AJIT K.SENGUPTA J. - (1.) THIS application has been made by the Commissioner of Income -tax for leave to appeal before the Supreme Court under section 261 of the Income -tax Act, 1961.
(2.) THE facts are that the assessee is a c ompany engaged in aluminium industry. During the accounting years relevant to the assessment years 1965 -66 to 1969 -70, the assessee incurred expenditure of Rs. 3,07,865, Rs. 3,26,067, Rs. 5,53,765, Rs. 2,47,665 and Rs. 6,922, respectively, under the head 'Prospecting and investigation expenses' and claimed the same as revenue expenditure. The Income -tax Officer, however, disallowed the assessees claim. Being aggrieved by the said order of the Revenue, the assessee filed an application under section 256(1) of the Income -tax Act, 1961. Upon the said application, the Income -tax Appellate Tribunal, Calcutta, by its order dated March 23, 1977, referred the following question to the High Court at Calcutta : 'Whether, on the facts and in the circumstance of the case, the Tribunal was justified in law in holding that the expenses incurred in each of the year under reference on prospecting and investigating bauxite mines were in the nature of capital expenditure and, therefore, not allowable as deduction under section 37 of the Income -tax Act, 1961 ?' The said Income -tax Reference being No. 215 of 1977 (sic) came up for hearing before Mr. Justice Depict Kumar See (as his Lordship then was and Mrs. Justice Manjula Rose, who by their judgment dated July 22, 1986 (sic), answer the question in favour of the assessee following the earlier order made in Income -tax Reference No. 62 of 1977 dated January 7, 1986. (Hindustan Aluminium Corporation Ltd. v. CIT : [1986]159ITR673(Cal) .
(3.) IT may be mentioned that the Division Bench in answering the question in favour of the assessee in that case relied on the judgment in the case of Hindusthan Aluminium Corporation Ltd. v. CIT : [1986]159ITR673(Cal) . There, the Division Bench, in answering the identical question in favour of the assessee, held as follows (at page 675) : 'In regard to the first question. The Tribunal held that the expenditure incurred by the assessee in prospecting and searching for bauxite mines was not incurred in connection with nearing profit but was incurred only with a view to finding out the source from where the assessee could get raw material for its aluminium plant which was yet in the construction stage. Construction of the plant had been completed and production actually started on May 14, 1962. It was not quite correct to say that this expenditure was incurred in its entirely during the construction stage or prior to the production stage. A part of it was undoubtedly spent subsequently. Bauxite was the raw material for the aluminium plant established in the assessees factory, it was its stock -in -trade. The expenditure was incurred in order to enable the assessee to prospect and search for its stock -in -trade. This expenditure could not be said to have been incurred with a view to obtain an asset of enduring nature. It was linked up and connected with the production, i.e., for earning profits at the factory. It was, in our opinion, allowable as revenue expenditure. It was not in the nature of capital expenses'. ;