TMI Blog2019 (7) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... but to capital. The Supreme Court in L.H. Sugar Factory and Oil Mills (P) Ltd [ 1980 (8) TMI 1 - Supreme Court] held that it was not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. If the advantage consists merely in facilitating the assessee's business operations or enabling management and conduct of the business to be carried on more efficiently or more profitably, while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. These observations of the Supreme Court (supra) completely cover the controversy in the present case. As rightly held by the ITAT, in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 2. This Tax Appeal challenges an order passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji ('ITAT'). The controversy in the appeal concerns treatment of the contribution of 1,38,54,167-00 made by the Respondent-₹ Assessee to Goa Infrastructure Development Co. Ltd., a Government Undertaking, during the assessment year 2008-09 for construction of Usgao bridge, which was said to be essential for smooth and efficient running of the business of the Assessee. The question was, whether this expenditure should be treated as 'capital expenditure' or 'revenue expenditure'. The ITAT, in its impugned order, held the expenditure to be entirely a revenue expenditure. That is challenged in this ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge reducing the number of trucks that could make trips per day, and that after the new bridge was commissioned, loaded as well as empty trucks could move in opposite directions, without having to stop or wait for the bridge passage. The ITAT was of the view that the construction of new Usgao bridge had thus resulted in revenue for the Assessee in terms of cost per ton transported as well as increase in the quantity of ore exported/sold. The ITAT, accordingly, held that the expenditure incurred by the company as its share for construction of the new bridge could not be termed as capital expenditure, but was entirely revenue expenditure. The ITAT relied on the Judgment of the Supreme Court in L.H. Sugar Factory and Oil Mills (P) Ltd. vs. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards the cost of construction of the quarters as revenue expenditure. The assessee relied on the decision of the Supreme court in Lakshmiji Sugar Mills Co. Pvt. Ltd. vs. CIT, [1971] 82 ITR 376, where the Supreme Court, whilst dealing with expenses incurred for repairs of a road, had held that though the assessee enjoyed an advantage of enduring nature, yet the contribution was a revenue expense, because it was spent for facilitating the day-to-day running of the business. The Allahabad High Court held that case to be distinguishable as in that case no asset of an enduring nature had come into existence. The High Court held that in the case before it, the quarters were freshly built and were exclusively used by the assessee and thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Supreme Court held that it was not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. If the advantage consists merely in facilitating the assessee's business operations or enabling management and conduct of the business to be carried on more efficiently or more profitably, while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. These observations of the Supreme Court in L.H. Sugar Factory and Oil Mills (P) Ltd., (supra) completely cover the controversy in the present case. 7. As rightly held by the ITAT, in the present case, the contribution made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hours imposed by the working time agreement, so that it could operate its profit-earning structure for a longer number of hours. The Supreme Court considered in this context the test formulated by Lord Clyde in Robert Addic Sons Collieries Ltd. vs. Inland Revenue, 8 TC 671, namely, whether the expenditure laid out was a part of the process of profit-earning or, on the other hand, was capital outlay, i.e. for acquisition of property or rights of permanent character the possession of which was a condition of carrying on the trade at all. The Supreme Court, applying the test, held that the payment made by the assessee for purchase of loom hours was expenditure laid out as part of the process of profit earning; what was expended was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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