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TMI Blog1977 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting period being the financial year ended March 31, 1964. The assessee-company is engaged in the manufacture of chemicals ; it had been receiving and despatching materials required for and produced in its factory through lorries. The assessee along with three other public undertakings approached the Government of Kerala for laying a new road from Kalamasseri to Udyogamandal ; this area where the assessee's factory is situate was not at the material time served by pucca roads. It was agreed that the Government of Kerala would bear the cost of the acquisition of the land and 25 per cent. of the cost of construction. The total cost to be shared by the four companies was Rs. 1,04,550 and the assessee's share came to Rs. 26,100. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The authorities both in this country and in England have pointed out the difficulties in formulating precise rules for distinguishing capital expenditure from revenue expenditure. The line of demarcation has been found to be very thin. Certain broad tests have, however, been laid down, and of them the test suggested by Viscount Cave L.C. in Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 TC 155 (HL) appears to have been largely accepted in this country. This court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax [1955] 27 ITR 34 (SC), Sitalpur Sugar Works Ltd. v. Commissioner of Income-tax [1963] 49 ITR 160 (SC) and a number of other decisions has adopted the test as laid down in Atherton's case [1925] 10 TC 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. If it was part of the fixed capital of the business it would be of the nature of capital expenditure and if it was part of its circulating capital it would be of the nature of revenue expenditure. " In the case before us, the High Court applied Viscount Cave's test and found that the expenditure made by the assessee brought into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture and sale of sugar. Under the provisions of the U. P. Sugarcane Regulation of Supply and Purchase Act, 1953, the assessee-company was obliged to contribute certain amounts for the development of roads which were originally the property of the Government and remained so even after the improvement had been made. Apart from the fact that in this case the expenditure incurred under a statutory compulsion, there was no finding that the roads were newly made. On the facts of that case this court was satisfied that the development of the roads was meant for facilitating the carrying on of the assessee's business. Lakshmiji Sugar Mills' case [1971] 82 ITR 376 (SC) is quite different on facts from the one before us and must be confined ..... X X X X Extracts X X X X X X X X Extracts X X X X
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