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TMI Blog2006 (8) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... T The judgment of the court was delivered by P. D. Dinakaran J.— The substantial question of law that arises for consideration in the present appeal is, whether the Tribunal was right in holding that the expenditure incurred for shifting of the factory from Kovilpatti to Cuddalore is a revenue expenditure or capital expenditure under the following facts and circumstances of the case. 2. The respondent/assessee-company is engaged in the business of dyeing and processing of cloth and it filed its return of income for the assessment year 1992-93 declaring "nil" income. In the said return, the assessee claimed a sum of Rs. 6,80,908, being the expenses incurred for shifting the factory from Kovilpatti to Cuddalore, as revenue expenditure. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks Ltd. v. CIT [1963] 49 ITR (SC) 160 and of this court reported in CIT v. Bimetal Bearings Ltd. [1994] 210 ITR 945, wherein this court has applied the ratio laid down in India Pistons Repco Ltd. v. CIT [1983] 143 ITR 424. 4. We have considered the submissions made by learned counsel appearing for the appellant. 5. Of course, the apex court, in Sitalpur Sugar Works Ltd. v. CIT [1963] 49 ITR (SC) 160, dealt with the case of shifting of factory to improve the business, whereunder the expenditure for shifting the factory was incurred in dismantling and refitting the existing plants at a better site. In the said case, the assessee-company was manufacturing sugar in its factory situated originally at Sitalpur and that place suffered from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure incurred by shifting the factory from one place to another is a revenue or capital was applied. Of course, strongly placing reliance on the decision of the apex court in the case of Sitalpur Sugar Works Ltd. [1963] 49 ITR (SC) 160 with regard to the application of test of enduring benefit to the assessee while shifting the factory, our attention was also invited to the observation of this court in the case of India Pistons Repco Ltd. v. CIT [1983] 143 ITR 424 that the enduring benefit is often regarded as the hallmark of capital expenditure. The Revenue, in those cases, relied upon the dictum of Viscount Cave in Atherton's case [1925] 10 TC 155 (HL), whereunder it was held that whatever brings into existence an asset or an advantage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess atmosphere in the new premises, but the respondent/assessee, who originally housed its factory in a leasehold building at Kovilpatti within the premises of Loyal Textile Mill Ltd. which was supporting the respondent/assessee by providing job work for dyeing, by shifting the factory from Kovilpatti to Cuddalore, had actually lost its advantage of being in the proximity of Loyal Textile Mill Ltd., which was providing job work for dyeing and the raw material and the finished products, therefore, had to be reshifted from Kovilpatti to Cuddalore and back to Kovilpatti, and thus, it is obvious that the shifting had only worked to the disadvantage of the respondent/assessee. 10. Another compelling circumstance for shifting, concededly, is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cuddalore, which is purely an incidental advantage to the assessee, in our considered opinion, cannot be termed as an enduring advantage. 11. That apart, the labour unrest, which was a reason for shifting in the case of CIT v. Bimetal Bearings Ltd. [1994] 210 ITR 945 (Mad) and India Pistons Repco Ltd. v. CIT [1983] 143 ITR 424 (Mad), cannot be equated with that of the objection of the public in the present case, because the labour unrest in a factory is nothing but a part and parcel of the internal affair of the assessee's industrial management, but, on the other hand, the objection of the public against letting out of sewage water and the consequential demand by the public for shifting of the factory is a matter of external pres-sure br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self. Therefore, the test of enduring benefit is not a certain and conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case, as sharply observed in Atherton's case [1925] 10 Tax Cases 155 (HL). 14. That apart, this court in CIT v. Madura Coats Ltd. [2002] 253 ITR 62, held that mere improvement in convenience and increase in efficiency does not mean a permanent advantage which has to be regarded as falling within the capital field and the expenditure incurred for shifting of the administrative office was allowable as a revenue expenditure in the computation of business income. 15. For the reasons well explained above, the expenditure which has been incurred b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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