- (1.) LEAVE granted.
(2.) APPELLANT is running a paper mill at Ahmedgarh in District Sangrur, Punjab. It is engaged in the business activity of manufacturing paper. During the previous year relevant to the assessment year 1996 -97, appellant applied to the Pollution Control Board and the Forest department to allow it to discharge its effluent water from its mill to Village Tallewal. The Department of Environment & Forest agreed to provide forest land for open drain to be constructed by the assessee (user agency) for carrying its effluent to Tallewal drain subject to certain conditions. One of the conditions was that the appellant will transfer 4.063 hectare non -forest land in favour of the Forest Department. That was done.
(3.) THE main controversy which arises for determination in this civil appeal is whether an amount of Rs. 70,79,862 incurred by the appellant on construction of open drain for disposal of effluents is revenue expenditure, as claimed by the appellant. According to the department the expenditure was on capital account, particularly, when the appellant has debited the building account to the extent of Rs. 70,79,862. It may also be noted that Commissioner (Appeal) as well as the Tribunal held that the expenditure incurred was on revenue account. However, aggrieved by the decision of the Tribunal the matter was carried by the department in appeal to the High Court. Before the High Court the department submitted that the following substantial question of law be framed: Whether on the facts and circumstances of the case, the Tribunal was justified in law in allowing the expenditure of Rs. 70,79,862 incurred by the assessee under the head 'Building account', for the construction of drainage for disposal of effluents by treating the same as revenue expenditure, while ignoring the facts that the assessee had acquired an asset of enduring benefit in nature and enjoys exclusive rights for the usage of the same?.;