SARABHAI M CHEMICALS PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case, at the instance of the assessee, the following two questions have been referred to this Court for its opinion :

(2.) MR . Patel appearing for the assessee has not pressed question No. (2) and, therefore, we are not called upon to answer that question and we will dispose of that question as not pressed.

(3.) IT must be pointed out that certain facts are not in dispute before us. Prior to February 1, 1967, the supply was being obtained from the Baroda Municipality but the Baroda Municipality itself was distributing the electrical energy which it was receiving from the Gujarat Electricity Board. The power lines through which the supply was being received from the Baroda Municipality were inadequate for the increased supply of electrical energy and the new power lines were laid at the instance of the group of companies located in the Sarabhai Chemicals' compound. Further, the new lines belonged to the Gujarat Electricity Board and under the terms of the agreement it was open to the Gujarat Electricity Board to utilise these lines for supplying electrical energy to other consumers also. But the obligation of the Gujarat Electricity Board was to supply the contracted electrical energy at the necessary voltage to the group of companies located in this compound. It is common ground that the assessee company was in manufacturing business for a number of years and that the payment of Rs. 58,062 was not an initial outlay for obtaining electrical energy but was spent by it for getting increased supply of electrical energy. It must also be pointed out that the amount of Rs. 58,062 was over and above the regular charges for the electrical energy consumed by the assessee company. It is in the light of these undisputed facts that we have to decide the point of law before us, namely, whether this amount of Rs. 58,062 was by way of capital expenditure or was by way of revenue expenditure.