TMI Blog1988 (3) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing a sum of Rs. 75,600 paid as filing fee as 'revenue expenditure' ? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the Commissioner (Appeals) who held that the sum of Rs. 1,66,184 being development and commissioning expenses should be treated as revenue expenditure ? (4) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer was not justified in restricting the relief under section 80J on pro rata basis ?" I shall, at first, answer the four questions referred at the instance of the Revenue. (i) The first question is covered by the decision of this court against the Revenue in CIT v. Motor Industries Co. Ltd. (ITRC Nos. 178 to 180 of 1979 disposed of on 12-2-1986 [1988] 173 ITR 374 (Kar) ), and is, therefore,answered in the affirmative and against the Revenue ; (ii) The second question relates to the expenditure incurred by way of remitting filing fee to the Registrar of Companies in respect of enhancement of the authorised share capital of the company. Following the view taken by the Himachal Pradesh High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinct advantage to the assessee since the present road belongs to the Indian Air Force and passes through the railway crossing resulting in loss of man-hours. Even though the road may not belong to the assessee, the construction of the road brought an enduring benefit to the assessee. The Income-tax Officer was of the view that the facts of the assessee's case are identical with the facts in the case of Travancore-Cochin Chemicals Ltd. v. CIT [1977] 106 ITR 900 (SC). Against the impugned orders of the Income-tax Officer, the assessee preferred appeals before the Commissioner of Income-tax who confirmed the impugned orders. The Commissioner of Income-tax held that there was no compulsion on the assessee to incur the expenditure and that by the construction of the road, the assessee obtained an enduring advantage. Thereafter, the assessee preferred appeals before the Income-tax Appellate Tribunal. The Tribunal held that the ratio of the decision in the case of Travancore-Cochin Chemicals Ltd. v. CIT [1977] 106 ITR 900, is apposite to the facts of these cases and that the expenditure incurred was capital in nature. Thus, the Tribunal upheld the orders of the Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of an approach road from Tumkur road to Bharat Electronics Limited up to railway crossing. Hindustan Machine Tools, Bharat Electronics Limited and City Improvement Trust Board agreed to share equally the expenditure involved. The State Government approved the estimate submitted by the City Improvement Trust Board and gave sanction for the construction of the approach road by its order dated June 13, 1973, vide annexure-A. Thereafter, the road came into existence by the joint venture of Hindustan Machine Tools, Bharat Electronics Limited and City Improvement Trust Board (Bangalore Development Authority). Learned counsel for the assessee-company produced the copy of the proceedings of the Government of Mysore (Karnataka) under order NO. HMA/ 10/MNJ/73 dated June 13, 1973, which reads as follows ANNEXURE-A "PROCEEDINGS OF THE GOVERNMENT OF MYSORE Sub : Estimate for formation of an approach road from Tumkur Road to Bharat Electronics Ltd. up to railway crossing. ORDER No. HMA/10/MNJ.73, DATED: BANGALORE: THE 13TH JUNE, 1973. Read : Correspondence ending with letter No. CITB/BO/4097/72-73, dated 5th March, 1973, from the Chairman, City Improvement Trust Board; Bangalore. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oad was of a long duration and an advantage beneficial to the business of the assessee, it was, however, not an advantage in the capital field at all since the assessee acquired neither tangible nor an intangible asset and furthermore, there was no addition to, or, expansion of, the profit-making apparatus of the assessee. Learned counsel also contended that the amount of Rs. 3,61,236 which was contributed by the assessee was for the purpose of facilitating and promoting the business of the assessee in order to make it more profitable and efficient and that it was an expenditure on revenue account. Learned counsel for the Revenue placed reliance on the decision of the Supreme Court in Travancore-Cochin Chemicals Ltd. v. CIT [1977] 106 ITR 900, and also on the decision of this court in D. P. Chirania and Co., v. CIT [1978] 112 ITR 12, and argued that the expenditure incurred by the assessee is purely in the nature of capital expenditure and is exigible to tax. Reliance was also placed by learned counsel for the assessee on the decision in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CIT [1988] 172 ITR 131, rendered by the High Court of Madhya Pradesh, wherein it was held on simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n application of this test. 