TMI Blog1971 (3) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... to the exemption from tax under section 15C of the Income-tax Act, 1922 ? " The facts relevant to the first question may briefly be stated: M/s. Naya Sahitya, Delhi (hereinafter referred to as " the as is a registered firm carrying on business of publishing books. The assessee wanted to obtain recognition of the Himachal Pradesh Education Department for some of the text tooks published by it in order to enable the assessee to sell the text books in the territory of Himachal Pradesh. For this purpose, the assessee entered into an agreement with another firm, M/s. Ranbir Brothers, Kanpur, which, according to the assessee, was in a position to use its inflnence for obtaining recognition of the assessee's text books from the Himchal Pradesh Education Department. This agreement was entered into some time in September, 1959. Under this agreement, the assessee agreed to pay 6 1/2% royalty on the net sales of such aporoved books in consideration for the services of M/s. Ranbir Brothers for, obtaining such recognition to the assessee's text books. The assessee did obtain recognition for its text books through the good offices of M/s. Ranbir Brothers and it paid to M/s. Ranbir Brothers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment. Such expenditure can be looked at either from the point of view of what is acquired or from the point of view of what is the source from which the expenditure is incurred. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in a later case, namely, Gotan Lime Syndicate v. Commissioner of Income-tax. So far as the facts of the present case are concerned, although the assessee had been carrying on the business of publishing books in the earlier years also, it had not obtained recognition of its text books in Himachal Pradesh and it was for the first time during the assessment year under reference that the assessee obtained such recognition. As a result of obtaining such recognition, the assessee was able to sell its text books in the territory of Himachal Pradesh. Without obtaining such recognition, the assessee could not have sold its text books in the said territory. This recognition resulted in the expansion of the assessee's business in a new territory. This recognition, therefore, brought to the assessee an advantage of an enduring nature. What is an advantage of an enduring nature has been explained by Latham C.J. in Sun Newspapers Ltd. and Associated Newspapers Ltd. v. Federal Commissioner of Taxation as under: " When the words permanent or enduring' are used in this connection it is not meant that the advantage which will be obtained will last for ever. The distinction whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the assessee had installed a printing press for the first time in this year and also whether the printing press installed by it was a new one or whether it was a second-hand one. But we shall proceed on the basis of what is stated in the appellate order of the Tribunal and in the statement of the case and assume that the assessee had installed a new printing press for the first time in this year only and that the assessee printed its books in its own printing press. On the basis of these facts, it cannot be seriously dispnted that the business of the assessee is in the nature of an industrial undertaking which manufactures or produces articles, namely, books. It is also not disputed that the assessee satisfies clause (iii) of sub-section (2) of section 15C of the Act inasmuch as it employs 10 or more workers in a manufacturing process carried on with the aid of power. The learned counsel for the revenue, Shri G. C. Sharma, however, contends that the assessee does not satisfy clause (i) of sub-section (2) of this section which reads as follows: " (2) This section applies to any industrial undertaking which (i) is not formed by the splitting up, or the reconstruction of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness or undertaking is not to cease functioning, and its identity is not to be lost or abandoned. The concept essentially rests on changes but the changes must be constructive and not destructive. The underlying idea of a reconstruction is of a ' business already in existence': there must be a continuation of the activities and business of the same industrial undertaking. The undertaking must continue to carry on the same business though in some altered or varied form. If the alterations and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. For instance, if the ownership of a business or an undertaking changes hands not ostensibly but in reality and effectively, that would not be reconstruction. Or, if the very nature of the business is changed, that again would not be reconstruction. On the other hand, reorganization of the business on sounder lines or alterations in the mode or method or scope of the activities of the business or in its personnel or infusion of new blood in the management or control of the business which may even be by some changes in the constitution of persons interested in the undertaking wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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