RAJESH BALIA, J. - (1.) APPEAL is heard on merit, as requested by both the learned counsel.
(2.) THE substantial questions of law which have been raised by the Revenue in this case read as under : '1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the expenditure of Rs. 2,16,000 incurred for construction of Manikyalal Verma Rajkiya Textile Institute as revenue expenditure, following its earlier order in ITA Nos. 741, 742 and 615/Jp/1992 in assessee's case for asst. yr, 1987 -88 ignoring the fact that : (i) admittedly the expenditure is on construction of building and Sections 30 to 36 r/w Section 37 do not provide for deduction of expenditure of capital nature. (ii) transfer of capital assets cannot be construed to mean that capital nature into revenue and the reference to accrual of a benefit of enduring nature is quite irrelevant and in fact superfluous. (iii) the provisions of Section 37(1) expressly excludes the allowability of capital expenditure even though wholly and exclusively laid out of or expended for the purpose of business.' 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law to come to the conclusion that the expenditure on construction of textile institute building was a business expenditure allowable as revenue expenditure when the facts that the assessee got a permanent right to nominate its employee for training in further years was not controverted by the assessee ?' As the questions suggested that the decision of the Tribunal is founded on its earlier decision for the asst. yr. 1987 -88 in the case of very same assessee and the case of said assessment year as well as other assessment years have also been made subject -matter of appeal under Section 260A before this Court. Since detailed reason of the Tribunal are in the order passed in the appeal arising out of assessment for the asst. yr. 1987 -88 and the said appeal is also before us, we refer the facts as emerging from the asst. yr. 1987 -88. The facts on which this claim has been made and considered has been narrated by the CIT(A) in his appellate order for the asst. yr. 1987 -88.
(3.) THE assessee -company is engaged in the business of manufacturing of different kinds of synthetic yarn and fabrics at Gulabpura, District Bhilwara. The assessee -company was desirous of setting up an institution in textile technology and to train persons so that, the mill can get skilled technical personnels at Gulabpura which was otherwise a remote place. The Rajasthan Government proposed to set up a modern training institute. For the purpose, the State Government agreed to allot land for setting up the institute free of cost and the assessee -company was to construct the required building thereon at its own cost. The following terms and conditions of the agreement, were spelled out under the agreement dt. 2nd Jan., 1987 : 1. Sh. Manikya Lal Verma Rajkiya Textile Institute with Monogram of Mill. 2. A stone slab would be fixed on main building stating the building was constructed by mill. 3. The building would be made available to the Government by handing over the same. 4. Government shall meet all recurring expenses, equipments and machines to be installed at the said institution. 5. Government shall conduct such diploma courses to students in textile technology as mutually agreed between mill and Government. 6. Curriculum and syllabus for the course relating to the workers training programme in textile, shall be finalised in consultation with the mill. 7. The mill shall nominate upto 10 worker students and 2 diploma students in each working session. 8. The advisory committee shall consist of 2 members appointed by the mill. As per the said agreement on the land provided by the State, for the purpose, the assessee raised construction of the building. The construction cost was incurred spreading over several assessment years. During the asst. yr. 1987 -88 Rs. 15,05,007 were spent and during the relevant assessment year under appeal that is to say asst. yr. 1990 -91 Rs. 2,16,000 were spent. The assessee claimed these expenses for each year as revenue expenses to be deducted as business expenditure in computing the taxable income.;