TMI Blog1992 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows : The assessee-company carries on the business of manufacture of zinc slabs with sulphuric-acid and cadmium as by-products. The assessee-company included a sum of Rs. 4,77,080 under the head "Repairs and maintenance and others" being expenditure included for the water pipeline including cost of pipes, labour charges and electrical inspection charges. The Income-tax Officer disallowed the said expenditure as capital expenditure. On an appeal having been preferred before the Commissioner of Income-tax (Appeals), it was stated that, during the summer season, the flow of water in the river Periyar is restricted and the sea water enters the Periyar river causing more salinity in the water, thereby making it impossible to use the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e water from the Periyar river to the factory of the assessee. In the relevant year, the salinity problem was acute and, there fore, it became necessary to re-route the pipeline connection and to take the pipeline further upstream for getting saline-free water for operation. The Tribunal found that, from the facts of the case, it is clearly established that the expenditure on re-routing the pipeline had to be incurred by the assessee-company in order to enable it to carry on the business. In fact, the finding recorded by the Commissioner of Income-tax (Appeals) has not been challenged before the Tribunal by the Department. The Tribunal further found that re-routing of the pipe was not a new feature. Similar course of action had to be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e did not result in any benefit of enduring nature. It was also pointed out that there was already in existence a pipeline for drawing water from the river Periyar for operational purposes and that for preventing sea water from entering the river, the assessee had to re-route the pipeline by taking it upstream so that saline-free water was available to the assessee for operating its factory. The expenditure included replacement and repairing of old pipes as well as adding some more pipes for the purpose of re-routing the pipeline. Reliance was placed on the decision of the Gujarat High Court in the case of Sarabhai M. Chemicals (Pvt.) Ltd. v. CIT [1981] 127 ITR 74. It was further contended that the expenditure of Rs. 45,000 was incurred o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r upstream for getting saline-free water for the operation of its factory. The expenditure was incurred as an operational expense and the expenditure was incurred for running and working the factory with a view to earn more profit and was, therefore, in the nature of revenue expenditure. In the case of CIT v. Panbari Tea Co. Ltd. [1985] 151 ITR 726 (P H), it was held that the expenditure incurred for laying service lines for carrying on the business of growing and manufacturing of tea was held to be revenue expenditure. The expenditure incurred by the assessee-company by way of contribution towards the construction of roads was held by the Supreme Court to be revenue expenditure as the said roads were advantageous to the business of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure acquired by an assessee that brings the case within the principles laid in this test, provided by Lord Cave L. C. in Atherton v. British Insulated and Helsby Cables Ltd. [1925] 10 TC 155 (HL). If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's 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. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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