Patna High Court
Commissioner Of Income-Tax vs Karuna Mica Co. on 20 February, 1987
JUDGMENT Ashwini Kumar Sinha, J.
1. These two references are under Section 256(1) of the Income-tax Act, 1961. The assessment years in question are 1968-69 and 1969-70.
2. Both the references involve a common question of law and the question of law referred for the opinion of this court is as follows :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the amounts of Rs. 1,63,735 and Rs. 2,42,216 incurred by the assessee were expenses of revenue nature and were allowable in the assessment years 1968-69 and 1969-70, respectively ?"
3. As it appears from the statement of the case submitted by the Income-tax Appellate Tribunal, the assessee is a registered firm carrying on the business of extracting mica from mica mines taken on lease from the State of Bihar. The Income-tax Officer, in the course of asssessment for the assessment years in question, found that under the head "Palmo Godown", certain expenses were debited which included expenses on mine surfaces, channel work, mines, underground works and bricks used for these works. For the assessment year 1968-69, according to the Income-tax Officer, the total expenditure, which represented expenses of capital nature came to be Rs. 1,63,735 and similarly for the assessment year 1969-70, according to the Income-tax Officer, the total expenditure came to be Rs. 2,42,216, which represented expenses of a capital nature.
4. The assessee's explanation before the Income-tax Officer was that the Narayan Mica Mines were worked by the firm and these mines could be worked only for a part of the year, as during the rainy season the mining operation had to be discontinued due to the nullah located above the mines overflowing. According to the assessee, during the rainy season, it was not possible to close the mines for fear of cracks taking place which might result in water getting into the mines. To safeguard against the rain water of the nallah going into the mines and for extracting mica through-out the year, the assessee-firm spent substantial amounts in the assessment years in question. The assessee's stand before the Income-tax Officer also was that the work done was in the nature of concreting the walls and roof underground and it was carried out under the orders of the Chief Inspector of Mines, Government of India, Dhanbad. According to the assessee, this work had to be completed by the assessee as it was a condition placed by the mining authorities for further operation.
5. The Income-tax Officer, however, found that the assessee himself wanted to extend the working of the mines throughout the year and thus they carried out this work for which permission was granted by the mining authorities. According to the Income-tax Officer, these works enabled the assessee to work the mica mines throughout the year and to extract more mica in the years in question. Hence, in the view of the Income-tax Officer, this resulted in a clear enduring benefit to the assessee-firm inasmuch as before the construction of this wall and roof in the mines, raising of mica was done only for a period of six months and after this construction, the raising could be done throughout the year. The Income-tax Officer pointed out to the actual increase in the raising of mica and held it to be the result of the work carried out by the assessee.
6. The Income-tax Officer held that the expenditure incurred by the assessee for the assessment years in question were of a capital nature and the amounts claimed were added.
7. The orders of the Income-tax Officer are annexures "A" and "A-1" to the statement of the case submitted by the Tribunal.
8. The assessee, as against the orders of the Income-tax Officer, moved the Appellate Assistant Commissioner of Income-tax in appeals for the assessment years in question.
9. The Appellate Assistant Commissioner, by a consolidated order, took a different view and held that the expenditure incurred by the assessee was of a revenue nature and hence the same was an admissible deduction.
10. According to the Appellate Assistant Commissioner, the work carried out by the assessee for the assessment years in question was necessary for carrying on the business operation and the assessee did not acquire any asset/right of enduring nature as a result of these expenses. The Appellate Assistant Commissioner held that the erection of the wall to ward off the water of the river from getting into the mine and by that way not bringing the working operations to a standstill during the rainy season was not an acquisition of an asset of enduring benefit so as to term it to be a capital expenditure. On the other hand, the Appellate Assistant Commissioner was of the view that the same was built for running the business or working it with a view to producing profits and, in that view of the matter, the Appellate Assistant Commissioner held that the expenditure was of revenue nature and an admissible deduction.
11. The consolidated order of the Appellate Assistant Commissioner has been marked annexure "P" to the statement of the case submitted to this court.
12. Aggrieved by the consolidated order passed by the Appellate Assistant Commissioner, the Department moved separately before the Income-tax Appellate Tribunal for the assessment years in question.
13. The Department's stand before the Tribunal was that the expenses were incurred once for all for securing an advantage of enduring nature. According to the Department, the expenses incurred were of special nature and had not been incurred in the earlier year or in the subsequent year.
