TMI Blog1985 (4) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... -75, the assessee incurred an expenditure of Rs. 18,501 in the installation of poles and additional power lines. The assessee was having a 40 H.P. electric connection. On its request, the Rajasthan State Electricity Board sanctioned a load of 290 H.P. to the assessee, in order to cope with the heavy load required for manufacturing purposes. The Board decided to extend the 11 KV line up to the premises of the assessee. On account of the extension of 11 KV line, the assessee was required to pay the aforesaid sum of Rs. 18,501 to the Electricity Board. The installation remained the property of the Electricity Board. The assessee claimed deduction in respect of the expenditure incurred in the installation of poles and additional power line to the extent of Rs. 18,501 as revenue expenditure. The ITO refused to allow the deduction on the ground that the said expenditure was of capital nature. On appeal, the AAC, jodhpur, by his order dated April 12, 1977, held that the payment of the aforesaid amount of Rs. 18,501 by the assessee to the Electricity Board for installation of poles and laying of additional power line was in the nature of revenue expenditure, as it provided additional facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in CIT v. Indian Mica Supply Co. P. Ltd. [1970] 77 ITR 20 (SC). In that case, a similar question arose before their Lordships of the Supreme Court as has been raised before us, namely, as to whether a particular expenditure incurred by the assessee represented revenue expenditure or was of the nature of capital expenditure. Their Lordships held that the High Court was justified in refusing to direct the Tribunal to state the case and refer the question which was sought to be referred by the Commissioner, because it was perfectly clear that the amount which had been paid by the assessee was an expenditure which was wholly and exclusively incurred for the purpose of carrying on its business. It was observed that the assessee in incurring the expenditure had acted in the interest of and for the purpose of its business and the expenditure was not laid out for any purpose other than that of carrying on the business of the assessee. Their Lordships further observed that the answer was self-evident and the High Court was justified in declining to call for a reference. In CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC), Bhagwati J., speaking for the Supreme Court, observed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the produce or fruit. What the assessee acquired was merely an advantage in the nature of relaxation of restriction on working hours imposed by the working time agreement, so that the assessee could operate its profit-earning structure for a longer number of hours. Undoubtedly, the profit-earning structure of the assessee was enabled to produce more goods, but that was not because of any addition or augmentation in the profit-making structure, but because the profit-making structure could be operated for longer working hours. The expenditure incurred for this purpose was primarily and essentially related to the operation or working of the looms which constituted the profit-earning apparatus of the assessee. It was an expenditure for operating or working the looms for longer working hours with a view to producing a larger quantity of goods and earning more income and was, therefore, in the nature of revenue expenditure. We are conscious that in law as in life, and particularly in the field of taxation law, analogies are apt to be deceptive and misleading, but in the present context, the analogy of quota right may not be inappropriate. Take case where acquisition of raw material is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable the assessee to receive higher voltage electric power for its manufacturing plant, then it must be treated as revenue expenditure. Similar view was taken by the Allahabad High Court in CIT v. Kanodia Cold Storage [1975] 100 ITR 155. In that case, the assessee made payment to the Electricity Supply Undertaking towards the cost of transformer and laying down service line for replacing the existing service line so as to enable the assessee to have higher electric power and the expenditure incurred was claimed as an allowable deduction. It was held that there was no creation of a new asset of enduring nature and the productive unit of the assessee remained the same but only a part of it, which had become unsuitable for its use was replaced so as to make it possible for the existing set up to function efficiently and the cost incurred in doing so was held to be revenue expenditure. In view of all the aforesaid decisions, it is clear that there is no possibility of holding two views in the matter like the one before us. The expenditure incurred by the assessee in the installation of poles and laying of additional power lines was part of the cost of operating the profit-earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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