Seth, J. - (1.) At the instance of the Revenue, the following question has been referred by the Income-tax Appellate Tribunal, Delhi Bench 'E', Delhi, for the opinion of this court: " Whether, on the facts and in the circumstances of the case, the expenditure of Rs, 13,254 on account of unsuccessful tube-well expenses was a capital or revenue expenditure ?"
(2.) The assessee is a co-operative society carrying on the business of manufacture and sale of crystal sugar. For the assessment year 1968-69, the assessee claimed a sum of Rs. 13,254 as expenses for boring a tube-well which, however, proved to be unsuccessful. The ITO disallowed the claim on the reasoning that these expenses cannot be said to have been laid out wholly and exclusively for the purpose of the business. The AAC rejected the claim of the assessee on the ground that the expenditure was of a capital nature. On appeal, the Tribunal held that the expenditure was incurred to facilitate the carrying on of the assessee's business better and, consequently, directed that the disallowance of Rs. 13,254 shall stand deleted.
(3.) The stand taken by the assessee was that it had two tube-wells in the factory premises but supply of water from them for the assessee's business of manufacturing sugar from cane was found inadequate. It was, consequently, decided to bore a new tube-well. The attempt, however, did not prove successful. The expenses incurred in boring the unsuccessful tube-well was claimed as an expense incurred wholly and exclusively for the purpose of its business.;