14. On the other hand, on behalf of the assessee, it was submitted that the expenses were incurred in order to carry on the business of extracting mica and the productive work carried on by the assessee had become necessary in view of the revision of the conditions under which the lease had been granted. The assessee's stand also was that the assessee's lease was for a fixed period and the assessee had to abide by the conditions laid down by the mining authorities.
15. In short, the assessee's stand was that the work undertaken by it was only to protect the mines during the rainy season and the work had to be completed as it was a condition placed by the mining authorities for further operation.
16. The Tribunal observed that the expenses incurred by the assessee were operational expenses and they did not bring into existence any asset or advantage of enduring benefit to the assessee. The Tribunal held that the expenditure was basically an expenditure incurred for working the mines in a better manner and, therefore, the expenses had to be allowed as revenue expenditure and thus the Tribunal allowed the expenses as being revenue in nature,
17. Before I deal with the submissions advanced by the respective counsel of the parties, it is pertinent to mention a few more facts, as it appears from the statement of the case submitted to this court as well as from the order of the Income-tax Officer and that of the Appellate Assistant Commissioner.
18. The assessee-firm filed an application dated February 26, 1962, to the Chief Inspector of Mines for the construction work in the mines in question. The Chief Inspector of Mines replied to that application. The construction work was done by the assessee only after securing permission from the Chief Inspector of Mines. Before the construction of the wall and roof, raising of mica was done only for six months and after the construction, raising of mica was done for all the year round. Thus, it would appear that it was the assessee which wanted to extend the work of the mines and that it applied for the construction work to enable the firm to raise more mica from the mines throughout the year and it was only on the application filed by the assessee-firm that the Chief Inspector of Mines gave the directions and for such permission certain conditions were laid down,
19. The assessee's stand was that these expenses were incurred in the course of mining business and that it enabled the assessee to extract more mica and also resulted in greater safety in the mines. According to the assessee, the concreting of the roof and the sides of the pillars was an extra protection undertaken, as desired by the mining authorities. The assessee's further stand before the Income-tax Officer was that the protection work was a necessary safeguard against percolation as well as overflow of water. The assessee submitted that such work was necessary for the working of the mines as water flowed and endangered the lives of the workers and the mining authorities could not permit carrying on the mining operations if the protection works were not undertaken.
20. As already stated above, the Income-tax Officer took the view that these expenses were capital expenses, whereas, the Appellate Assistant Commissioner and the Tribunal held that the expenses incurred by the assessee were operational expenses and they did not bring into existence any asset or any permanent advantage to the assessee and hence the expenses were revenue in nature and had to be allowed.
21. Occasions have arisen in this court as well as in other High Courts and also in the Supreme Court to deal with the controversy whether an item of expenditure should be considered as a capital expenditure or revenue expenditure.
22. The Act does not define the expressions "capital expenditure" and "revenue expenditure". The line that divides revenue expenditure from capital expenditure is very thin and hence the decisions of the courts have not been able to give a quietus to the controversy whether an item of expenditure is capital or revenue. The decisions enumerate the general tests to be applied to distinguish capital expenditure from revenue expenditure. The whole difficulty arises when the courts are called upon to apply those tests to a given set of facts and, barring rare exceptions, the facts of no two cases are similar.
23. The court has to look to the surrounding circumstances to arrive at a decision as to what was the real object and purpose of the expenditure from the commercial point of view. No single test of universal application can be discovered for the solution of the question.
24. A long line of decisions have laid down that when an expenditure is made with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, there is good reason for treating such an expenditure as attributable not to revenue but to capital. In the case of Benarsidas Jagannath [1947] 15 ITR 185, a Full Bench of the Lahore High Court attempted to reconcile the principles enumerated in several decisions and the Full Bench deduced the following broad tests for distinguishing capital expenditure from revenue expenditure. The opinion of the Full Bench of the Lahore High Court in the case of Benarsidas Jagannath [1947] 15 ITR 185, was in the following terms (at pages 198 and 199):
"It is not easy to define the term ' capital expenditure ' in the abstract or to lay down any general and satisfactory test to discriminate between a capital and a revenue expenditure. Nor is it easy to reconcile all the decisions that were cited before us, for each case has been decided on its peculiar facts. Some broad principles can, however, be deduced from what the learned judges have laid down from time to time. They are as follows:
1. Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment: vide Lord Sands in Commissioners of Inland Revenue v. Granite City Steamship Company Ltd. [1927] 13 Tax Cases 1 at page 14. In City of London Contract Corporation Ltd. v. Styles [1887] 2 Tax Cases 239 at page 243, Bowen L. J., observed as to the capital expenditure as follows :
'You do not use it "for the purpose of" your concern, which means, for the purpose of carrying on your concern, but you use it to acquire the concern.'
2. Expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade : vide Viscount Cave L. C. in Atherton v. British Insulated and Helsby Cables Ltd. [1926] 10 Tax Cases 155. If what is got rid of by a lump sum payment is an annual business expense chargeable against revenue, the lump sum payment should equally be regarded as a business expense, but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether. Thus, if labour saving machinery was acquired, the cost of such acquisition cannot be deducted out of the profits by claiming that it relieves the annual labour bill, the business has acquired a new asset, that is, machinery.
The expressions 'enduring benefit' or 'of a permanent character' were introduced to make it clear that the asset or the right acquired must have enough durability to justify its being treated as a capital asset.
3. Whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business. Again, it is to be seen whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. Fixed capital is what the owner turns to profit by keeping it in his own possession. Circulating or floating capital is what he makes profit of by parting with it or letting it change masters. Circulating capital is capital which is turned over and in the process of being turned over yields profit or loss. Fixed capital, on the other hand, is not involved directly in that process and remains unaffected by it."
25. Thereafter, an occasion arose for the Supreme Court in the case of Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34, to consider the question and the Supreme Court observed that the synthesis attempted by the Full Bench of the Lahore High Court truly enunciates the principles which emerge from the authorities and it further held as follows (at pages 45 and 46):
"In cases where the expenditure is made for the initial outlay or for extension of a business or a substantial replacement of the equipment, there is no doubt that it is capital expenditure. A capital asset of the business is either acquired or extended or substantially replaced and that outlay whatever be its source whether it is drawn from the capital or the income of the concern is certainly in the nature of capital expenditure. The question, however, arises for consideration where expenditure is incurred while the business is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment. Such expenditure can be looked at either from the point of view of what is acquired or from the point of view of what is the source from which the expenditure is incurred. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If, on the other hand, it is made not for the purpose of fringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits, it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence, it would be immaterial whether the source of the payment was capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. If it was part of the fixed capital of the business, it would be of the nature of capital expenditure and if it was part of its circulating capital, it would be of the nature of revenue expenditure. These tests are thus mutually exclusive and have to be applied to the facts of each particular case in the manner above indicated. It has been rightly observed that in the great diversity of human affairs and the complicated nature of business operations, it is difficult to lay down a test which would apply to all situations. One has, therefore, got to apply these criteria one after the other from the business point of view and come to the conclusion whether on a fair appreciation of the whole situation, the expenditure incurred in a particular case is of the nature of capital expenditure or revenue expenditure in which latter event only it would be a deductible allowance under Section 10(2)(xv) of the Income-tax Act. The question has all along been considered to be a question of fact to be determined by the income-tax authorities on an application of the broad principles laid down above and the courts of law would not ordinarily interfere with such findings of fact if they have been arrived at on a proper application of those principles."
26. Keeping in mind, the principles referred to in several decisions, the question posed has to be examined in the light of judicial common sense.
27. Learned counsel for the Revenue submitted that the expenses incurred by the assessee were of a special nature and had not been incurred in any earlier or subsequent years. The expenses were incurred once for all for securing an advantage of an enduring nature. Learned counsel for the Revenue submitted that the fact that the raising of mica was increased from 10,657 kgs. to 1,45,254 kgs. during the accounting period itself showed that the expenses incurred were for securing an advantage of an enduring nature.
28. Learned counsel for the Revenue, in support of his submission relied upon the case of CIT v. North Dkemo Coal Co. Ltd. [1977] 106 ITR 592 (Cal). In my opinion, the facts of this case are at par with the facts of the instant case. In the case of CIT v. North Dhemo Coal Co. Ltd. [1977] 106 ITR 592 (Cal), there was a serious disaster in the immediately preceding assessment year as a result of which the assessee had to construct dams under the instructions of the Mines Department for prevention of recurrence of such disaster. Thus, dams were constructed for the protection of the mines as also for the safety of the labourers. In that case, the following facts were established :
(i) There was new construction, viz., that of the dams;
(ii) the purpose of such construction was to prevent the recurrence of a disaster which had occurred earlier ; and
(iii) the ultimate object was the protection of the mines as also the safety of the labourers.
