TMI Blog2001 (10) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 : (1972) 84 ITR 277 (SC) which laid down the principle that in a case where expenditure is for bringing into existence as asset or an advantage of enduring nature and has made once and for all meaning thereby an expenditure made once and for all for procuring an enduring benefit would be of capital in nature. The CIT(A) held that the company had decided to put up the super smelter which required large availability of water for day-to-day operation. Unless and until water is available, the super smelter would not function and would not be able to produce any items. Therefore, the water was a necessary ingredient of the process. The State Government was requested to identify locations where water would be available at Ghosunda and accordingly the assessee constructed part of the dam. The dam was not an asset owned by the assessee-company but was the asset owned by the State Government. The State Government has constructed the dam initially and the assessee had modified the said construction. The share of the water is also to be decided by the State Government. Under the Constitution only the State Government and Central Government have a right over water and its sources. A host of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In such circumstances, the expenditure incurred on doing business more efficiently, conveniently and economically is necessarily revenue expenditure. The AO was wrong in relying upon the apex Court decision in 84 ITR 277 (sic). He failed to note that the cited decision had been partly reversed in L.G. Sugar Factory Oil Mills (P) Ltd. vs. CIT (1980) 19 CTR (SC) 185 : (1980) 125 ITR 293 (SC). The learned authorised representative has relied upon the following cases: (1) Lakshmiji Sugar Mills Co. (P) Ltd. (1971) 82 ITR 376 (SC); (2) Assam Bengal Cement Co. Ltd. vs. CIT (1955) 27 ITR 34 (SC); (3) Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 : (1980) 124 ITR 1 (SC); (4) CIT vs. Associated Cement Companies Ltd. (1988) 70 CTR (SC) 28 : (1988) 172 ITR 257 (SC); (5) Mohanlal Hargovind of Jubbulpore vs. CIT (1949) 17 ITR 473 (PC); (6) 125 ITR 293 (SC); (7) National Organic Industries Ltd. vs. CIT (1993) 115 CTR (Bom) 434 : (1993) 203 ITR 410 (Bom); and (8) CIT vs. Bongaigaon Refinery Petro-Chemicals (1997) 141 CTR (Gau) 154 : (1996) 222 ITR 208 (Gau). 6. We have considered the rival submissions. The Ghosunda Dam has been constructed by the State Government. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also inconclusive. What is relevant is the purpose of the outlay and its intended object and effect, considered in a commonsense way having regard to the business realities. In a given case, the test of "enduring benefit" might break down. As regards the plea of the Revenue that the assessee had claimed deduction through revised return and given different treatment in the books of account, it was held by the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC) that the accountants might have taken some other view but accountancy practice was not necessarily good law. Keeping in view the facts of the case and the legal position, explained above, we have come to the conclusion that the object and effect of this expenditure is facilitating the assessee s trade operation and enabling the management to conduct business more efficiently or more profitably. Therefore, we decline to interfere with the order of the learned CIT(A). 7. Ground No. 2 : Disallowance of Rs. 4,07,522 by reducing the disallowance of Rs. 15,40,677 to Rs. 11,33,155 and observing that the rent is allowable expenditure in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retations are possible, the interpretation favourable to the assessee should be accepted. Accordingly adopting the view favourable to the assessee, rent paid on guest-house was held as allowable deduction. Therefore, keeping in view the legal position as above, we do not consider it necessary to interfere with the order of the CIT(A). 10. Ground No. 3 : Deletion of disallowance of Rs. 45,26,220 made under s. 43B on account of unpaid royalties. It was contended before the CIT(A) that royalty was neither tax nor duty, hence not covered under s. 43B. The learned Departmental Representative referred to the judgment of Madhya Pradesh High Court in the case of CIT vs. Gorelal Dubey (1998) 232 ITR 246 (MP). 11. The learned authorised representative explained that the unpaid royalties have been disallowed under s. 43B by the AO. The learned CIT(A) has rightly allowed the relief on the ground that it is neither a tax nor a duty, neither cess nor fee. The payment does not fall within the prohibition contained in s. 43B. The learned counsel for the assessee relied upon the following case laws: (1) Ismail Sons vs. ITO (1992) 43 TTJ (Jabalpur) 81 : (1992) 40 ITD 178 (Jabalpur); (2) N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Revenue. In circumstances such as these, a myopic view is not proper. The view required to be taken is whether the exercise is in conformity with commercial practice and accounting principles. If that test is applied, the conclusion as reached by the CIT(A) is unassaible. Incidentally, returns of both the years have been assessed at loss. On the issue of inventory valuation, the AO does not dispute the advisability of the method. His only objection is to the timing of the method. Objection has been taken on the ground that such method as now adopted by the assessee ought to have been applied three to four years earlier when relevant guidelines were actually issued by the Institute of Chartered Accountants of India. The AO failed to note that the assessee is a Government company. Where any alteration or change requires a series of approvals within and outside the organisation, including the Ministry of Mining. It is for this reason that changes have been instituted only in the subject year. This however cannot detract from the merits of the claim. He relied on the following case-laws: (1) Forest Industries Travancore Ltd. vs. CIT (1964) 51 ITR 329 (Ker); (2) Indo Commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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