TMI Blog2005 (11) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... e court that shall hold the field, so that even as the assessee's primary obligation to treat its discharge may have been the factor weighing on the court's mind, the very fact that it directed the defaulting unit(s) to contribute also towards the pipeline, only goes to show that it looked at the larger picture, and did not adjudicate in the matter on the basis of that primary obligation alone. And the considerations that would have weighed on the said units, in accepting the court's directions, could only be that of business. As such, the contribution even though comprising of two separate amounts for different purposes, has to be viewed as a composite sum, serving the same end, and forming part of the same common scheme formulated by the court, so that one cannot be divorced from, or looked at independent of, the other, as, for want of either, the said scheme becomes inoperational. We hold the entire contribution by the assessee for the setting up of the common ETP facility and for the laying of the pipeline network for conveyance of the discharge, in the facts and circumstances of the case, as a revenue expenditure. We order accordingly, upholding the order of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of the revenue, and the order of the learned CIT(A) is upheld. 4. In respect of the second ground, it was contended at the outset by the learned D.R. that this issue, was also subject-matter of appeal by the revenue in assessee's case for assessment year 1995-96 before the ITAT and stands heard by it in July, 2005. As such, the facts being identical, the ratio of the said decision be applied in deciding the issue in the present appeal as well. The learned A.R. concedes. 5. From records it has been found that the revenue's appeal in the assessee's case for assessment year 1995-96 (ITA No. 1414/Ahd./1999) stands since decided by the ITAT, 'B' Bench, Ahmedabad, vide its order dated 20-7-2005, wherein it has disposed off this matter by remitting it back to the file of Assessing Officer to decide the same in accordance with the final outcome on the issue for assessment year 1994-95, in the following words: "5. The common contention of the ld. representative of the parties that the above issues have been decided by the CIT(A) following his predecessor's order for assessment year 1994-95. Both the parties has failed to point out the final outcome of assessment year 1994-95. Under the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 ('Act' hereinafter). The assessee happens to be one such unit. In view of the facts, respectfully following the said decision, we hold the impugned payment of Rs. 15,68,777 by assessee to the Government of Gujarat as compensatory in nature, and thus allowable in full. The order of the learned CIT(A) is thus upheld. 9. The fourth ground of appeal relates to the disallowance of Rs. 4,20,000 being the payment(s) made to Ahmedabad Municipal Corporation ("AMC" for short)/Gujarat Industrial Development Corporation ("GIDC" for short) at Rs. 3,70,000, and further amount of Rs. 50,000 to M/s. Odhav Enviro Projects Limited (OEPL), towards setting-up of a common Effluent Treatment Plant (ETP), as also the conveyance of the said effluent from their point of discharge (by the polluting units of which the assessee is one) to its ultimate point of disposal, on the direction of the Hon'ble Gujarat High Court in Civil Petition No. 770/95. The same was held to be as a capital expenditure by the learned Assessing Officer, who disallowed the same, placing reliance on the decision of the Hon'ble Rajasthan High Court in case of Jaswant Trading Co. v. CIT [1995] 212 ITR 293, wherein, a similar issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of a revenue expenditure; the assessee having no right or title in the facilities to be set-up from the amounts contributed by the contributing units. He, in support of his claims, placed reliance on the decision of the Hon'ble Supreme Court in the case of Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 and that of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat Mineral Development Corpn. [1981] 132 ITR 377. 12. We have heard the rival submissions and perused the material on record, as also the case law cited. We find that though the payment of Rs. 3,70,000 and Rs. 50,000 to AMC and OEPL during the relevant year is confirmed on the basis of the orders of the authorities below, there is no finding by any of them as to the exact purpose for which the respective amounts stand paid, even as the same are, undoubtedly, for the purpose of the setting up of a common ETP (for and on behalf of the polluting units of the area) and the conveyance of the effluent so discharged. As such, we, for the time being, proceed with the matter accepting the contention of the assessee, as also made before the lower authorities, i.e., of Rs. 50,000 as representing the contributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh relevant from business stand-point, are irrelevant to the purpose of the nature and scope of the obligation under the law. Rather, if at all, these consideration(s) only go to support its (assessee's) argument of the said contribution being made only to protect its business as an on-going entity, and thus, its business interests/ profitability, with no concomitant financial benefit/interest, so that the expenditure is only a revenue expenditure incurred wholly and exclusively for its business. As such, we are inclined to agree with the arguments of the learned A.R. that the said expenditure is revenue in nature, the only advantage the assessee deriving from the said expenditure being avoidance of protracted litigation and enabling its smooth conduct, and thus, protecting its business profits and assets; it being not charged under law to do so, and thus, is a revenue expenditure allowable in full. In doing so, we are aware that the cost of the pipeline would also include that from the respective polluting unit to the common ETP, which, strictly speaking, lies in the area of responsibility of the discharging unit. However, considering the totality of the facts, where the cost ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo separate amounts for different purposes, has to be viewed as a composite sum, serving the same end, and forming part of the same common scheme formulated by the court, so that one cannot be divorced from, or looked at independent of, the other, as, for want of either, the said scheme becomes inoperational. 15.2 Further, no rights or property in the said facility (ETP) enures to the assessee. The nature of the right that accrues, i.e., to get the discharge treated, has not been spelled out in any definite terms, so that as far as we understand, it is limited to just that, with no further rights, as say of transferability, etc., in the absence of which the benefit/advantage cannot be regarded as one lying in the capital field, even as held by the Hon'ble Supreme Court in the case of Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377. In the facts of that case, it may be useful to recapitulate, the payment/expenditure was for acquisition of technical know-how, and considered by the Apex Court as revenue in nature, in view of the assumption of a transient character by the knowledge acquired thereby in an environment of rapid development in the scientific arena, as no definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon'ble Rajasthan High Court in a similar matter in the case of Jaswant Trading Co. v. CIT [1995] 212 ITR 293, and wherein the said court held the same to be capital expenditure, in the following words: "In the present case, it is not in dispute that if the water treatment plant was installed by the assessee himself, he would not have been entitled to claim it as revenue expenditure. If RIICO as a catalyst agent acted on behalf of a number of entrepreneurs in installing the plant which has given an enduring benefit to all the units, it cannot be considered to be revenue expenditure. We are, therefore, of the opinion that the payment made to RIICO for the water-treatment plant is capital expenditure." The said decision, however, is distinguishable, as in the instant case, the assessee, in paying the contribution, is only defending its title to its business, and also facilitating its conduct, as the same would not be possible without the impugned contribution. In the cited case, RIICO acts as an agent for the contributing units in setting-up the common ETP facility. Clearly, the proprietary rights directly or indirectly, in such a case would vest with the contributing un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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