Sudhindra Mohan Guha, J. - (1.) The question as referred to this court in the present reference is as follows : " Whether, on the facts and in the circumstances of the case, fees of Rs. 21,137 paid for revaluation of the assets by the assessee-company was rightly allowed by the Tribunal as a deduction under Section 10(2)(xv) of the Indian Income-tax Act, 1922?"
(2.) The assessment relates to the year 1961-62 for which the relevant previous year ended on March 31, 1961.
(3.) The assessee-company was a manufacturer of oxygen and acetylene gas. It claimed an expenditure of Rs. 21,137 representing the fees paid by it to M/s. Talbot & Co., Calcutta, in respect of their professional services of making a valuation report of the fixed assets of the company. The ITO disallowed the claim holding the claim to be of capital nature. In appeal before the AAC, it was argued on behalf of the assessee that as a result of revaluation of the assets of the assessee-company for which the payment was made, no asset or advantage of an enduring benefit had come into existence and the only purpose of the revaluation was to improve the credit-worthiness of the company so that it could obtain loans for the purpose of its business without difficulty or inconvenience. The AAC did not accept the argument of the assessee. But at the same time he made a reference to the report of the directors dated May 1, 1961, to the shareholders of the assessee-company. Therein, it was stated : " The value of the fixed assets of the company as appearing in the balance-sheet was disproportionate to their present day valuation and the directors, therefore, considered it fair that these assets may be revalued by expert valuers to bring them in line with the present day valuation in the balance-sheet. The result of this has been an increase in the fixed assets valuation to the extent of Rs. 26,96,000, which has been debited to the fixed assets and a capital reserve to this extent has been credited in the balance-sheet.";