1. In all these cases there is one common question of law that has been referred and in T. C. No. 971/77 there re two other questions dealing with a different point.
2. It is not in dispute that as far as the common question is concerned, the facts in the case of all these assessees are identical. That question, as referred in T. C. 971/77, runs as follows :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the amount contributed by the assessee to M/s. Simpson & General Finance Co. Ltd., towards the expenditure incurred on black topping of the approach road in the Sembiam Estate, in which the assessee's factory is located, was a revenue expenditure for the assessment year 1969-70 ?'
3. Except for some verbal change, the question in the other cases being identical, need not be reproduced.
4. The assessees run their factories in what is called the Sembiam Estate, which is the property of a company called the Simpson & General Finance Co. Ltd. The said company incurred expenditure for black topping of the road in the estate from time to time. there was an agreement dated September 25, 1968, between the said company and M/s. Wheel & Rim Company of India Ltd., one of the companies carrying on business in the Sembiam Estate. The agreements with the other companies having their factories in the estate stood in the same pattern. A similar expenditure had been incurred in the year was concerned, a sum of Rs.3,50,000 was the expenditure which was allocated among the several companies working in this estate. In the case of M/s. Tractors and Farm Equipments Ltd., the amount allocated was Rs. 80,500. In the case of Bimetal Bearings Ltd., the amount was Rs. 26,900 and in the case of Addison Paints & Chemicals Ltd. it was Rs. 36,750.
5. In the assessment made on the several assessee for the assessment year 1969-70, and in the case of Bimetal Bearings Ltd., for the assessment year 1971-72, the assessees claimed the amounts paid as mentioned above as revenue expenditure. The ITO held that the amounts could not be allowed as revenue expenditure in each of these cases and that depreciation also could not be granted as the roads were not the properties of the respective assessees. The assessees appealed to the AAC who allowed the respective claims on the ground that the expenditure incurred tended to the smooth running of the assessee's day-to-day business and that, therefore, it was revenue in nature.
6. The department filed appeals before the Tribunal. The point was discussed in the appeal in the case of India Pistons Ltd., featuring in T. C. No. 971/77, and the same conclusion was followed in the other cases. The Tribunal came to the conclusion that no new road came into existence and that the use of heavy vehicles by factories resulted in the deterioration of the condition of the road, requiring the black topping of the road from time to time. In the Tribunal's view, the amount was clearly revenue expenditure. It is this part of the order of the Tribunal, which has given rise to the question extracted above being referred to this court at the instance of the Commissioner.
7. Learned counsel for the Commissioner, Mr. J. Jayaraman, drew our attention to the trilogy of cases decided by the Supreme Court on the very point. He submitted that the expenditure is clearly capital in nature on the facts here and that the conclusion to the contrary arrived at by the Tribunal was clearly wrong.
8. The first case cited is Lakshmiji Sugar Mills Co. P. Ltd. v. CIT : 82ITR376(SC) . The assessee in that case was the manufacturer of sugar. It paid contributions to the ane development council for the construction and development of roads between the various sugarcane producing centers and the sugar factories of the assessee. The expenditure incurred was under a statutory obligation for the development of roads which belonged to the Government. The question was whether the expenditure incurred was revenue expenditure. The Supreme Court pointed out that the expenditure was not of a capital nature and had to be allowed as an admissible deduction in computing the profits of the assessee's business. In the view of the Supreme Court, the expenditure was incurred for the purpose of facilitating the running of its motor vehicles and other means employed for transportation of sugarcane to its factories and was, therefore, incurred for running the business or working it with a view to producing profits without the assessee gaining any advantage of an enduring benefit to itself. This case would support the assessee's claims.
9. In Travancore-Cochin Chemicals Ltd. v. CIT : 106ITR900(SC) , a similar question arose on the following facts : The assessee, a manufacturer of chemicals, was receiving and dispatching through lorries materials required for and produced in its factory situated in an area which was not served by good roads. Along with three other public undertakings area. The Government bore the cost of acquisition of the land and 25 per cent. of the cost of construction of the road. The total cost of construction came to Rs. 1,04,500, of which the assessee's share came to Rs. 26,100. In considering the deductibility of this amount, the Supreme Court held that by having the new road constructed for the improvement of transport facilities, the assessee acquired an enduring advantage for its business and the expenditure incurred by the assessee was of a capital nature.
