Skip to content


Additional Commissioner of Income-tax Vs. Indian United Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 93 of 1972
Judge
Reported in(1982)27CTR(Bom)207; [1983]141ITR399(Bom); [1982]8TAXMAN182(Bom)
ActsIncome Tax Act, 1922 - Sections 10(2)
AppellantAdditional Commissioner of Income-tax
RespondentIndian United Mills Ltd.
Excerpt:
.....incurred on replacement of ordinary lighting was allowable as revenue expenditure under section 10 (2) (xv) and expenditure alleged to be on 'current repairs' allowable as deduction as revenue repairs under section 10 (v) - mere fact that expenditure brought benefit of larger life to asset and better service would not make expenditure capital in nature - no capital asset acquired - assessee did not acquire any advantage of enduring nature - expenditure incurred on 'current repairs'. - - 1 is concerned, it has been found by the tribunal that under the improved system better lighting was provided to the workers. in the view of the tribunal, the mere fact that the expenditure had brought the benefit of a larger life to the asset and better service would not make the expenditure..........by fluorescent lighting is deductible as revenue expenditure under section 10(2)(xv) of the indian income-tax, 1922, or as revenue repairs under section 10(2)(v) of the said act ? (2) whether, on the facts and in the circumstances of the case, the expenditure of rs. 18,506 incurred on the substitution of old worn out does by fire-proof doors is admissible as deduction as 'current repairs' under section 10(2)(v) of the indian income-tax act, 1922, or as revenue expenditure under section 10(2) (xv) of the said act ? (3) whether, on the facts and in the circumstances of the case, the expenditure of rs. 10,192 incurred by way of renewal of roof of the bleaching house is admissible as deduction as 'current repairs' under section 10(2)(v) of the indian income-tax act, 1922, or as.....
Judgment:

Desai, J.

1. In this reference the assessees are the India United Mills Ltd. They were represented by M/s. Mulla and Mulla and Craigie, Blunt and Caroe, advocates, but they have taken a discharge this morning from us, stating that they have no instructions from the assessee.

2. We are concerned in this reference with the assessment year 1961-62. In that year the assessee, a mill company, owned various establishments, namely, five textile mill units and a dye works, with a capacity of over 2,00,000 spindles and over 600 looms.

3. In the weaving sheds of mills Nos. 2, 3 and 4 and in the folding sizing and drawing Depts. the assessee-company replaced ordinary lighting by fluorescent tubes, incurring an expenditure of over Rs. 2,15,000 for the purpose. According to the ITO, this expenditure brought to the assessee an advantage of enduring nature and it was of a capital nature. The AAC agreed with the view taken by the ITO. The matter was carried to the Income-tax Appellate Tribunal, and the Tribunal upheld the contention of the assessee, holding that this was revenue expenditure covered by s. 10(2)(xv) of the Indian I.T. Act, 1922. However, the claim for allowance under s. 10(2)(v) of the said Act was rejected.

4. Certain old worn out door were removed by the assessee-company and approved fire-proof doors were substituted instead, as per factory rules. In this connection, the assessee incurred an expenditure of Rs. 18,506. The assessee-company also incurred an expenditure of Rs. 10,192 for the renewal of the roof of the bleaching house. The aim of this was to get more light into the factory. These items were also claimed by the assessee as revenue expenditure. The ITO disallowed the same on the ground that it was of a capital nature. The AAC agreed with the ITO, but, on appeal, the Tribunal upheld the contention of the assessee. This was also allowed in terms of s. 10(2)(v) of the Indian I.T. Act, 1922.

5. In addition to this claim, the assessee-company had incurred the following legal expenses set out in para. 14 (of the statement of the case) :

'(1) Rs. 54,221 : Legal fees paid for conducting income-taxappeals.(2) Rs. 13,104 : Legal fees paid to solicitors for appearancebefore the Collector of Bombay in connectionwith the threatened attachment of property inthe course of recovery of income-tax demandsrelating to the assessment years 1946-47 to1956-57.'

6. Both these items were disallowed by the ITO, and this disallowance was sustained by the AAC. The Tribunal, however, found in favour of the assessee.

