TMI Blog1968 (5) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-company towards road development was a capital expenditure and as such not admissible as an expenditure in computing its business income for the assessment year 1959-60 ? " The assessee is a company deriving income from certain sugar mills in Uttar Pradesh. The assessment years involved are 1958-59 and 1959-60, the corresponding previous years being the years ending on the 31st October, 1957, and the 31st October, 1958, respectively. For both these years the assessee-company claimed extra shift depreciation allowance equal to the normal depreciation in respect of the machinery and plant utilised in the sugar manufacturing business. There is no dispute that the assessee's factories are seasonal factories which worked only during that part of the year when sugarcane is available. The Income-tax Officer disallowed Rs. 12,259 in the first year and Rs. 15,898 in the second year out of this claim for extra shift allowance. The disallowance was upheld in appeal by the Appellate Assistant Commissioner and also on further appeal by the Tribunal. For the assessment year 1959-60, the assessee claimed deduction of a sum of Rs. 19,220, being the amount contributed by the assessee-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corresponding entry in the second column of the following statement : Provided that if the buildings, machinery, plant or furniture have been used by the assessee in his business for not less than two months during the previous year, the percentage shall be increased proportionately according to the number of complete months of user by the assessee : Provided further that in the case of a seasonal factory worked by the assessee during all the working seasons of the previous year, the percentage shall be increased as if the buildings, machinery, plant or furniture had been in use throughout the period the assessee was the owner thereof during the previous year. " In item III, which provides for the percentage of depreciation on machinery and plant, there is a note allowing depreciation for double and triple shift working of the machinery and plant. The note provides that : " An extra allowance up to a maximum of 50 per cent. of the normal allowance will he allowed by the Income-tax Officer where a concern claims such allowance on account of double shift working and satisfies the Income-tax Officer that the concern has actually worked double shift. An extra allowance up t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to the main rule 8 in calculating the allowances for extra shift depreciation in the case of seasonal factories. The authorities below and the Tribunal were right in disallowing the assessee's claim to the full amount of 50 per cent. of the normal depreciation as extra shift allowance and the first question must be answered in the affirmative and against the assessee. Dr. Pal submitted that the second question referred was covered by a very recent decision of this court in Commissioner of Income-tax v. Hindustan motors Ltd. In that case the assessee, which was manufacturing motor cars, had its factory near Uttarpara. There was an approach road connecting the factory to a main trunk road. The approach road was a public road belonging to the State Government but on account of lack of repairs for a long period the condition of the road had deteriorated and caused transportation difficulties to the assessee. The Government was not prepared to meet the expenses for the repairs of the road unless the assessee had contributed towards the costs of such repairs. The assessee paid an amount of Rs. 39,770, being the amount of such repairs, to the Government, as a consequence of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cane-growers as well as the delivery by the assessee of the finished product would be accelerated. The development of the road was so related to the carrying on and conduct of the assessee's business that it might be regarded as an integral part of the profit-earning process and so the expenditure must be held to be revenue in nature. Dr. Pal pointed out that the above exposition of the law by the Supreme Court was reaffirmed in its decision in India Cements Ltd. v. Commissioner of Income-tax. Mr. B. L. Pal, learned counsel for the revenue, on the other hand, submitted that, as by this expenditure a system of roads came into existence, the assessee acquired an asset of enduring nature and as such the expenditure was a capital expenditure. Mr. Pal referred to the following observation of Lord Cave in Atherton's case, which had been quoted with approval by the Supreme Court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, namely : " But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficulty either in obtaining cane or despatching finished product. At a tripartite conference between the State Government, the owners of the sugar mills and the representatives of the cane-growers, it was decided to form a co-operative society to whom contributions would be made by the sugar mills to develop and build roads which would be used both by the mills and by the cane-growers and would facilitate the movement of both cane and sugar. Here the expenditure brought into existence a new asset, viz., the roads, which facilitated the carrying on of the assessee's business. The use of the roads would be of "enduring benefit" to the assessee's business, in the sense that the expression has been interpreted both by the Supreme Court and by the House of Lords, and the assessee's expenditure would be a capital expenditure within the ratio of Lord Cave's definition in Atherton's case . The authorities below and the Tribunal were, therefore, justified in rejecting the assessee's claim for deduction of the amount of Rs. 19,220 under section 10(2)(xv) for the assessment year 1959-60 and the second question referred must also be answered in the affirmative and against the assessee. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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