29. In the instant case also, the assessee was accorded permission by the Mining Department to extend the workings beneath and within 15 metres of the nullah, though certain conditions were laid down and, thus, (a) there was, admittedly, a new construction ; (b) the purpose of the new construction was to prevent overflooding of the mines which had occurred earlier; and (c) the ultimate object was the protection of mines as also the safety of the labourers.
30. Learned counsel for the Revenue also relied upon the case of CIT v. India Tobacco Co. Ltd. [1978] 114 ITR 182 (Cal). In this case, the asses-see (India Tobacco Co. Ltd.), having acquired a piece of land, constructed a hospital thereon. At the time the hospital was ready, the Employees' Insurance Scheme came into operation and the Government of Bihar required the hospital in pursuance of this. Some negotiations thereafter took place between the assessee-company, the Government and the workers' union and eventually, a memorandum of settlement was arrived at. The assessee-company gifted to the Government of Bihar the hospital it had constructed together with the land by a deed of gift. Clause 8(d) of the settlement stipulated that the assessee should give a sum of Rs. 50,000 to the Government for the purpose of purchasing equipments for the hospital built by the assessee when it would be taken over by the Government. The company had two kinds of employees, those who were covered by the provisions of the Employees' Insurance Scheme, which provided for hospital benefits and also employees who were not covered by the scheme. By making the payment of Rs. 50,000, the employees of the assessee, who were not governed by the scheme, were entitled to the use of the hospital facilities.
31. The assessee claimed the amount of Rs. 50,000 as a deduction on the ground that the expenditure was incurred out of commercial expediency. The Appellate Tribunal held that the expenditure was an admissible deduction. On a reference, the High Court held that the assessee-company was getting the advantage of having its workers treated at the hospital which was being established by the Government. The equipment to be purchased with the money given by the company would enure for the benefit of the treatment of the workers of the company. Though the expenditure in question was incurred for commercial purposes yet, at the same time, the assessee-company obtained an advantage or a benefit or a privilege and that the benefit or the privilege or the advantage was that the workers who were not governed by the State Insurance Scheme were entitled to the benefit of treatment at the hospital run by the Government at no rate or perhaps at concessional rate. On the basis of that benefit, the workers' union also agreed to the settlement. If annual sums had to be spent for meeting the workers' expenses for treatment at the hospital, the same would have merited deductions as revenue expenditure. If this was the only aspect of the matter, then it might have been possible to hold that the expenditure incurred was a revenue expenditure. But, the High Court held that the company not only incurred the expenditure for getting rid of the obligation to make recurring annual expenses for meeting the treatment of its workers but also for getting an advantage or a privilege which, indeed, could be considered to be an asset for an indefinite period to have its workers treated at no expense or at concessional expense. The High Court further held that this was an asset or a benefit and as it enured for a considerable length of time or for an indefinite time, it could certainly be considered to be an asset or advantage of enduring benefit, enduring in the sense in which fixed capital in modern times endures. It was further held that by making this one lump sum payment, the assessee-company not only got rid of a liability to make recurring annual payments for the treatment of the workers, who were not covered by the State Insurance Scheme at the hospital, but also obtained this advantage or privilege for an indefinite period. The High Court, ultimately, held that on the facts of the case, the expenditure in question was capital in character not admissible for deduction.
32. In the instant case also, the expenses incurred were once for all securing an advantage of an enduring nature and, in fact, in the assessment years in question, raising of mica increased enormously. Thus, in my opinion, the facts of the case of CIT v. India Tobacco Co. Ltd. [1978] 114 ITR 182 (Cal), are also at par with the facts of the instant case.
33. Learned counsel for the Revenue also relied upon the case of Raza Buland Sugar Co. Ltd. v. CIT [1980] 122 ITR 817 (All). In this case, one of the questions for the opinion of the High Court was of a similar nature. In this case, the State Government introduced a scheme for construction of workmen's staff quarters. Under it, the company was to lease out its land near its factory to the U.P. Housing Board. The Government was to contribute some amount for construction of staff quarters for the factories and the balance by the factory owners and contractors. These staff quarters were to remain the property of the U.P. Sugar and Power Alcohol Housing Board and they were to be leased oat to the factory owners on the agreed terms and conditions. The assessee gave out some land and paid Rs. 32,004 towards cost of construction of the quarters and secured the quarters for the exclusive use of its workers for an unlimited time.
