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CIVIL APPEALLATE JURISDICTION : Civil Appeal No. 1836 (NT) of 1977.

From the Judgment and Order dated 9th/10.3.77 of the Gujarat High Court in Income Tax Reference No. 197 of 1976.

H.N. Salve, P.H. Parekh and U.Sagar for the Appellant. B.B. Ahuja, Manoj Arora and Ms. A. Subhashini for the Respondent.

The Judgment of the Court was delivered by G.N.RAY, J. This appeal arises out of a Certificate granted by the High Court of Gujarat against its Judgment dated 9/10th March, 1977 in Income Tax Reference No. 197 of 1976. The appellant-Arvind Mills Ltd. is a Company incorporated under Companies Act and running a textile mill. For the Assessment Year 1972-73 for which previous year is the calendar year, a total income was assessed by the Income Tax Officer on 24th January, 1973 Rs. 1,30,92,040. The appellant claimed a deduction of Rs.2,02,907 being the contribution made by the assessee towards to cost of Town Planning Scheme under Section 66 of the Bombay Town Planning Act, 1954. The aforesaid payment made by the assessee was described as betterment charges. The Income Tax Officer disallowed the claim for deduction by his Order dated 25th January, 1974. The appellant preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner by his order dated 19th September, 1974 held inter alia that the expenditure in question was a revenue expenditure but since the assessee had paid the betterment charges in ten equal instal-ments with interest, instead of payment in lump of the entire amount of Rs. 2,02,907, a sum of Rs. 14,434 only since paid by the assessee by way of instalment in the year of assessment should be deducted from income. The contention of the assessee that since the method of accounting of the assessee was mercantile, the entire amount of Rs. 2,02,907 should be deducted and not the yearly instalment of Rs. 14,434, was not accepted. The assessee thereafter preferred a Cross Appeal against the order of the Appellate Assistant Commissioner before the Income Tax Tribunal in I.T.A. No. 133 (AHD)/74-75. The Tribunal held inter alia that the betterment charge was not revenue expenditure. Hence no deduction on account of the betterment charge was allowable. The Tribunal, however did not interfere with the deduction of Rs. 14,434 since allowed by the Appellate Assistant Commissioner.