TMI Blog1991 (3) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ding engines and looms. On July 22, 1966, an agreement was arrived at between the assessee-company and the Maharashtra Industrial Development Corporation ("M. I. D. C.", for short) for temporary water supply connection from 24" steel pipelines and 16" pre-stressed concrete pipes laid on the Thane-Belapur Road. The said agreement recited that the assessee-company had applied to M. I. D. C. for a temporary water supply connection, since the assessee-company was in urgent need of water for their factory for industrial production and residential consumption in the factory estate. It appears from the said agreement that M. I. D. C. had agreed to provide water supply connection to the assessee-company on a temporary basis till a final agreement was entered into between the parties. Clause 16 of the said agreement provided that the said agreement shall remain in force for maximum period of not more than nine months and thereafter the parties shall enter into a final agreement which will be acceptable to both the parties. The terms and conditions of the subsequent agreement were kept open for negotiation between the parties. Clause 16 of the agreement does not provide for renewal of the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for obtaining water supply for its business in addition to its obligation to pay the water charges at a particular rate. It was also emphasised by the Tribunal that the pipeline belonged to M. 1. D. C. and continued to so belong. Applying the relevant tests as laid down in Gotan Lime Syndicate V. CIT [1966] 59 ITR 718 (SC), the Tribunal came to the conclusion that the said expenditure was liable to be considered as of a revenue nature and was thus liable to be allowed as a revenue deduction. Shri Jetley, learned counsel for the applicant-Revenue, has submitted that the assessee had obtained an enduring advantage under the said agreement dated July 22, 1966, and that it will not be correct to state that the said agreement was for a period of nine months only inasmuch as the said agreement contemplated the entering into of a further agreement also. Shri Jetley submitted that the assessee had made a capital contribution of Rs. 4,50,000 not for the purpose of availing of the facility of water supply for a period of nine months only. In our judgment, the Tribunal is right in the view which it took. The said agreement, on its plain interpretation, in the light of the recitals precedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 82 ITR 376. In this case, it was held by the court that the contribution made by the assessee towards the construction and development of roads between the various sugarcane producing centres and the sugar factories was liable to be considered as a revenue expenditure, as the said expenditure was incurred by the assessee for the purpose of facilitating the running of its motor vehicles and was, therefore, incurred for running the business or working it with a view to producing profits without the assessee gaining any advantage of an enduring benefit to itself. The criterion to be applied is to see whether the assessee has obtained any advantage of an enduring benefit under the said agreement dated July 22, 1966. Shri Jetley, learned counsel for the applicant-Revenue, also relied on the judgment of the Hon'ble Supreme Court in L. H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT [1980] 125 ITR 293. It was held by the Hon'ble Supreme Court in this case that the contribution made by the assessee had nothing whatsoever to do with the business of the assessee. It was, therefore, held that the expenditure in question was not a revenue expenditure. The question to be asked is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is on all fours and the facts of the case under consideration are almost identical with the facts of this case. We are in complete agreement with the ratio of the judgment in CIT v. Excel Industries Ltd. [1980] 122 ITR 995 (Bom) as well as the finding of fact recorded by the Tribunal. We do not consider it necessary to refer to other authorities cited by counsel on either side on this question. We, accordingly, answer question No. 1 in the affirmative and in favour of the assessee. We shall now proceed to deal with the second question under consideration. The relevant facts for consideration of the second question are as under : During the year ended December 31, 1966, the assessee paid a sum of Rs. 1,56,800 to the Maharashtra Housing Board as contribution towards the cost of certain tenements in lieu of the right conferred on the assessee to allot the tenements for the use of its workmen. Our attention has been invited by learned counsel on both sides to the copy of the scheme framed by the Maharashtra Housing Board to assist the employers in solving the problem of providing houses to their workmen. Under the said scheme, the State Government or its approved agencies like th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, the assessee had obtained an advantage of enduring nature by incurring the expenditure in question inasmuch as the assessee had secured the advantage of housing its employees for a long period. It was observed by our court that the buildings would stand for a considerable period. It was, therefore, held that the assessee by making a contribution to the State Housing Board had derived advantage of an enduring nature and, therefore, the expenditure incurred therefor was of a capital nature and was not deductible. We are in complete agreement with the view taken in the above case and we see no material difference between the facts of the case before the High Court in Cooper Engineering Ltd. v. CIT [1988] 169 ITR 66 (Bom) and the facts of this case. Shri Mehta, learned counsel for the respondent-assessee, has, however, invited our attention to another judgment of our High Court in CIT v. Hingir Rampur Coal Co. Ltd. [1983] 140 ITR 73. In that case, the agreement between the assessee and the Coal Mines Labour Housing Board was to remain in force for a period of 15-years only. Having regard to the facts of that case, the High Court came to the conclusion that the assessee in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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