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'. " It is, therefore, to be seen that the test of enduring benefit is not conclusive test and it cannot be applied in a mechanical way without regard to the particular facts and circumstances of the case on hand. In the said decision, the Supreme Court also referred to the decision rendered in Lakshmiji Sugar Mills Co. Pvt. Ltd. v. CIT [1971] 82 ITR 376 (SC), wherein the facts of the case were very similar to the facts of the case in L. H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT [1980] 125 ITR 293 (SC). The only difference between the facts of L. H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT [1980] 125 ITR 293 (SC), and the facts of Lakshmiji Sugar Mills Co. Pvt. Ltd. v. CIT [1971] 82 ITR 376 (SC), was that there was a statutory obligation in Lakshmiji Sugar Mills' case [1971] 82 ITR 376, for contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC), and hold that the expenditure incurred by the assessee, for formation of the road, not belonging to the assessee, is an admissible revenue expenditure. In L. H. Sugar Factory and Oil Mills P. Ltd. v. CIT [1980] 125 ITR 293 (SC) the proposition of law which fell for consideration is as follows (at p. 296) : "Whether, on the facts and circumstances of the case, the sums of Rs. 22,332 and Rs. 50,000 were admissible deduction in computing the taxable profits and gains of the company's business ?" The circumstances leading to the reference of the above question for the opinion of the court are as follows In the year 1952-53, a dam was constructed by the State of Uttar Pradesh at a place called "Deoni" and a road "Deoni-Dam-Majhala" was constructed connecting type Deoni Dam with Majhala. The Collector requested the assessee to make some contribution towards the construction of the Deoni Dam and the Deoni Dam-Majhala road and pursuant to this request of the Collector, the assessee contributed a sum of Rs. 22,332 during the accounting year ending September 30, 1955. The assessee also contributed a sum of Rs. 50,000 to the State of Uttar Pradesh during the same accounting year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existed special circumstances leading to an opposite conclusion, On a consideration of both the points, the Supreme Court came to the conclusion that the expenditure incurred by the assessee was clearly a revenue expenditure. In the earlier decision of the Supreme Court, which was also rendered by a Bench of three-judges, i.e., in Travancore-Cochin Chemicals Ltd. v. CIT [1977] 106 ITR 900, the Court considered only the first point mentioned above and reached a different conclusion. The second point was not brought to the notice of the Supreme Court in the said case and was not, therefore, considered by the court while applying Lord Cave's test. The observation made by the Supreme Court which is extracted above in L. H. Sugar Factory's case [1980] 125 ITR 293 (SC) is self-explanatory. In the light of the above facts, it is reasonable to hold that the second point which was couched in the parenthetical clause of Lord Cave's test passed sub silentio and that the decision in Travancore-Cochin Chemicals' case [1977] 106 ITR 900 (SC) is a "precedent sub silentio". In the circumstances and for the aforesaid reasons, it is not only preferable but also reasonable to follow the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the order of the Income-tax Officer. On a reference, the High Court of Madhya Pradesh held that where construction of a road had facilitated the business operations of the assessee and enabled the management and conduct of the assessee's business to be carried on more efficiently and profitably though the advantage secured for the business of the assessee was of a long duration, it was not an advantage in the capital field because no tangible or intangible asset was acquired by the assessee nor was there any addition to, or expansion of, the profit-making apparatus of the assessee. Following the aforesaid decision, it was held by the Madhya Pradesh High Court that the Tribunal was not justified in holding that the expenditure incurred by the assessee in connection with the construction of the road and tubewells was of a capital nature and held that the assessee was entitled to the deduction claimed as revenue expenditure. It may also be pointed out that the Madhya Pradesh High Court placed reliance on another decision of the Supreme Court in Empire Jute Co. Ltd. v. CIT 1980] 124 ITR 1 for its conclusion. We are in respectful agreement with the view taken by the Madhya Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, reads: "A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour ; but point was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio." (Underlining by me) In all the three decisions of the Supreme Court, namely, Lakshmiji Sugar Mills Co. Pvt. Ltd. v. CIT [1971] 82 ITR 376, Travancore Cochin Chemicals Ltd. v. CIT [1977] 106 ITR 900 and L. H. Sugar Factory and Oil Mills Pvt. Ltd. v. CIT [1980] 125 ITR 293, the question involved was similar, namely, whether the expenditure incurred by the concerned assessee for formation of roads, which was useful for its business, but di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sisting of equal number of judges, the later decision is binding. The answer furnished by the Full Bench of this court on the point, reads (p. 95) : "If two decisions of the Supreme Court on a question of law cannot be reconciled and one of them is by a larger Bench while the other is by smaller Bench, the decision of the larger Bench, whether it is earlier or later in point of time, should be followed by High Courts and other courts. However, if both such Benches of the Supreme Court consist of equal number of Judges, the later of the two decisions should be followed by High Courts and other courts." Further, a judgment of the Supreme Court in which a question of law has been decided, does not lose its binding authority as a precedent just because a particular aspect or point was not urged before the Supreme Court. This is clearly laid down by the Supreme Court in the case of Somawanti V. State of Punjab [1963] 33 Comp Cas 745. The relevant portion of the same reads (at p. 758) "...The binding effect of a decision does not depend upon whether a particular argument was considered therein or not, provided that the point with reference to which an argument was subsequently adva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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