Madras High Court
Cit vs Coats Viyella India Ltd. on 30 November, 2000
Equivalent citations: [2002]253ITR667(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R. Jayasimha Babu, J.
For the revenue, it is contended that the contribution made by the assessee to the, government for building a new bridge in place of the old one which had become unserviceable, and which bridge was essential to provide access to the assessee's factory-as the workmen could not reach the factory, unless that bridge was available for their movement is in the nature of capital expenditure, and not revenue as held by the Tribunal. We do not find it possible to agree.
The Supreme Court in the case of L. H. Sugar Factory and Oil Mills (P) Ltd. v. CIT (1980) 125 ITR 293, held that when a road is constructed in order to facilitate transport of sugarcane to the sugar factory and the outflow of the manufactured sugar to the market, such construction facilitates the business operation of the assessee and enables the assessee to conduct the business more efficiently and profitably. Though the advantage may be of long duration as the roads would last long, nevertheless, it would not be an advantage in the capital field, as 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. That judgment was delivered by a Three-Judge Bench of the Apex Court.
Counsel for the revenue, however, relied upon a decision rendered by a Two-Judge Bench of the Apex Court in the case of Arivind Mills Ltd. v. CIT (1992) 197 ITR 422, wherein it was held that the betterment charges paid by the mill in respect of the lands owned by it was a payment which was in the capital field, and not revenue, as the improvement effected was for the better enjoyment of the land, and as a consequence of the improvement, the value of the land had increased. The land, over which the improvement was carried out was owned by the mill. It was in that context, the court held that the fact that the improvement so effected resulted in better facilities, would not render the betterment charge a revenue expenditure.
Here, the bridge is one, which is built across the river. The bridge is not owned by assessee. It is built by the government, and the assessee does not acquire any rights of ownership over the bridge in the short-term or in the long run by reason of the contribution that it agreed to pay towards the construction of the bridge. So far as the assessee is concerned, the payment made is an outgo in return for which it receives no addition to the value of any of the assets owned by it. The bridge merely facilitates the movement of the workmen to gain access to the assessee's factory and to return home, and also for the movement of the goods over the bridge. The facts of this case are such as to bring it within the ratio of the decision in the case of L. H. Sugar Factory and Oil Mills (P) Ltd. v. CIT (1980) 125 ITR 293 (SC).
We, therefore, do not see any justification for calling for a reference. The Tribunal has rightly held that the amount is to be treated as revenue expenditure. The assessment year is 1991-92. The petitions are dismissed.