TMI Blog2007 (1) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... et created is of a durable nature and its maintenance and operating cost only could be called revenue expenditure while the investment could only be capital. The assessee is a private limited company engaged in the business of manufacture of latex and such other rubber products. During the financial year 1990-91 the assessee installed a water pollution treatment plant spending an amount of ₹ 4,31,017 in due compliance with the direction of the Kerala State Pollution Control Board. For the year ended March 31, 1991, relevant to the assessment year 1991-92, return of income was furnished by the assessee on December 30, 1991, showing a net income of ₹ 4,28,840. The assessee had stated that it expended an amount of ₹ 4,31,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore dismissed against which this appeal has been preferred. Sri George K. George, standing counsel appearing for the Revenue, submitted that the Tribunal has committed an error in holding that the expenditure incurred for installation of water treatment plant is revenue expenditure. Counsel submitted that the principle laid down by the apex court in Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 was not correctly applied by this court while arriving at that conclusion. Counsel submitted that a water effluent plant is of a permanent nature with an enduring advantage to the assessee and the fact that due to installation of the plant the production or manufacture has not been increased is not a relevant consideration but the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or principle or rule of thumb is paramount in deciding such issues. Such a question has to be answered in the light of all the circumstances which are reasonable to take into account and the weight which must be given to a particular circumstance in a particular case must depend rather on common sense than on strict application of any single legal principle. The apex court in CIT v. Associated Cement Companies Ltd. [1988] 172 ITR 257 held that there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther on a fair appreciation of the whole situation the expenditure incurred for a particular matter is in the nature of capital expenditure or revenue expenditure. Again in K. T. M. T. M. Abdul Kayoom v. CIT [1962] 44 ITR 689 the apex court reiterated that each case depends on its own facts and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. The court observed that what is decisive is the nature of the business, the nature of the expenditure, the nature of the right acquired and their relation inter se, and this is the only key to resolve the issue in the light of the general principles which are followed in such cases. In Bombay Steam Navigation Co. (1953) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. The court held that there was no material for the Tribunal to hold that the area of improvisation was not a part of the existing business or that the entire gamut of the existing manufacturing operations for the commercial production of penicillin in the assessee's existing plant had become obsolete or inappropriate in relation to the exploitation of the new sub-cultures of the high yielding strains supplied by Meiji. The apex court held that the expenditure incurred is revenue expenditure and not capital expenditure. The apex court in Bikaner Gypsums Ltd. v. CIT [1991] 187 ITR 39, held where the assessee has an existing right to carry on a business, any expenditure made by it during the course of business for the purpose of removal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ker) in the instant case. We are of the view, when water treatment plant is installed permanently in compliance with the statutory requirement the same would attain the character of capital expenditure. Installation of water treatment plant of the permanent nature has come into existence with enduring advantage to the assessee. Water treatment plant is a chargeable asset installed to prevent pollution. The question as to whether by installation of this plant, production of centrifuged latex has been increased or not is immaterial. Failure to comply with the statutory requirements of installation of water treatment plant would lead to closure of the factory and hence there is no question of any increase in the manufacture or production i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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