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TMI Blog1986 (11) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Rs. 2,02,273 being the cost of diesel generating set as a revenue expenditure. The ITO, however, rejected the claim of the assessee, as according to him, the expenditure was of a capital nature. He, however, held that the assessee-company would be entitled to depreciation as well as investment allowance. 7. This matter was taken up in appeal and before the Commissioner (Appeals) it was stated that the diesel generating set was installed as a standby in case of a break-down or shortfall of electric power supply. It was further submitted that the alternative power supply was of considerable importance in view of the fact that regular power supply used to fail from time to time on account of power cut as well as the system of staggeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1985] 155 ITR 536. He drew our attention to the observations at page 541 to press home his arguments. 9. The learned counsel for the assessee, on the other hand, placed strong reliance on the order of the Commissioner (Appeals). It was contended that (1) the item of expenditure was not in respect of the initial outlay but was only an alternative item of expenditure, (2) that it was not a replacement but a standby, (3) the acquisition of the generator did not increase the production but only maintained the same production, and (4) that a generating set cannot produce anything except electricity which was to be entirely used by the assessee-company and could not be given to an outsider. The learned counsel also drew our attention to pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd by which it was agreed to pay cable line charges to the tune of Rs. 4,28,550 in four half-yearly instalments. This entire expenditure was shared by the various companies including the assessee. As a consequence the power supply was increased by the Gujarat Electricity Board. It was held by the Hon'ble Court that the expenditure incurred by the assessee-company was for the purposes of augmenting the productivity of the profit-making structure and was allowable as revenue expenditure. The distinguishing features between the aforesaid judgment and the present assessee which is before us are that (1) the new power lines were laid to augment the existing power lines since the increased load could not be supplied by means of the old power line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not increase his production in any manner but it may only enable him to maintain the existing production. However, this could not make it revenue expenditure inasmuch as the assessee has with him as an asset a generating set which is his property and which is likely to give him enduring benefit for a number of years. To accept the same as a revenue expenditure, on the analogy that it is only a standby and does not increase his production would be to bring about a situation when every second item of a capital nature would be treated as an item of revenue expenditure since it is a 'standby'. A similar reasoning would mean that one office car as pointed out by the departmental representative is an item of capital expenditure but a second off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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