7. It is from the decision of the Tribunal that five questions have been referred to us by the ITO :

'(1) Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 2,16,045 incurred by the assessee-company on replacement of ordinary lighting by fluorescent lighting is deductible as revenue expenditure under section 10(2)(xv) of the Indian Income-tax, 1922, or as revenue repairs under section 10(2)(v) of the said Act ?

(2) Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 18,506 incurred on the substitution of old worn out does by fire-proof doors is admissible as deduction as 'current repairs' under section 10(2)(v) of the Indian Income-tax Act, 1922, or as revenue expenditure under section 10(2) (xv) of the said Act ?

(3) Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 10,192 incurred by way of renewal of roof of the bleaching house is admissible as deduction as 'current repairs' under section 10(2)(v) of the Indian Income-tax Act, 1922, or as revenue expenditure under section 10(2)(xv) of the said Act ?

(4) Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 54,221 by way of legal fees paid for conducting income-tax appeals is allowable under section 10(2)(xv) of the Indian Income-tax Act, 1922 ?

(5) Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 13,104 by way of legal fees paid to solicitors for appearance before the Collector of Bombay is admissible as deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922 ?'

8. As far as question Nos. 4 and 5 are concerned, they would appear to be concluded in favour of the assessee by the decision of this court in CIT v. Gannon Dunkerley & Co. Ltd. : [1979]119ITR595(Bom) . These questions, therefore, will have to be answered in the affirmative and in favour of the assessee.

9. As far as question No. 1 is concerned, it has been found by the Tribunal that under the improved system better lighting was provided to the workers. The Tribunal went on to add that it was not possible to speculate how far efficiency improved. In the view of the Tribunal, the mere fact that the expenditure had brought the benefit of a larger life to the asset and better service would not make the expenditure capital in nature.

10. Section 10(2)(xv) of the Indian I.T. Act, 1922, requires that the expenses must be laid out for the purpose of business of the assessee, and further that they should not be in the nature of capital expenditure.

11. It is impossible to hold that the amounts have not been expended for the purpose of the business of the assessee. The learned counsel appearing for the Department, however, submitted that the largeness of the expenditure. He also disputed the approach of the Tribunal and submitted that by incurring this expenditure the assessee had secured and enduring advantage of better lighting condition and better working condition.

12. These arguments have been duly considered by the Tribunal, but merely because of these advantages it is not possible to hold that any asset of an enduring nature has been secured by the assessee. In CIT v. Excel Industries Ltd. : [1980]122ITR995(Bom) , the payment made to an Electricity board towards the cost of providing an overhead service line was accepted as revenue expenditure and, hence, as allowable deduction. This was a decision of this court. In Hindustan Times Ltd. v. CIT : [1980]122ITR977(Delhi) , the amounts paid to the municipality, and the expenditure incurred for a change-over from direct current to alternate current system were allowed business expenditure. The conclusion reached by the Tribunal that the expenditure was capital in nature was dissented from by the Delhi High Court, which held that the expenditure could not be said to be laid out either to acquire an asset or to acquire any advantage of an enduring nature. The case before us is not identical with the cases before the earlier Bench or before the Delhi High Court, but the principles laid down in the above cases there was no capital asset acquired nor could the assessee be said to acquire any advantage of an enduring nature. If so, the Tribunal was right in allowing the expenditure under s. 10(2)(xv) of the Indian I.T. Act, 1922. Question No. 1 also will have to be answered in favour of the assessee.

13. As regards questions Nos. 2 and 3, it is difficult to find anything to be said in favour of the Commissioner of Income-tax. These are obviously current repairs, and the Tribunal was right in allowing the same under s. 10(2)(v) of the Indian I.T. Act, 1922.

14. In the result, the five question referred to us are answered as follows :

Questions No. 1 :

Allowable under s. 10(2)(xv) of the Indian I.T. Act, 1922. In favour of the assessee.

Question No. 2 :

Allowable under s. 10(2)(v) of the Indian I.T. Act, 1922. In favour of the assessee.

Question No. 3 :

Allowable under s. 10(2)(v) of the Indian I.T. Act, 1922. In favour of the assessee.

Question No. 4 :

In the affirmative and in favour of the assessee.

Question No. 5 :

In the affirmative and in favour of the assessee.

15. There will be, however, no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //