Income Tax Appellate Tribunal - Delhi
Modipon Ltd. vs Income-Tax Officer on 29 April, 1988
Equivalent citations: [1988]27ITD624(DELHI)
ORDER
M.C. Agarwal, Accountant Member
1. These appeals are by the assessee for asst. years 1971-72 and 1972-73 and raise a common point. They are, therefore, disposed of by this common order.
2. The assessee Modipon Ltd. has a factory at Modi Nagar in Distt. Ghaaiabad, U.P. In the accounting year relevant to asst. year 1971-72, it claimed an expenditure of Rs. 27,892 and in the subsequent accounting year an expenditure of Rs, 4,802 on the removal of a cremation ground that existed in front of the factory gate. The expenditure of Rs. 27,892 had been capitalised and was not claimed as a revenue expenditure before the ITO. A claim was, however, made before the AAC, who did not admit the additional ground. However, on a further appeal to this Tribunal, the ground was allowed to be raised. That is how the CIT (A) has decided this contention against the assessee and it is in appeal before us.
3. The admitted facts are that a cremation ground existed in front of the factory gate of the assessee. The cremation ground belonged to the Notified Area Committee, Modi Nagar. The assessee wanted the cremation ground to be shifted to another place. The land could not be shifted and only its use could be changed. Therefore, it was agreed between the assessee and the Notified Area Committee that the assessee would provide another land in the neighbourhood for use as a cremation ground and the land in front of the factory gate would be converted into a park. It was also agreed that the assessee would pay for the expenditure in providing the necessary facilities at the new cremation ground. The amounts in question were spent by the assessee in that connection. The learned CIT (A) has held that the shifting of the cremation ground did not facilitate the business carried on by the assessee nor had it resulted in any economy in business. The learned CIT (A) further observed that it was probably an individual desire by someone in authority to convert the cremation ground into a public park in front of the gate. He also observed that the expenditure was not on account of any commercial expediency or justification and cannot be considered as an expenditure laid down wholly or exclusively for the purposes of business.
4. At the hearing before us the learned counsel for the assessee referred to ruling in the case of Atlas Cycle Industries v. CIT [1982] 134 ITR 458 in which the Hon'ble P & H High Court has held that a temple constructed inside the factory premises primarily and directly for the benefit of employees is a business asset and was entitled to depreciation. He, therefore, contended that if a temple inside the factory premises can be for the benefit of the employees, on the same analogy a park in front of the factory gate is also for the benefit to the employees and the assessee's business visitors and, therefore, the expenditure for bringing about that park is an expenditure for business purposes. It was also contended that a cremation ground is an undesirable thing and amounted to a nuisance and, therefore, the removal of a nuisance from near the factory, the continuance of which was likely to affect the mental health of the assessee's employees was an act of business expediency and, therefore, the expenditure is a proper business expenditure.
5. On the other hand, the learned Departmental Representative conceding that the existence of a cremation ground in front of the factory gate, was an unseemly sight, contended that the expenditure resulted in an enduring advantage to the assessee and was, therefore, a capital expenditure. For this he relied upon a judgment of the Hon'ble Supreme Court in Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1. Reliance was also placed on a judgment of the Hon'ble Bombay High Court in the case of Fancy Corpn. Ltd. v. CIT [1986] 162 ITR 827 and R.J. Trivedi (HUF) v. CIT [1987] 166 ITR 856 (MP).
6. We have given our careful consideration to the respective arguments. It has been conceded by the learned Departmental Representative that the existence of a cremation ground presented an unseemly sight. It is common knowledge that a cremation ground is a, place that inspires awe as well as a sense of despodency and frustration. Therefore, if there is such a sight at the entrance of a factory, the mental health of the visitors and employees is likely to be adversely affected. The removal of the cremation ground to another place was, therefore, in our view, an act of business expediency. The expenditure in question is not on the laying down of the park in front of the factory gate but on the provision of facilities relating to cremation at the new site. Thus so far as the assessee is concerned, no asset whether of enduring or of temporary nature came into existence. The park has been laid by the Town Area Committee and there is nothing to show that the expenditure in question relates to the laying down of the park. The principles laid down by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. (supra) are not applicable to the facts before us and if there is anything therein it is in favour of the assessee. The Hon'ble Supreme Court observed that there may be cases where expenditure even incurred for obtaining an advantage of enduring benefit may, nonetheless, be on revenue account and the test of enduring benefit may break down. What is material to consider is the nature of the advantage in a commercial sense. Similarly the other two rulings relied upon by the learned Departmental Representative have no application to the present case.
7. Looking to the facts of the present case and the nature of expenditure, we are of the view that the expenditure in question relates to the removal of an unseemly sight or a nuisance which was likely to adversely affect the mental and psychological health of the assessee's employees and business visitors and, therefore, an expenditure incurred for the removal thereof was an expenditure directly related to the assessee's business and can be said to have been laid out wholly and exclusively for the purposes of the assessee's business. The learned CIT (A)'s observation that the cremation ground was though to be removed probably by an individual desire by someone in authority is a freak of imagination and conjecture and ignores the reality of life. We, therefore, hold that the expenditure in question should have been allowed as a deduction. Allowing the assessee's appeal we direct that the expenditure referred to above be allowed as a deduction in determining the income for the two years respectively.