TMI Blog1981 (12) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ed this amount as an item of allowable revenue expenditure in its business. The ITO, however, disallowed the amount, holding that the amount represented capital expenditure. On appeal, the Income-tax Appellate Tribunal went into the break-up of the shifting expenses, which amounted to Rs. 60,016. It found that Rs. 12,490 represented expenditure incurred by the assessee towards lorry transport charges for transporting raw materials and stores from the old factory site at Sembiam to the new factory site at Kakkalur. A sum of Rs. 6,267 represented the insurance premium paid in connection with the transit of consumable stores, machinery spares, finished products, raw materials, processed stocks, etc. The Tribunal held that the expenditure incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequence, sugarcane of good quality in sufficient quantity became unavailable in that place. With a view to improving the business the assessee shifted the factory from Sitalpur to another place called Garaul. In the process of dismantling the plant and machinery and transporting them to Garaul and erecting them in the new site, the assessee incurred an expenditure of Rs. 3,19,766. This was claimed as an item of admissible expenditure. The Department disallowed the expenditure as a capital outlay. When the matter was taken before the Supreme Court it was held by that court that the expenditure must be regarded as one incurred for putting up its factory in a better site and that being so, the expenditure must be regarded as capital in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure, and an expenditure incurred in dismantling and refitting the existing plant at a better site. In all these cases, it may be verily said that the expenditure subserves a benefit of an enduring kind, which is often regarded as the hallmark of capital expenditure. We accordingly hold that the Tribunal had come to a correct conclusion in disallowing the expenditure incurred by the assessee in this case in dismantling and shifting the factory from Sembiam to Kakkalur as capital expenditure. Mr. Subramanian, learned counsel for the assessee, submitted that recent case-law discloses a departure from the earlier trend of decisions in this country which have had as their model the dictum of Viscount Cave in Atherton's case [1925] 10 TC 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision [1925] 10 TC 155 (HL), would show that the learned Lord Chancellor did not intend to lay down any universal proposition or principle by laying down enduring benefit as an absolute test. It would have been noticed that Viscount Cave in a bracketed parenthesis, makes an exception of certain kinds of expenditure which might bring about enduring benefit to trade and yet have to be regarded as non-capital expenditure, or revenue expenditure, owing to the presence of special circumstances. To cite an example, where machinery or other fixed capital equipment is repaired, the expenditure on such repair would be an item of revenue expenditure, even though the effect of the repair may be enduring, as when we say " A stitch in time saves nin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-to-day operations of manufacturing business cannot be conceived without the pre-existence of a factory or other fixed asset, which is the very source for carrying on the business and earning profits. Although, the Sitalpur case [1963] 49 ITR 160 (SC), is not expressly referred to in the Empire jute decision[1980]124 ITR I (SC), we have no doubt whatever that uprooting a factory and re-establishing it in a new place must be held to subserve an enduring advantage in the capital field, in the sense spoken of by Bhagwati J. Having regard to the consideration aforesaid, we answer the question referred to us in the present case in the affirmative and against the assessee. There will be no order as to costs. - - TaxTMI - TMITax - I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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