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TMI Blog1982 (6) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... s. According to the ITO, the expenditure was incurred for better working of the laboratory and for research and the benefit which was to be derived from this shifting was of enduring nature (underlined by us). The ITO further held that it created a permanent advantage to the assessee-company and ultimately the entire sum was disallowed as a capital expenditure. Being aggrieved by the said order the assessee went up in appeal before the AAC. The AAC relying on the decision of this court in the case of CIT v. Hindusthan Motors Ltd. [1968] 68 ITR 301 and discussing the decision of the Supreme Court in Sitalpur Sugar Works Ltd. v. CIT [1963] 49 ITR 160 (SC), upheld the decision. The assessee went up in further appeal before the Appellate Tribunal. After discussing certain authorities which have been cited, one or two we shall presently note, the Tribunal decided in favour of the assessee. The Tribunal found that the shifting of the assessee's laboratory was for efficient working and for better research. On this aspect it upheld the finding of facts made by the ITO. The Tribunal, however, further held that the assessee did not derive any permanent benefit therefrom. On this aspect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itting up their new yard had thought it necessary to buy a crane, nobody could say that that was a deduction which would have been allowed. It would not have come under the head of a deduction allowable but would clearly have been struck at under the words of that rule. It seemed to them to make no difference if instead of having to buy a crane completely new they had a crane at the old yard, but at the same time they had a certain expense in order to put that up as working crane in the new yard and as such it was a capital expenditure. The same opinion was expressed by Lord McLaren. At p. 171, His Lordship observed as follows: " I think that the cost of transferring plant from one set of premises to another more commodious set of premises is not an expense incurred for the year in which the thing is done, but for the general interests of the business. It is said, no doubt, that this transference does not add to the capital value of the plant, but I think that is not the criterion. There are costs that would not properly be set against the income of the year, and which yet may not add to the capital value. Suppose a person is imprudent enough not to insure his premises or his goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital ". In view of the particular facts and circumstances of the case, the, Supreme Court felt that the observations in the case of Granite Supply Association Ltd. v. Kitton [1905] 5 TC 168 (C. Exchq.) (Scot), were applicable to this case. On behalf of the assessee it was emphasised that the predominant test should be to find out what was the purpose in incurring the expenditure. Reliance was also placed on the observations of the Calcutta High Court in the case of CIT V. Hindusthan Motors Ltd. [1968] 68 ITR 301. There the location of the factory of a motor car manufacturing company was a little distance away from the main trunk road, but there was an approach road from the main trunk road to the factory premises of the assessee, which road belonged to the Govt. of West Bengal. The said approach road fell into disrepair and began to cause transportation difficulties to the assessee. The Government was not prepared to meet the expenses for the repair of the road. Thereupon, the assessee offered to contribute sum of Rs. 39,770, namely, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business it is properly attributable to capital and is of the nature of capital If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. (Vide Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34 (SC)). The argument on behalf of the Revenue is that the expenditure which was incurred by the assessee in the, present case was intended for bringing into existence an advantage for the end during benefit of the business. On the other hand it has been maintained on behalf of the assessee that the expenditure was properly attributable to running the business or working it with a view to produce the profits. The Calcutta High Court had occasion to consider an identical question in CIT v. Hindusthan Motors Ltd. [1968] 68 ITR 301 (Cal). There the location of factory of a motor car manufacturing company was a little distance away from the main road. The approach road belonged to the Government. It fell into disrepair and began to cause transportation difficulties to the assessee. The Government was not prepared to meet the expenses f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises was not an item of expenditure incurred for the year in which the shifting was done, but in the general interest of the business of the Corporation and resulted in an enduring benefit to the Corporation and, therefore, was not a proper deduction from income. Simply because the expenditure incurred was for an enduring benefit beyond the year in question, that was not allowable as a revenue expenditure. With great respect, we are unable to accept that should be the criteria. Of course, there the Karnataka High Court had the finding of fact that the expenditure resulted in an enduring benefit to the assessee. This question was again considered by this court in the case of CIT v. Belgachi Tea Co. Lid. [1975] 99 ITR 99. There the assessee, a tea-grower, claimed under " repairs account " a sum of Rs. 19,748 as cost of repairs to the fencing of the tea gardens. The ITO was of the view that new fencing was fixed with new pillars and, therefore, a major portion of the expenditure was capital expenditure and disallowed on estimate a sum of Rs. 12,000. On second appeal, the Appellate Tribunal allowed that claim. We held in reference that the assessee's business was to carry on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The roads under the scheme were undoubtedly advantageous to the business of the assessee as they facilitated the transport of sugarcane to the factory and outflow of manufactured sugar from the factory to the market centres. The construction of those roads, the Supreme Court noted, facilitated the business operations of the assessee and enabled the management and conduct of the assessee's business to be carried on more efficiently and profitably. The Supreme Court noted that it was true that the advantage secured for the business of the assessee was of long duration inasmuch as it would last so long as the roads continued to be in motorable condition, but it was not an advantage in the capital field, because the Supreme Court felt, 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. The Supreme Court dealt with their previous decisions and also the decision in the case of Travancore-Cochin Chemicals Ltd. [1977] 106 ITR 900, referred to hereinbefore, and observed that that decision must be confined to the peculiar facts of that case. The question was also considered by the Suprem ..... 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