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12. We shall now take up the second question referred to us at the instance of the department. During the accounting year, relevant to the assessment year 1966-67, the assessee-company deposited a sum of Rs. 66,684 with the Railways for constructing an overbridge at the unmanned level crossing. It was contended by the assessee before the ITO that the said sum should be allowed as staff welfare expenses. This plea was rejected by the ITO on the ground that the said sum represented only a donation or contribution made to the Railways and not an expenditure incurred by the assessee. It is also observed by the ITO that this amount was paid for constructing a bridge which is not the assessee's property, but that of the Railways and, therefore, it cannot be said to be for business purposes. It was further held that it resulted in bringing into existence an asset of an enduring nature and as such it represented capital expenditure, but, however, no depreciation can be granted since the bridge was not the property of the assessee. In, this view, he added the sum of Rs. 66,684 to the income returned by the assessee. The appeal preferred by the assessee to the AAC was also dismissed. On a further appeal before the Tribunal, it was contended on behalf of the assessee that the expenditure was exclusively incurred for the purpose of business. The attention of the Tribunal was drawn to the speech delivered on November 26, 1964, on behalf of the assessee-company, on the occasion of the opening of the road overbridge by the Railway authorities in which the circumstances leading to the construction of the bridge were elaborately set out. It was pointed out that the unmanned level crossing was a perpetual danger to the residents of the colony, that the Railway authorities pressed the assessee for the execution of a rail-road overbridge at the assessee's expense and that the assessee-company consented to the construction and deposited the aforesaid sum of Rs. 66,684 because of the safety ensured to its employees and to its vehicles as a result of such an overbridge. It was further contended that the said expenditure did not bring into existence any asset, but the same was made for running the business of the company efficiently and conveniently. The Tribunal has accepted the submissions made on behalf of the assessee and held that this amount could not be added to the income of the assessee.

13. Sri Rama Rao, the learned counsel for the department, contends that the Tribunal was in error in deducting this amount from the assessee's income as it was meant for the purpose of construction of a bridge which can be said to be a benefit of an enduring nature and as such it represented capital expenditure. On the other hand, Sri M.J. Swamy, the learned counsel for the assessee, contends that the expenditure incurred by the assessee was wholly and exclusively for the purpose of business of the assessee. The question to be decided is whether the construction of this railway bridge for which an amount of Rs. 66,684 has been spent by the assessee was wholly necessary for the purpose of running the business. It is common ground that the overbridge at the unmanned railway level crossing was considered a necessity by both the Railways and the factory having regard to the location of the main factory and the colony. A reference to the speech made on behalf of the company while requesting the railway administration to open the railway overbridge would throw light on the circumstances that led to the construction of the railway overbridge. It appears that the management decided to locate the cement factory in the outer fringes of Panyam reserve forest area, very near the limestone belt but not far away from Bugganipalli R.S. There was an unmanned level crossing which was a potential danger to the residents of the colony. Hence, the factory proposed to have a manned level crossing at the place of the unmanned one and deposited some amount. As a manned level crossing would involve a recurring expenditure of Rs. 2,500 per annum, the factory considered the feasibility of having a rail-road overbridge at this location. Estimates were prepared by the railway administration for this purpose and finally when tenders were accepted for this construction, the estimate was Rs. 66,684. Though for many years the unmanned level crossing did not involve in accidents, in 1968, one of the State Road Transport buses collided with a railway engine and this accident involved injuries to 15 persons. Immediately, the railway administration pressed the company for the execution of the rail-road overbridge at their expense and in view of the actual safety that this work would ensure to the employees of the factory, the management readily consented to the construction of the road overbridge and deposited immediately the balance of amount payable to make up the final estimate of Rs. 66,684. It is further observed in the said speech that the management was satisfied that this is an amenity for the safety and in the interest of all the employees of the company. As the company's aided school for the children is situated on the factory side and the children pass through the area, the construction was undertaken. In these circumstances, we cannot say that the amount was simply donated to the railways. In this connection, we rely upon the decision of the Calcutta High Court in the case of CIT v. Hindusthan Motors Ltd. [1968] 68 ITR 301. Though in that case the expenditure was incurred for repairing the road, the ratio laid down in that case would apply to the facts of the instant case. It cannot be denied that the expenditure was incurred to run the business of the assessee efficiently and conveniently as a result of the construction of the bridge for which the railways were not willing to incur the expenditure. At page 309 of the above referred decision, it was observed that "each case has to be decided on the facts and circumstances obtaining therein ". We extract the following passage from the judgment (p. 309):

15. Having regard to the said principle their Lordships held in the case before them that they were satisfied that the expenditure was incurred by the assessee for reasons of commercial expediency and, therefore, should have been allowed as admissible deduction. The ratio laid down by the Supreme Court in the case of Lakshmiji Sugar Mills Co. P. Ltd. v. CIT [1971] 82 ITR 376 applies to the facts of the instant case. It is further seen that the construction of the overbridge in question ensured the safety of the employees and vehicles of the assessee's factory, and that it avoided collisions at the unmanned level crossing and the expenditure on such were certainly incurred for commercial expediency and in order to facilitate the assessee's business. In this connection we may refer to the observations of the Calcutta High Court in the case of Calcutta Landing & Shipping Company Ltd. v. CIT [1967] 65 ITR 1 at page 10 :

"It is now well-settled that the expression expenditure laid out or expended wholly and exclusively for the purpose of such business' includes expenditure voluntarily incurred for commercial expediency and in order indirectly to facilitate business. It is immaterial if a third party also benefits thereby."

16. In the case before the Calcutta High Court, the expediency was to create incentives in its employees to work efficiently by passing a resolution to give a payment of pension to the dependants of a murdered employee. It was held that if in these circumstances, it was reasonable to hold that the resolution was adopted for the purpose of either giving incentives to loyal workers or of creating confidence in the minds of workers who need face risks to their lives in the discharge of their duties, that the employer would reward selfless loyalty, the proper legal inference would be that the expenditure was laid out for business expediency. It was further observed that to have a loyal body of employees was of great commercial expediency, and if the assessee-company made a payment to achieve such an object, the said expenditure could be said to have been incurred wholly and exclusively for the purpose of business. In the present case, the overbridge was constructed for the safety of the employees and vehicles of the assessee-company and also for the safety of the children of the company's aided school which is situate on the factory side. Such an amenity is certainly essential to earn the goodwill of the workers and hence it may be said to be incurred wholly and exclusively for the purpose of business. In the case of M. K. Brothers P. Ltd. v. CIT [1972] 86 ITR 38, 42, the Supreme Court has held that "payment made in the course of and for the purpose of carrying on business or trading activity would be revenue expenditure even though the payment is of a large amount and has not to be made periodically ".