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TMI Blog1982 (6) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure was capital in nature. When the matter came up in appeal before the AAC on an earlier occasion, the assessee contended that as the roads did not belong to the assessee, the expenditure was allowable as revenue expenditure and reliance was placed on the ruling in Lakshmi Sugar Mills Co. (P) Ltd. vs. CIT (1971) 82 ITR 376 (SC). The ITO who was present at the time of the hearing, stated that the roads were in the premises of the assessee; that no old roads were given to the assessee by the Maharashtra Industrial Development Corpn. and that the entire roads were constructed by the assessee. It was, therefore, contended by the ITO that the assessee derived an enduring benefit by the asphalting of the roads and that the expenditure was, therefore, capital in nature. The order of the AAC as extracted in the order of the Commr. (Appeals) shows that the assessee undertook to furnish evidence to show that the roads were in existence even before the assessee undertook the asphalting work. In pursuance to the same the assessee produced a letter from M/s Recondo Ltd. Bombay, who carried on the asphalting work. It is certified in the letter that the roads were already in existence and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 ITR 323 (Bom) that roads within the factory premises have to be regarded as the adjuncts of the factory building. 5. Before us, it was contended by the ld. Rep. for the assessee that it was not possible for the assessee to obtain a certificate from the Maharashtra Industrial Development Corpn. with regard to the previous existence of the roads and that the certificate obtained from the company which carried on the asphalting work, which has already been produced, is the only evidence available in the matter. It was not claimed by the ld. Rep. that the roads were situated outside the premises and that they did not belong to the assessee. In fact, even the certificate issued by Recondo Ltd. and which is relied upon by the assessee, describes the roads as distillery roads. It has, therefore, to be taken that the roads belong to the assessee. The only ground on which the expenditure for asphalting was claimed to be allowable was that the assessee only repaired the roads which were in existence before. With regard to this aspect, the certificate of Recondo Ltd. clearly says that the roads were already in existence and the company only broke the roads and freshly asphalted the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of decayed or worn out parts, by refixing what has become loose or detached". May be, by metalling, a road becomes comparatively more permanently restored, but the conversion of a kutcha road into a metalled one does not necessarily tentamounts to the construction of a new road. Even a metalled road does not last for ever and has to be repaired after some interval. The kutcha roads which were already in existence and which were converted into metalled roads did not belong to the assessee nor could it have any control over them. The assessee being a cooperative society registered under the Punjab Cooperative Societies Act, 1961, can. with the sanction of the Registrar, contribute a part of its profits towards any purpose connected with the development of cooperative movement or charitable purposes. The more advantageous execution of its business, because of the metalling of the kutcha roads, was by itself expected to give an impetus to the cooperative movement. The contribution made by the assessee in the peculiar circumstances of this case does not procure an enduring or a lasting benefit to it. The expenditure was incurred on account of business expediency, namely, the effort to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transportation of sugarcane. This was essential for the benefit of its business which was of manufacturing sugar in which the main raw material admittedly consisted of sugarcane. These facts would bring it within the second part of the principle mentioned before, namely, that the expenditure was incurred for running the business or working it with a view to produce the profits without the assessee getting any advantage of an enduring benefit to itself". On a careful consideration of the observations of the Supreme Court above and those in the ruling of the Punjab High Court referred to earlier, it appears to us that the expenditure cannot be said to be revenue in the nature when the roads are situated inside the premises and they belong to the assessee. In such cases, by the asphalting of the roads the assessee gets an advantage of an enduring benefit to itself. The ruling cited above do not support the contention of the assessee that the asphalting of the roads, even if they belong to the assessee and are situated inside the factory premises, will amount only to current repairs and thus a revenue expenditure. We, therefore confirm the finding of the Commr. (Appeals) that the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stand taken by the assessee. 9. As against this, it was contended by the ld. Deptl. Rep. that the ruling of the Supreme Court in the case of Cloth Traders Pvt. Ltd., is not applicable, that, on the other hand, it is the ruling of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. 1978 CTR (SC) 50: (1978) 113 ITR 84 (SC) that is applicable and that under the same, the relief u/s 80HH can be worked out only after adjustment of the unabsorbed depreciation and development rebate which had been carried forward and not on the gross total income. 10. On a careful consideration of the matter, we find that the contention of the assessee has to succeed. In the case of Cloth Traders Pvt. Ltd. (1979) 10 CTR (SC) 393 : (1979) 118 ITR 243 (SC), the Supreme Court considered not only the appeal from this decision of the Gujarat High Court in the case of Addl. CIT vs. Cloth Traders (Pvt.) Ltd. reported in (1974) 97 ITR 140 (Guj) but also the other tax references. Apart from previous s. 85A, the Supreme Court also considered s. 80M. A comparison of s. 80HH with s. 80M will show that as far as the controversy as to whether the relief is to be worked out on the gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the business of......, there shall be allowed a deduction from such profits and gains of an amount equal to......" The Supreme Court pointed out that the important words in the section are those which appear in the parenthesis, viz., "as computed in accordance with the other provisions of the Act" and held that before working out the relief under the section, the total income has to be computed in accordance with all the other provisions of the Act. It was held that as the income was from business, it has to be computed in accordance with ss. 29, 30 to 43A. It is, therefore, clear that the relief u/s 80E, as it stood at the relevant time has to be granted with reference to the total income as computed by applying all the provisions of the Act. There is no such provision in the present s. 80M or 80HH. The ruling in the case of Cambay Electric Supply Industrial Co. Ltd. cannot, therefore, apply to the present case and, on the other hand, the ruling of the Supreme Court in the case of Cloth Traders Pvt. Ltd. will apply. Therefore, respectfully following the ruling of the Ahmedabad Bench of the Tribunal, relied upon by the assessee and referred to earlier, we accept the contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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