34. The assessee claimed that it had no title to the quarters and that the expenditure was revenue in nature and was allowable as such.
35. The Tribunal repelled the plea of the assessee and held that there was no getting away from the fact that the assessee-company derived an advantage of an enduring character in that it secured quarters for exclusive user by its workers for an unlimited period of time. The Tribunal further held that the circumstance that the assessee was compelled to agree to the scheme was irrelevant in so far as the nature of the expense was concerned.
36. The High Court held that (i) the workmen's quarters were freshly built; (ii) though the company was not the owner of the quarters, it was entitled to its exclusive user for an unlimited period of time ; and (iii) the assessee, therefore, secured an asset of an enduring nature by expending Rs. 32,004 and the expenditure was capital in nature.
37. Thus, as it would appear from above, the facts in the case of Raza Buland Sugar Co. Ltd. [1980] 122 ITR 817 (All) were also at par with the facts of the instant case.
38. On the other hand, learned counsel for the assessee conceded that the line that divides revenue expenditure from capital expenditure is very thin, yet learned counsel for the assessee submitted that the expenses incurred by the assessee were only operational expenses and they did not bring into existence any asset or advantage of enduring benefit to the assessee. Learned counsel for the assessee submitted that the expenditure incurred was basically an expenditure for working the mines in a better manner and hence the expenses had to be allowed as revenue expenditure and in support of his submissions, he relied upon a Supreme Court case, CIT v. Ashok Leyland Ltd. [1972] 86 ITR 549. In this case, the assessee-company which was originally importing and assembling motorcars, parts, etc., manufactured by Austin of England, had appointed C.B. Ltd. in 1948 as its managing agents for a period of 14 years. In 1952, the Government of India referred the question of establishing an automobile industry in India to the Tariff Commission; The assessee-company submitted a comprehensive scheme for the manufacture of Leyland trucks and participated in the proceedings before the Commission. The Government instructed the assessee to take up the manufacture of Leyland commercial vehicles and in 1954, the company ceased to manufacture Austin cars in view of the Government's decision. At a meeting held on January 24, 1955, it was suggested by the Minister that the company invite Leylands to provide part of the capital and raise the remaining capital in India and assured that the Government would arrange for the required capital in India but that such a liability would be accepted only if the managing agency was abolished. The directors of the company, having already taken steps to terminate the services of the managing agents, by means of an agreement dated January 29, 1955, terminated the managing agency on payment of compensation of Rs. 2,50,000.
39. The assessee-company claimed deduction of that amount in computing its profits as revenue expenditure. The Appellate Tribunal found that, in view of the change in its business activity, the continuance of the managing agents became superfluous and that the company terminated their services on business considerations.
40. It was held that the compensation paid for termination of the services of the managing agents was a payment made with a view to save business expenditure in the accounting period as well as a few subsequent years and it was not made for acquiring any enduring benefit or income-yielding asset. The expenditure was of a revenue nature and was an allowable deduction in computing the profits of the assessee-company.
41. In my opinion, the facts in the case of CIT v. Ashok Leyland Ltd. [1972] 86 ITR 549 (SC) are distinguishable. On the particular facts of that case, the Supreme court held that the expenditure was of a revenue nature.
42. In my opinion, I hold that the facts of the instant case do not stand at par with the facts in the case of CIT v. Ashok Leyland Ltd. [1972] 86 ITR 549 (SC) and thus this case [1972] 86 ITR 549 does not help the assessee.
43. Learned counsel for the assessee then relied upon the case of Palani Andavar Oil Mills Ltd. v. CIT [1977] 110 ITR 742 (Mad). In this case, the assessee expended a sum of Rs. 12,039 being a part of the total amount spent on the construction of an elementary school on the land belonging to the Employees' Housing Co-operative Society, the balance amount for the construction being met by the society. On the completion of the building, it was handed over to the Municipality to be run as a school for the benefit of the children of the employees of the assessee. This amount was transferred to the Labour and Welfare Account at the close of the year.
