Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1972-73, the following question of law has been referred to this court: "Whether, on the facts and in the circumstances of the case and having regard to the agreement dated June 29, 1961, between the assessee and the West Bengal State Electricity Board, the Tribunal was right in holding that the payment of Rs. 1,66,740 was a revenue expenditure?"
(2.) Shortly stated, the facts are that the assessee made a payment of Rs. 1,66,740 to the West Bengal State Electricity Board. In the original assessment, the Income-tax Officer allowed payment of Rs. 1,66,740 as revenue expenditure. Thereafter, the Commissioner of Income-tax invoked the provisions of Section 263 of the Act. The assessee contended before the Commissioner, by referring to the agreement dated June 29, 1961, between the assessee and the Electricity Board, that when the service lines and apparatus remained the property of the Electricity Board, though payment had been made by the assessee for that and when the service lines are maintained by the Electricity Board and that when they were entitled to supply electricity to other consumers on the same line as per Clause 5(3) of the agreement, the payment made by the assessee was for facilitating supply of electrical energy and hence the expenditure is an allowable revenue deduction. The Commissioner held that as the company would continue to derive benefit having electricity supplied to the plant even after payment of the instalments ceased to be paid after 25 years, there was an enduring advantage to the assessee and hence the payment in question should not be allowed as a revenue deduction.
(3.) The assessee contended before the Tribunal that, when maintenance of the service lines was the responsibility of the Electricity Board and when default in payment would lead to disconnection of energy and when the meter boxes were the property of the Electricity Board, the expenditure in question would certainly be revenue in nature because, without payment of this amount, the assessee would not have electrical energy to carry on its business. It was contended that the expenditure in question was an integral part of the assessee's business expenditure. It was further contended that the conditions imposed were similar to those in the case of ordinary consumers and the only difference was that the amount involved was substantial. It was also contended that, at any rate, payment of interest at 4 1/2% per annum was clearly admissible as revenue expenditure. The assessee further contended that when the predominant and main purpose of business was the carrying on of the business, the incidental advantage of that expenditure, which is of some endurance, could not affect its revenue character.;