Dwarka Prasad, J. - (1.) THIS is an application under Section 256(2) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), praying that the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short "the Tribunal"), may be directed to submit a statement of the case and refer the following question of law arising out of the order of the Tribunal dated June 30, 1978, to this court for its opinion : "Whether, on the facts and in the circumstances of the case, the ITAT was justified to hold that the sum of Rs. 18,501 pertaining to installation of poles and additional power lines by the R.S.E.B. was admissible as deduction in the computation of the assessee's total income for the assessment year 1974-75 ?"
(2.) THE assessee is a registered partnership firm engaged in the manufacture of guwar gum and pulses used as cattle feed. In the accounting year relevant to the assessment year 1974-75, the assessee incurred an expenditure of Rs. 18,501 in the installation of poles and additional power lines. THE assessee was having a 40 H.P. electric connection. On its request, the Rajasthan State Electricity Board sanctioned a load of 290 H.P. to the assessee, in order to cope with the heavy load required for manufacturing purposes. THE Board decided to extend the 11 KV line up to the premises of the assessee. On account of the extension of 11 KV line, the assessee was required to pay the aforesaid sum of Rs. 18,501 to the Electricity Board. THE installation remained the property of the Electricity Board. THE assessee claimed deduction in respect of the expenditure incurred in the installation of poles and additional power line to the extent of Rs. 18,501 as revenue expenditure. THE ITO refused to allow the deduction on the ground that the said expenditure was of capital nature. On appeal, the AAC, Jodhpur, by his order dated April 12, 1977, held that the payment of the aforesaid amount of Rs. 18,501 by the assessee to the Electricity Board for installation of poles and laying of additional power line was in the nature of revenue expenditure, as it provided additional facility to the assessee and did not result in the creation of any new asset. On further appeal by the ITO, the Tribunal, by its order dated June 30, 1978, affirmed the order passed by the AAC and held that the expenditure was excludible as revenue expenditure because the same was incurred with a view that the existing set up of the assessee could function more efficiently. The Commissioner submitted an application before the Tribunal for making a reference to this court, which was rejected by the Tribunal by its order dated December 28, 1978, on the ground that the finding recorded by the Tribunal, that the expenditure incurred by the assessee in getting the electric installation made it possible for the existing set up of the assessee to function more efficiently, was essentially a finding of fact and no question of law arose out of the order of the Tribunal. In this application under Section 256(2), it was urged by the learned counsel appearing for the Revenue, that the question which arose on the facts found proved by the Tribunal, namely, that the expenditure incurred by the assessee was of the nature of revenue expenditure or capital expenditure, was essentially a question of law and the Tribunal committed an error in not referring the aforesaid question to this court for its opinion. There can be no doubt that whether on the facts found proved by the Tribunal, a specific expenditure could be considered to be revenue expenditure or it was of the nature of capital expenditure is a question of law and, ordinarily, the Tribunal should have referred such a question to this court on an application made before it under Section 256(1). But, in cases, where the question of law raised is not substantial or the answer to the question is self-evident or the same has been concluded by a decision of the Supreme Court, the Tribunal is not bound to state the case nor is this court bound to call upon the Tribunal to refer the question, as has been held by their Lordships of the Supreme Court in CIT v. Chander Bhan Harbhajan Lal [1966] 60 ITR 188 (SC). In that case, their Lordships held that no substantial question of law arose out of the order passed by the Tribunal and observed that the High Court was right in exercising its discretion under Section 66(2) of the Indian I.T. Act, 1922, in rejecting the application for making a reference. The same view was taken by the Supreme Court in CIT v. Indian Mica Supply Co. P. Ltd. [1970] 77 ITR 20 (SC). In that case, a similar question arose before their Lordships of the Supreme Court as has been raised before us, namely, as to whether a particular expenditure incurred by the assessee represented revenue expenditure or was of the nature of capital expenditure. Their Lordships held that the High Court was justified in refusing to direct the Tribunal to state the case and refer the question which was sought to be referred by the Commissioner, because it was perfectly clear that the amount which had been paid by the assessee was an expenditure which was wholly and exclusively incurred for the purpose of carrying on its business. It was observed that the assessee in incurring the expenditure had acted in the interest of and for the purpose of its business and the expenditure was not laid out for any purpose other than that of carrying on the business of the assessee. Their Lordships further observed that the answer was self-evident and the High Court was justified in declining to call for a reference.
(3.) IN CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC), Bhagwati J., speaking for the Supreme Court, observed as under (p. 42); "It is true that there must be a question of law arising out of the order of the Tribunal before a reference can be made, but it is not every question of law that is required to be referred by the Tribunal to the High Court. Where the answer to the question of law is self-evident or is concluded by a decision of this court, it would be futile to make a reference and in such a case the Tribunal would be justified in refusing to refer the question to the High Court." It is urged before us by the learned counsel appearing for the assessee that even if a question of law arose in the present case, it is not a substantial question inasmuch as no plausible reason could be advanced in support of the view canvassed on behalf of the Revenue that the expenditure incurred by the assessee was of the nature of capital expenditure and that several decisions of the various High Courts in the country have uniformly taken the view that the expenditure of the nature incurred by the assessee in the present case was one of revenue nature. In CIt v. Mahalakshmi Textile Mills Ltd. [1967] 66 ItR 710 (SC), their Lordships of the Supreme Court held that the introduction of the "Casablanca conversion system" in its spinning plant by the assessee involved replacement of certain roller stands and fluted rollers fitted with rubber aprons to the spinning machinery, removal of ring frames from certain existing parts and introduction of ball-bearing jockey-pulleys. It was held that the expenditure incurred by the assessee in modernising the machinery and plant was an expenditure of revenue nature and was admissible as a deduction. ;