10. The present case differs from the above decision of the Supreme Court, as in the present case the road was not laid for the first time as it happened in the Supreme Court case. It may be noticed that in this decision, reference was made to Lakshmiji Sugar Mills Co. P. Ltd. v. CIT : 82ITR376(SC) and it was observed that the said case was quite different on facts and that it must be confined to the peculiar facts of that case.
11. The third decision is L. H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT : 125ITR293(SC) . The assessee was a sugar factory and it paid two amounts, viz., (1) a construction of the Deoni Dam and the Deoni Dam-Majhala Road, which was completed in the year 1952-53 (the assessment year under consideration by the Supreme Court was 1956-57), and (2) a contribution of Rs. 50,000 to the State of Uttar Pradesh towards meeting the cost of construction of roads in the are around the assessee's factory under a sugarcane development scheme under which one-third of the cost of construction of the roads was to be met by the Central Govt., one-third by the State Govt. and the balance by the sugar factories and sugar-growers. The question before the Supreme Court was whether these two amounts were allowable as deduction. As far as the sum of Rs. 22,332 was concerned, it was held to be non-deductible. At p. 297, the Supreme Court observed :
'So far as the first item of expenditure of Rs. 22,332 is concerned, the case does not present any difficulty at all, because it was common ground between the parties that this amount was contributed by the assessee long after the Deoni Dam and the Deoni Dam-Majhala Road were constructed and there is absolutely nothing to show that the contribution of this amount had anything to do with the business of the assessee or that the construction of the Deoni Dam or the deoni Dam-Majhala Road was in any way advantageous to the assessee's business. The amount of Rs. 22,332 was apparently contributed by the assessee without any legal obligation to do so, purely as an act of good citizenship, and it could not be said to have been laid out wholly and exclusively for the purpose of the business of the assessee. The expenditure of the amount of Rs. 22,332 was, therefore, rightly disallowed as deductible expenditure under s. 10(2)(xv) of the Indian Income-tax Act, 1922.'
12. Regarding the sum of Rs. 50,000, the Supreme Court referred to the facts and several other decisions including the one in Lakshmiji Sugar Mills' case : 82ITR376(SC) and Travancore-Cochin Chemicals' case : 106ITR900(SC) . After referring to a passage from Lakshmiji Sugar Mills' case, at p. 379, their Lordships pointed out that these observations were directly applicable to the case before them and that on the analogy of that decision the sum of Rs. 50,000 was contributed for running the business and working it with a view to produce the profits without the assessee getting any advantage of enduring benefit to itself. The decision in travancore-Cochin Chemicals' case was distinguished and at p. 300, after referring to the observations in Travancore-Cochin Chemicals' case, at p. 904, it was held that Lakshmiji Sugar Mills' case must be confined to the peculiar facts of that case. Their Lordships pointed out at p. 301 (of 125 ITR) thus :
'We would make the same observations in regard to the decision in Travancore Cochin Chemicals' case : 106ITR900(SC) , and say that that decision must be confined to the peculiar facts of that case, because Lakshmiji Sugar Mills case : 82ITR376(SC) , admittedly bears a closer analogy to the present case than the Travancore-Cochin Chemicals' case and if at all we apply the method of arguing by analogy, the decision in Lakshmiji Sugar Mills' case must be regarded as affording us greater guidance in the decision in the present case than the decision in Travancore-Cochin Chemicals' case. Moreover, we find that the parenthetical clause in the test formulated by Lord Cave L. C. in Atherton's case  10 TC 155 was not brought to the attention of this court in Travancore-Cochin Chemicals'case with the result that this court was persuaded to apply that test as if it were an absolute and universal test regardless of the question applicable in all cases irrespective of whether the advantage secured for the business was in the capital field or not. We would, therefore, prefer to follow the decision in Lakshmiji Sugar Mills' case and hold on the analogy of that decision that the amount of Rs. 50,000 contributed by the assessee represented expenditure on the revenue account.' The parenthetical clause referred to in the passage of Lord Cave L. C. in Atherton's case  10 TC 155 may be extracted along with the full passage. It runs as follows (p. 192) : 'When an expenditure 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..... there is very good reason (in the absence of special circumstance leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.'
