TMI Blog1996 (2) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... at:- Appeal dismissed. The expenditure incurred towards professional charges of the Solicitors' firm for the services rendered in connection with the said amalgamation was in the course of carrying on of the assessee's business and, therefore, deductible as a revenue expenditure. The amount was advanced to the Government which purchased the land in its own name and the buildings constructed thereon became property of the Government - and not of the assessee. The High Court was justified in rejecting the application under section 256(2). - CIVIL APPEAL NOS. 593-94 OF 1978 - - - Dated:- 29-2-1996 - B.P. JEEVAN REDDY AND M.K. MUKHERJEE, JJ. ORDER 1. These appeals are preferred against the judgment of the Bombay High Court r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the companies thought that it would be advantageous if both the companies are amalgamated. Accordingly, a scheme of amalgamation was evolved. It was submitted that the legal expenses incurred in connection with the said amalgamation are in the nature of revenue expenditure. The ITO did not agree nor did the AAC. On further appeal, the Tribunal upheld the assessee's contention. It disagreed with the revenue's contention that inasmuch as the said amalgamation resulted in acquisition of the other company by the assessee, which acquisition was in the nature of acquisition of a capital asset, the legal expenses incurred in that behalf partake the nature of capital expenditure. The Tribunal was of the opinion that "as both the companies were car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court referred to the earlier decision of this Court in State of Madras v. G.J. Coelho [1964] 53 ITR 186 wherein it was held that the interest on the amount borrowed for acquiring a capital asset is deductible as revenue expenditure. It is true, that in the said decision this Court re-affirmed the well established principle that any expenditure laid out for acquiring an asset of a permanent character would be capital expenditure, held at the same time that inasmuch as the acquisition of the other company was in the course of carrying on of the assessee's business, the interest paid thereon was deductible under section 10(2)( xv ). In this case too, the Tribunal has recorded a finding that the acquisition of Nawrosjee Wadia Ginning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... better and cheaper housing in this case obtained by the industrial workers of the assessee-company did not constitute a direct benefit of an enduring nature in the assessee. The expenditure, it observed, was incurred merely with a view to carry on the business of the assessee-company more efficiently by having a contented labour force. 2. Dr. V. Gaurishankar, the learned counsel for the revenue, places strong reliance upon the decision of this Court in Travancore Cochin Chemicals Ltd. v. CIT [1977] 106 ITR 900. The facts of the case are the following: The assessee-company was receiving and despatching material required for its purposes through trucks. The approach road to its premises was not a pucca road and was causing difficultie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the cost of construction of the roads in the area around the factory and it was held that it was a business expenditure. Our attention is also invited to an order of this Court in CIT v. T.V. Sundaram Iyengar Sons (P.) Ltd. [1990] 186 ITR 276 wherein it has been held that the amount advanced by the assessee for construction of houses under a subsidised industrial scheme for its employees is in the nature of a revenue expendi-ture. In this case too, the amount was advanced to the Government which purchased the land in its own name and the buildings constructed thereon became property of the Government - and not of the assessee. Having regard to the facts of the appeals before us and in the light of the findings recorded by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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