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TMI Blog1985 (11) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the assessee that 50% of the profits earned in the computation period should be included in the computation of its capital employed for the purpose of section 84 of the Income-tax Act, 1961, has been rightly rejected ? (2) Assessment year 1967-68.--Whether the claim of the assessee to deduct the sum of Rs. 12,188 being the expenditure on the boring of wells at the new factory site at Borivli has been rightly rejected on the ground that it was a capital expenditure ? " As the questions themselves make it clear, question No. (1) pertains to the assessment years 1965-66 to 1967-68. As far as question No. (1) is concerned, it is agreed between counsel that in view of the decision of Division Bench of this court in Income-tax Reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred in attempting to obtain a capital asset by boring the well, there can be little doubt that the expenditure was in the nature of capital expenditure. The submission of Mr. Mehta, learned counsel for the assessee, however, was that the expenditure in question did not relate to the framework of the business of the assessee and, therefore, it was not a capital expenditure but a revenue expenditure. In support of this submission, Mr. Mehta placed reliance on the decision of the Supreme Court in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1. In that case, the appellant, being the assessee-company, carried on the business of manufacture of jute and was a member of the Indian jute Mills Association, which was formed with the object, inter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms for longer hours than permitted under the working time agreement and increase its profitability. It was held by the Supreme Court that the acquisition of additional loom hours did not add to the fixed capital of the appellant; the permanent structure of which the income was the product or fruit remained the same; it was not enlarged nor did the appellant acquire a source of profit or income when it purchased the loom hours. It was observed by the Supreme Court that the test of enduring benefit was, therefore, not a certain or conclusive test and it could not be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. We totally fail to see how this decision advances the argument of Mr. Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn exchange liability in setting it up and hence it was revenue expenditure. The principle laid down in that case can have no application to the case before us, because in the present case the expenditure directly related to an attempt to bore the well which would have been capital asset of the assessee had the attempt succeeded. Mr. Devadhar, learned counsel for the respondent, has drawn our attention to the decision of the Allahabad High Court in CIT v. Bazpur Co-operative Sugar Factory Ltd. [1983] 142 ITR 1. We find that the Allahabad High Court has taken the same view as the one we have taken in this case, as we have already set out earlier. In the result, question No. (2) is answered in the affirmative and against the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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