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TMI Blog1988 (5) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1922. The question referred to the court for consideration was as follows : " Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 2,09,459, or any portion thereof, incurred by the company in the accounting period relevant to the assessment year 1959-60 was allowable as deduction in determining the profits of the company for the assessment year 1959-60 ? " The relevant facts are as follows : The assessee, the Associated Cement Companies Ltd., has a chain of factories manufacturing cement all over the country. The assessment year in question is the year 1959-60 and the corresponding previous year ended on July 31, 1958. One of the factories of the assessee was situated at Shahabad, which is now i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Shahabad Municipal Committee was to take over possession of the remaining pipelines, installations and accessories and it was declared to be the owner thereof. These pipelines, installations, etc., had to be maintained by the Municipal Committee in future. Under clause 23, in consideration of the assessee-company having agreed to provide these amenities, supply and services, the Government of Hyderabad undertook not to include any of the properties of the company comprising the cement factory, the main workshop, the housing colony, quarries and limestone-bearing lands within the limits of the Shahabad Municipality or the village panchayat or like body for a period of fifteen years from the date of the agreement. According to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue before the Tribunal that the entire expenditure concerned was laid out for the purpose of business and the only question was whether it was capital expenditure or revenue expenditure. The only ground on which the claim of the assessee for deduction of the said expenditure under section 10(2)(xv) of the Indian Income-tax Act was resisted was that it was capital expenditure. After exhaustively considering several decisions of the Supreme Court and several English decisions, the Division Bench of the Bombay High Court came to the conclusion that the expenditure in question was revenue expenditure and was liable to be allowed as deduction. On the basis of these conclusions, the Bombay High Court decided the question referred in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt the fact that the assessee was already running a cement factory at Shahabad and that it was not as if the expenditure incurred was in connection with the starting of a new business. Mr. Manchanda, learned counsel for the appellant, has raised only two contentions before us. The first contention was that, since, as result of the expenditure incurred, certain water pipelines were laid which could be regarded as capital assets, the expenditure could only be regarded as capital expenditure. In our view, there is no substance in this contention. It is true that certain water supply lines did come to be laid as a result of the expenditure incurred, but the facts on record, which we have referred to above, clearly show that these water pipeli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. In that case, the appellant, a company carrying on the business of manufacture of jute, was a member of the Indian jute Mills Association, which was formed with the objects, inter alia, of protecting the trade of its members, including imposing restrictive condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and hence the advantage secured was in the field of revenue and not capital. As a result of the expenditure incurred, there was no addition to the capital assets of the assessee-company and no change in its capital structure. The pipelines, etc., which might have been regarded as capital assets and which came into existence as a result of the expenditure incurred did not belong to the assessee-company but to the municipality. In these circumstances, applying the principles laid down in Empire Jute Co.'s case [1980] 124 ITR I (SC), the expenditure is clearly liable to be allowed as deductible from the profits under section 10(2)(xv) of the Indian Income-tax Act. In the result, the appeal fails and is dismissed with costs. Appeal dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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