13. The phrase in the bracket and underlined by us is referred to as the parenthetical clause. In other words, what is meant is that in the absence of special circumstances leading to an opposite conclusion, an expenditure bringing into existence an asset or an advantage for the enduring benefit of a trade, would result in the expenditure being capital. One has, therefore, to examine whether there were special circumstances leading to the opposite conclusion and that was what was done in the two cases, one in Lakshmiji Sugar Mills case : 82ITR376(SC) and the other in L. H. Sugar Factory and Oil Mills' case : 125ITR293(SC) .
14. Of the three cases, as earlier pointed out, the decision in travancore-Cochin Chemicals' case : 106ITR900(SC) would clearly go out of the field of our consideration even apart from the doubt cast by the Supreme Court in the latest case, because that decision dealt with the construction of a new road for which the contribution was made. Construction of a new road would produce a new asset. Wherever there is either a direct expenditure or a contribution by way of reimbursement for black topping of the road already laid out, as in the case of painting a house, the expenditure cannot but be of a revenue nature. There is no question of any asset brought into existence or even an enduring benefit. The expenditure does not bring in any enduring benefit just as a fixed capital does. It is this aspect which was pointed out by Lord Radcliffe in Commr. of Taxes v. Nachanga Consolidated Coppr Mines Ltd.  58 ITR 241, where he observed that it would be misleading to suppose that in all cases securing a benefit for the business would be, prima facie, capital expenditure 'so long as the benefit is not so transitory as to have no endurance at all'. As pointed out by the Supreme Court in Empire Jute Co. Ltd. v. CIT : 124ITR1(SC) :
'It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future.'
15. In the present case, there is no question of any advantage, much less an advantage enduring for an indefinite future. The condition of the roads depends on the heaviness of the rain during monsoon and, therefore, sometimes repairs would have to be effected more often or less often depending on the intensity of the monsoon. In such cases of mere redoing the surface, we consider that the expenditure could only be treated as revenue expenditure.
16. Thus, following the latest decision of the Supreme Court, we consider that the expenditure was rightly allowed as revenue expenditure. The question referred is thus answered in the affirmative and in favour of the assessee, in the sense that the expenditure is allowable as revenue expenditure.
17. There is no other question to be answered in the other cases, except in T. c. No. 971/77, where the two questions which remain to be answered are :
'(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Appellate Assistant Commissioner had rightly directed the Income-tax Officer to allow the relief under section 80E/80-I for the assessment year 1969-70 after verifying the figure of Rs. 1,52,00
(2) Whether, on the facts and in the circumstances of the case the Appellate Tribunal was right in law in holding that the relief under section 80E/80-I should be allowed before set off of the business loss and development rebate relating to earlier year ?'
Balanoor Tea and Rubber Co. Ltd.
18. The Supreme Court in Cambay Electric Supply Industrial Co. v. CIT : 113ITR84(SC) , held that in computing profits of the assessee for the purpose of the deduction provided under s. 80E, items of unabsorbed depreciation and unabsorbed development rebate carried forward from earlier years would have to be deducted before arriving at the figure on which the percentage contemplated by s. 80E was to be computed. This decision was followed in CIT v. Rane Brake Linings Ltd. : 120ITR82(Mad) and in CIT v. English Electric Co. Ltd. : 131ITR277(Mad) . It is not in dispute that there is no fresh point to be considered in this case and the earlier decisions would apply here.
19. Applying these decisions, the questions referred have to be and are, accordingly, answered in the negative and in favour of the revenue.
20. As the assessees have been successful in all the cases on the first question, we think it proper to award costs to the assessees. Counsel`s fee Rs. 500, one set.