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TMI Blog1972 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... isory Committee, and the object of the scheme was to develop intensively an area of four thousand acres around the assessee's sugar mill for a period of three years with a view to raising the average yield of sugarcane per acre. The scheme contemplated that the total cost would be borne by the factory, the canegrowers of the area, the State Government and the Government of India. The share of the sugar mill was determined at Rs. 24,000. The assessee paid the amount, and it claimed a deduction of the payment against its business income for the assessment year 1964-65. The Income-tax Officer rejected the claim in the view that it brought into existence an enduring benefit and was, therefore, capital in nature. The Appellate Assistant Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. The Tribunal examined the terms and conditions of the scheme and deduced therefrom that the canegrowers were bound to sell their produce to the assessee, that full accounts of the expenses incurred by the Development Council were maintained and the assessee joined the scheme not under any compulsion but of its own volition. In the circumstances, the Commissioner of Income-tax had obtained a reference of the following question of law : " Whether, on the facts and in the circumstances, the Tribunal was right in holding that the contribution of Rs. 24,000 made by the assessee to the Development Council was an allowable deduction under the Income-tax Act, 1961 ? " That is Income-tax Reference No. 60 of 1969. Considering the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made by the assessee for the purpose of benefiting its business. He rejected the claim on the ground that it brought into existence an enduring benefit and the expenditure was, therefore, capital in nature. The Appellate Assistant Commissioner observed : " If the yield of sugarcane increases, the factory will get benefit through increased supplies and better recoveries. " He rejected the claim on the ground that the expenditure incurred for intensive development activities could not be said to be expanded for the day-to-day carrying on of the business and that, therefore, it was capital in nature. So far as the supply of sugarcane to the assessee is concerned, the Tribunal did not doubt that the supply would be effected to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r other means employed for transportation of sugarcane to the factory. From the business point of view and on a fair appreciation of the whole situation the assessee considered that the development of the road in question could greatly facilitate the transportation of sugarcane. This was essential for the benefit of its business which was of manufacturing sugar in which the main raw material admittedly consisted of sugarcane. These facts would bring it within the second part of the principle mentioned before, namely, that the expenditure was incurred for running the business or working it with a view to produce the profits without the assessee getting any advantage of an enduring benefit to itself. " The observations of the Supreme Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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