TMI Blog1993 (1) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the second question is confined to 1968-69 only. As is evident from the question set out above, the dispute in the first question pertains to allowability of initial depreciation under section 32(1)(iv) in respect of amounts spent by the assessee on the construction of school and shop buildings for its apprentices. The real controversy is as to whether apprentices can be said to be persons employed in the business of the assessee within the meaning of section 32(1)(iv) of the Act. The dispute raised in the second question relates to the allowability of the amount of royalty paid by the assessee to a foreign company for various technical services provided by it. The admitted position is that the payments of royalty made in pursuance of the very same agreement during the assessment year 1969-70 have already been allowed. The dispute in this case is confined to the payments made during the year 1968-69. We take up question No. 1 first. The contention of the Revenue is that apprentices are not " persons employed in the business of the assessee " and, as such, the benefit of initial depreciation under section 32(1)(iv) of the Act is not available to the assessee in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building; but any such sum shall not be deductible in determining the written down value for the purposes of clause (ii) of sub-section (1) (emphasis supplied). From a plain reading of this provision, it is clear that initial depreciation under this clause is allowed in respect of building used solely or mainly as a hospital, creche, school, canteen, library, recreational centre, rest-room or lunch-room. The only condition is that such building should be used solely or mainly for the welfare of persons employed in the business. Apparently, the object of this provision is to encourage the assessees in making investment in such activities which are beneficial to the persons employed in the business. Such a provision has to be considered in the light of its object. It has to be interpreted in a manner which will advance this objective. So interpreted, it is difficult to restrict the expression "persons employed in the business" to persons who are regular employees of the assessee in the strict legal sense of the term. In the context and setting in which it appears, it can only mean "engaged". The word "employed" in this clause, therefore, has to be read as "engaged" in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business". Reference may also be made in this connection to the apprenticeship agreement in this case which also clearly goes to show that the apprentices were engaged in the various trading activities of the assessee as specified in the agreement as any other employee. The assessee is, therefore, entitled to initial depreciation under section 32(1)(iv) of the Act in respect of the apprentice school building and the apprentice shop building, The first question is, therefore, answered in favour of the assessee. We now turn to the second question. Counsel for the assessee submits that the dispute in this question is restricted to the claim for allowance of royalty during the relevant year. According to counsel, the controversy is as to whether the amount became due and payable during the relevant year or not. The Tribunal has arrived at the finding of fact that it became due and payable during the relevant previous year corresponding to the assessment year 1968-69 and, in that view of the matter, it is a pure finding of fact and no question of law arises for consideration. According to counsel for the Revenue, the question is whether the amount paid by the assessee in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the surrounding circumstances and in the larger context of necessity and expediency. If the expenditure is so related to the carrying on or conduct of the business that it may be regarded as an integral part of the profit-making process and not for acquisition of an asset or a right of permanent character, the expenditure may be regarded as revenue expenditure even though the advantage may endure for some indefinite future. What is relevant is the purpose of the outlay and its intended object and effect, considered in a commonsense way, having regard to the business realities. In a given case, the test of "enduring benefit" might break down. (See Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 (SC), at 391 ; Empire Jute Co. Ltd. v. CIT [1980] 124 ITR I (SC) ; CIT v. Associated Cement Companies Ltd. [1988] 172 ITR 257 (SC)). As observed by the Supreme Court in Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377, the idea of " once for all " payment and enduring benefit " are not to be treated as something akin to statutory conditions nor are the notions of " capital " or " revenue " a judicial fetish. What is capital expenditure and what is revenue are not eterna ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
