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TMI Blog1987 (11) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the assessment years 1964-65 and 1965-66 was in the nature of capital expenditure and in not allowing deduction of such expenditure on that ground? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 5,125 and Rs. 3,481 contributed by the assessee to the Government of Kerala towards the cost of construction of tubewells in the assessment year 1965-66 was in the nature of capital expenditure and in not allowing the deduction of such expenditure on that ground ? " The material facts giving rise to this reference, briefly, are as follows : The assessee is a public limited company. In the returns filed by the assessee for the assessment years 1964-65 and 1965-66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid questions of law have been referred to this court for its opinion. Having heard learned counsel for the parties, we have come to the conclusion that this reference has to be answered in the negative and in favour of the assessee. The Tribunal has disallowed the expenditure incurred in connection with construction of road and tubewells on the sole ground that the expenditure was in the nature of capital expenditure. Therefore, the only question for consideration is whether the expenditure in question was in the nature of capital or revenue expenditure. The Tribunal has relied on the decision of the Supreme Court in Travancore-Cochin Chemicals Limited v. CIT [1977] 106 ITR 900. But as held by the Supreme Court in L. H. Sugar Fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly and profitably, though the advantage secured for the business of the assessee was of a long duration, it was not an advantage in the capital field because no tangible or intangible asset was acquired by the assessee nor was there any addition to or expansion of the profit-making apparatus of the assessee. Following the test laid down in L. H. Sugar Factor Oil Mill's case [1980] 125 ITR 293, it must be held that the Tribunal was not justified in holding that the expenditure incurred by the assessee in connection with the construction of the road and tubewells was of a capital nature. Our answer to the two questions referred to this court is, therefore, in the negative and in favour of the assessee. In the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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