K.S Hegde, J. - (1.) This is an appeal by certificate from the judgment of the High Court of Patna in a reference under Section 66 (1) of the Income Tax Act, 1922 (in short the Act). At the instance of the Commissioner of Income tax, Bihar and Orissa the Income Tax Appellate Tribunal (Patna Bench) referred the following question of law to the High Court for its opinion."Whether the sum of Rs.21,911 claimed as showing expenses is capital expenses or revenue expense".
(2.) The High Court answered that question in favour of the assessee. It held that it was a revenue expenditure.
(3.) The facts of this case lie within narrow compass. The assessee M/s. Kirkand Coal Co. is a firm carrying on coal mining business. During the accounting year ending on December 31, 1956, that company spent a sum of Rs. 21,911 for stowing operations. The department of Mines required the assessee to stow certain galleries near the pitmouth as a condition precedent for working the colliery during the accounting year. The assessee claimed that the said expenditure was a revenue expenditure coming within Section 10 (2) (xv) of the Act. The Income-tax Officer as well as the Appellate Assistant Commissioner overruled the contention of the assessee. They considered that expenditure as capital expenditure and hence not deductible as a permissible allowance. But on a further appeal, the Appellate Tribunal came to the conclusion that: "Stowing is an operation carried out in the process of extraction of coal and unless it is carried out extraction of coal is not possible irrespective of the fact whether depillaring has been done or not in this year. This expenditure, is, in our opinion, a revenue expenditure, as it is necessary for the purpose of extraction of coal." ;