TMI Blog1992 (9) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 4,100 (rupees four thousand and one hundred only) for the assessment year 1972-73 was a permissible deduction as a revenue expenditure ?" The questions relate to a matter relating to two successive assessment years 1973-74 and 1972-73. Shortly stated, the facts of the case are that the assessee-company claimed expenses of Rs. 4.100 and Rs. 4,000 being labour welfare expenses for the respective assessment years. According to the Income-tax Officer, the amount was spent on cost of construction of labour welfare fund quarters and, therefore, the assessee's claim was rejected. In this regard, he followed his orders for the earlier assessment years. The matter was taken in appeal to the Appellate Assistant Commissioner who deleted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the ownership of the houses constructed under that scheme did not vest in the assessee. That the assessee was not the owner of the quarters is evident from the fact that the assessee, even after meeting part of the cost of construction, was paying rent for the quarters to the State Government. The assessee had to incur this expenditure in discharge of its statutory obligation in putting up labourers' quarters partly at its own cost, In such a situation where the assessee was under a compulsion to incur this cost to enable it to carry on the trade, and the expenditure did not result in the creation of any assets, it is to be said that the expenditure is not on capital account and the contention of the Revenue is wrong. For this purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposes on the assessee an obligation to incur expenditure for being permitted to pursue its trading activity, the expenditure would be an outgoing from the profits of the trade. In CIT v. Associated Cement Companies Ltd. [1974] 96 ITR 650 (Bom), the cement factory of the assessee was situate outside the municipal limits of a town. The Government decided to include the area on which the factory was situate within the municipal limits. Negotiation ensued between the Government and the assessee. The assessee agreed to incur the expenditure to provide certain amenities to the town including provision of water supply, and the Government on its part undertook not to include the properties of the factory within the municipal limits for 15 years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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