Malik, C.J. - (1.) THESE are two references, one at the instance of the Commissioner of Income-tax and the other at the instance of the assessee.
(2.) THE assessee is the Hindustan Commercial Bank, Ltd., with its head office at Kanpur. In the account year 1944-45 the assessee opened forty-six new branches, sub-branches and pay offices. In opening these new branches expenses were incurred and, while the assessee claims that the amount spent was a revenue expenditure deductible under Section 10 (2) (xv), Income-tax Act, on behalf of the Department it is claimed that the expenses incurred were in the nature of capital expenditure. The Tribunal held that a part of the expenditure amounting to Rs. 89,870 was revenue expenditure and the balance, which came to Rs. 24,675-2-9, was capital expenditure. Though the Tribunal was of the opinion that the sum of Rs. 89,870 in round figures was revenue expenditure but as this was "deferred revenue expenditure" it spread it over a period of twenty years on the ground that the expenditure was of a heavy character, the benefits of which were likely to extend beyond the year in question upto that anticipated period. They, therefore, divided Rs. 89,870 by twenty and decided that the legitimate expenses per year were Rs. 4,493 for a period of twenty years. The Commissioner of Income-tax filed an application (Reference Application No. 261 of 1947-43) that the following question be referred to this Court: "Whether in the circumstances and on the facts of the case, the sum of Rs. 89,870 in respect of expenses incurred in opening offices of the bank was an admissible deduction under Section 10 (2) (xii) now Section 10 (2) (xv) of the Act?"
(3.) THE Tribunal was of the opinion that this was a question of law and has referred it to us under Section 66 (1), Income-tax Act. On behalf of the assessee two applications were filed (Reference Applications Nos. 259 and 260 of 1947-48) with a prayer that the following three questions be referred to this Court for answer : "1. Whether in view of the finding that the expenditure of Rs. 89,870 is of a revenue nature and was incurred not to start any new business but to facilitate the carrying on of an existing business there was any legal justification for treating the amount as a deferred expen-diture and for spreading it over a period of 20 years and allowing only 1/20th of that amount during the year in question ? 2. Whether in the circumstances of the case, charges for advertisement, entertainment, photos and invitation cards are of a revenue or capital nature? 3. Whether in view of the fact that Rs. 10,000 have already been disallowed on account of inadmissible expenditure a further disallowance on the same question is legally justifiable without distinctly determining that the amount disallowed, namely Rs. 41,271-5-6 does not cover this amount of Rs. 10,000." ;