44. The departmental authorities and the Tribunal treated this sum as a capital expenditure.
45. The High Court, on a reference, held that the school building was from its very inception not intended to be an asset of the company but was to be a part of the welfare scheme for the educational facilities to the children of the employees of the assessee and hence the amount in question was a revenue expenditure.
46. A mere look at the facts of that case shows that the case is clearly distinguishable and I hold that this case too does not help the assessee in the instant case.
47. Learned counsel for the assessee then relied upon the case of CIT v. Dasaprakash [1978] 114 ITR 210 (Mad).
48. In this case, the claim of the assessee, a firm carrying on the business of running a hotel, for deduction of an expenditure of Rs. 37,390 incurred by it in providing decorated mirrors, plaster-moulded roof, plywood panels, etc., in respect of the hotel premises during the previous year was negatived by the Income-tax Officer in the view that the expenditure could not be said to be in the nature of current repairs to the building as it had brought into existence an asset of an enduring nature and hence it was of a capital nature. The disallowance was confirmed by the Appellate Assistant Commissioner. The Tribunal, however, held that the expenditure was incurred wholly for the purpose of business and was allowable as a deduction under Section 37.
49. On a reference to the High Court, at the instance of the Department, the High Court held that some of the items in question were in the nature of petty replacement" of items which already existed and could not be taken as capital expenditure at all. It further held that other items of expenditure were incurred with a view to beautify the premises and obviously with a view to keep the place fit for the purpose for which persons assembled in the place, namely, for taking food and other edibles, as, without the proper atmosphere, it would not be possible to attract the necessary customers for running the hotel business carried on by the assessee. The High Court further held that the expenses could not be said to be of an enduring nature as the items for which they were used would be of no use with reference to any other place and they could not also be removed and used. They were just fixed in the walls so that they would present an inviting appearance to the customers assembled there. Thus, on the facts of the case, the High Court held that the Tribunal was right in its conclusion that the expenses were allowable as a deduction under Section 37 of the Act.
50. In my opinion, the facts of this case are clearly distinguishable and this case too does not help the assessee in the instant case.
51. Thus, I hold that, on the facts of the instant case, the cases relied upon by learned counsel for the assessee do not support the submissions advanced on behalf of the assessee.
52. The Tribunal, in the instant case, while holding the expenses as re venue expenditure relied upon the case of CIT v. Kirkend Coal Company [1966] 60 ITR 537 (Pat) which was approved by the Supreme Court in CIT v. Kirkend Coal Co. [1970] 77 ITR 530. I am afraid, the Tribunal, in the instant case, wrongly relied upon the case of CIT v. Kirkend Coal Co. [1966] 60 ITR 537 (Pat). There, the question arose whether the amounts spent by the assessee carrying on the business of coal mining for stowing operations was allowable as business expenditure. It was found as a fact that stowing was an operation carried out in the process of extraction of coal and unless the same was carried out, the extraction of coal was not possible irrespective of whether depillaring had been done or not. In such a situation, it was held that the expenditure incurred for stowing operations was a revenue expenditure. The facts of the present case are not as were in the case of CIT v. Kirkend Coal Co. [1966] 60 ITR 537 (Pat).
53. In view of the synthesis of judicial principles attempted by the Full Bench of the Lahore High Court in the case of Benarsidas Jagannath [1947] 15 ITR 185, which was duly approved by the Supreme Court in the case of Assam Bengal Cement Co. Ltd. [1955] 27 ITR 34 and also in view of the principles enunciated in the cases, CIT v. North Dhemo Coal Company Ltd. [1977] 106 ITR 592 (Cal), CIT v. India Tobacco Co. Ltd. [1978] 114 ITR 182 (Cal) and Raza Buland Sugar Co. Ltd. v. CIT [1980] 122 ITR 817, I hold that, on the facts and circumstances of the present case, the expenses were incurred once and for all for securing an advantage of an enduring nature and I am of the opinion that the expenses incurred in the instant case were in the nature of capital expenditure and not revenue expenditure and I further hold that, on the facts and circumstances of the present case, the Tribunal was not correct in holding that the amounts of Rs. 1,63,735 and Rs. 2,42,216 incurred by the assessee were expenses of revenue nature and were allowable in the assessment years 1968-69 and 1969-70, respectively.
54. Accordingly, I answer the question referred at the instance of the Revenue in the negative and in favour of the Revenue. Each party will pay and bear its own costs.
Uday Sinha, J.
55. I agree.