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TMI Blog1982 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... of crystal sugar. For the assessment year 1968-69, the assessee claimed a sum of Rs. 13,254 as expenses for boring a tube-well which, however, proved to be unsuccessful. The ITO disallowed the claim on the reasoning that these expenses cannot be said to have been laid out wholly and exclusively for the purpose of the business. The AAC rejected the claim of the assessee on the ground that the expenditure was of a capital nature. On appeal, the Tribunal held that the expenditure was incurred to facilitate the carrying on of the assessee's business better and, consequently, directed that the disallowance of Rs. 13,254 shall stand deleted. The stand taken by the assessee was that it had two tube-wells in the factory premises but supply of wat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be attributed to capital if it is made " with a view " to bringing an asset or advantage into existence and it is not necessary that it should have that result. This aspect of the matter came up for consideration in Pyrah v. Annis Co. Ltd. [1957] 31 ITR 517 (Ch. D). In that case, a company had obtained an " A " licence for four articulated vehicles. In an endeavour to bring the number of articulated vehicles authorised by its " A " licence up to seven, the company in 1952 incurred certain expenses in applying to the appropriate authorities to vary its licence by the inclusion of a further three articulated vehicles. The application was refused. The company claimed that these expenses might properly be deducted from its trading profits fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er it ultimately produces capital or not, must be regarded as in the nature of a capital expenditure. The stand taken by the Revenue finds support from the decision of the Supreme Court in A. V. Thomas and Co. Ltd. v. CIT [1963] 48 ITR 67 (SC). In that case, the memorandum of association of the assesseecompany authorised it to be interested in, promote and to undertake the formation and establishment of other companies, to make investments and to assist any company financially or otherwise. One of the directors of the assessee-company who was also a director in another private company, which took up the promotion of a textile mill, financed the private company to the extent of Rs. 6,05,000 and odd. The action of the director was approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme had succeeded, it would have acquired a capital asset. The mere fact that the attempt failed would not change the capital nature of the expenditure. Learned counsel for the assessee placed reliance on CIT v. Royal Calcutta Turf Club [1961] 41 ITR 414 (SC). In that case, the business of the assessee, Royal Calcutta Turf Club, was to hold race meetings on a commercial basis. The turf club established a school. In order to avoid the risk of jockeys becoming unavailable, a certain sum was spent on the running of the school and the assessee claimed that amount as a deduction under s. 10(2)(xv) of the Indian I.T. Act, 1922. The Supreme Court took the view that the amount spent by the turf club was not in the nature of a capital expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Commissioner, the Calcutta High Court confirming the view of the Tribunal held that the business of tea-growing could not be carried on unless there were proper fencing. Therefore, incurring of the expenditure was in connection with the carrying on of the business by the assessee. If the predominant and main purpose of incurring the expenditure was carrying on of the business, the incidental advantage of that expenditure, in that the property is secured more and thereby the assessee gains advantage which is of some endurance, cannot affect its revenue character. None of these cases are helpful in determining the nature of the expenditure incurred in the case in hand. As observed earlier, this expenditure was incurred with a view to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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