue but to capital. For this view there is already considerable authority. Thus, moneys expended by a brewing firm with a view to the acquisition of new licensed premises (Southwells. v. Savill Bros. Ltd. [1901] 4 Tax Cas. 430); 'fitting expenses' incurred in transferring a manufacturing business to new premises (Granite Supply Association v. Kitton [1905] 5 Tax Cas. 168); costs incurred in promoting a Bill which was dropped on the desired facilities being obtained by agreement (A.G. Moore and Co. v. Hare [1914] 6 Tax Cas. 572); and expenditure incurred by a shipbuilding firm in deepening a channel and creating a deep water berth (not on their own property) to enable vessels constructed by them to put out to sea (Ounsworth v. Vickers [1915] 6 Tax Cas. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the payments were admissible deductions in computing its profits for income tax purposes. The Crown contended, on the contrary, that the payments were not made in discharge of the company's statutory obligations but were contributions towards a general scheme of drainage improvement and resulted in the acquisition of a capital asset. The General Commissioners decided in favour of the company and held that the payments may be deducted. It was, however, held by the House of Lords that the payments to the Drainage Board were capital payments and, accordingly, not admissible deductions in computing the company's profits for income tax purposes. At page 312 Viscount Simon stated as follows : The same conclusion may be reached if the payments made are not regarded as substituted for the discharge of obligations under the Act of 1929, but rather as sums paid to secure 'an enduring advantage' within the proper application of Lord Cave's phrase in Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 Tax Cas. 155'The result of the transaction' said Uthwatt, J., in the Court of Appeal, 'clearly was that the value of the particular coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 10 and Calcutta Co. Ltd. v. Commissioner of Income-tax [1958] 37 ITR 1. It was submitted on behalf of the assessee that, even though the expenditure was of a capital nature, it was permissible to deduct it under section 10(1) of the Income-tax Act. I am unable to accept this argument as correct. It is true that the categories of permissible expenditure enumerated in section 10(2) of the Income-tax Act are not exhaustive in nature. That is the view expressed by the Supreme Court in Badridas Daga's case (supra) and Calcutta Co. Ltd's case (supra). It was laid down by the Supreme Court in these two authorities that the expression profits and gains in section 10(1) of the Income-tax Act has to be understood in its commercial sense and there can be no computation of such profits and gains until the expenditure which is necessary for the purpose of earning the receipts is deducted there from. But these authorities do not suggest that even though the expenditure is of a capital nature, it was permissible to make deduction under section 10(1) of the Income-tax Act. I agree with learned counsel for the assessee that the categories of permissible deductions mentioned in section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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