TMI Blog1979 (10) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... ble deduction ? " The relevant facts, very briefly stated, are as follows : The case relates to the assessment year 1973-74. The respondent-company was incorporated in 1960 and carries on business of manufacture of chemicals. During the year of account ended September 30, 1972, relevant to the aforesaid assessment year, the respondent set up a new unit at Bhavnagar for the manufacture of phosphorus. For the purpose of manufacture of phosphorus, the respondent required for consumption a large quantity of electrical energy which it had to obtain from the Gujarat Electricity Board. For this purpose, the respondent entered into an agreement with the Gujarat Electricity Board under which the said Board agreed to provide an overhead service l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly would be for a minimum period of seven years from the date of commencement of the supply. An analysis of the facts set out earlier, shows that the amount in question has been paid by the respondent towards the construction of an overhead supply line. This supply line never became an asset of the respondent and always belonged to the Gujarat Electricity Board. The supply was guaranteed under the aforesaid agreement for a minimum period of seven years. Notwithstanding the aforesaid contribution made by the respondent towards the cost of the overhead supply line, the respondent had to pay the normal charges for the amount of electricity consumed by it. There is also no doubt that the contribution was made by the respondent for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the name of the District Collector, Madurai, for the purpose of constructing houses for the company's workers by the Government under the subsidised industrial housing scheme sponsored by the State Government and claimed a sum of Rs. 39,696 being the purchase price as a deduction under s. 10(2)(xv) of the Indian I.T. Act, 1922, as being in the nature of welfare expenses. It was held by the Madras High Court that the expenditure was incurred wholly and exclusively for the purpose of the business of the assessee-company, that the assessee-company had not acquired for itself any capital asset and that as the assessee-company would not have any interest in the buildings to be built on the land and their obligation would be over by contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years been at variance with the company. A supplementary charter was granted in January, 1963, substantially in the form proposed ; the company's affairs were then reorganised and its commercial performance improved. The company, inter alia, claimed that the amounts paid to the two dissenting shareholders in respect of their shares were liable to be deducted in computing the income for the purposes of income- tax for the year 1964-65. It was held by the House of Lords that the objects of the new charter being to remove obstacles to profitable trading, anything in it beyond that could be disregarded and since the supplementary charter facilitated the day-to-day trading operations of the company, the expenditure was on income account. Lord Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he changes was to put the company in a position to recruit efficient managerial staff with freedom of action to develop the company's trading in an efficient and modern manner. No decided precedent in this field can ever be decisive, but comparison, however approximate, is the best tool that we have." As far as the present case is concerned, as we have already pointed out, by the aforesaid contribution the respondent has acquired no capital asset, the overhead service line being always the property of the Gujarat Electricity Board. There is no finding that any enduring benefit or advantage has accrued to the respondent-company by reason of the aforesaid contribution made towards the cost of the overhead supply line. The object of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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