INDORE MUNICIPAL CORPORATION Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference under Section 256(1) of the I.T. Act, 1961, has been made by the Income-tax Appellate Tribunal, Indore Bench, Indore, stating the case and seeking our opinion on the following questions:

(2.) FACTS stated and not disputed may be briefly set out. The assessee is a local body. Assessment year in question is 1972-73 for which the accounting period ended on March 31, 1972. The assessee derived income from sale of manure prepared out of waste and night soil dumped in the trenching ground outside the municipal limits. In its return of income, the assessee had claimed deduction of Rs. 67,748 incurred on construction of metal roads over the trenching grounds as revenue expenditure. It was urged on behalf of the assessee that the trenching grounds where manure was processed and prepared was at a distance of 5 or 6 miles from the corporation limits and away from the main road. The assessee had to construct metal roads to approach about 500 trenches for dumping the waste and night soil in the trenches and transporting the processed manure. According to the assessee this expenditure was revenue expenditure incurred wholly and exclusively for the purpose of the assessee's business.

(3.) THE case of Lakshmiji Sugar Mills Ltd. [1971] 82 ITR 376 (SC) has no application to the facts of this case. In the cited case the assessee who carried on the business of manufacture and sale of sugar had paid certain contribution to the Cane Development Council for the construction and development of roads between various sugarcane producing centres and the factories of the assessee. THE roads were the property of the Government and the assessee and other manufacturers had to contribute for the construction and development of such roads. THEre was no finding that the roads were to be altogether newly made or that the assessee would get an enduring benefit from those roads. On these facts the Supreme Court held that the expenditure was incurred for the purpose of facilitating the running of its motor vehicles for transportation of sugarcane to the factories and was, therefore, incurred for running the business or working it with a view to producing profits without the assessee gaining any advantage of enduring benefit to itself (emphasis ours). It is manifest that the facts are distinguishable. THE expenditure was allowed as revenue not because the assessee was liable to pay the same under a statute but mainly because the land or the roads belonged to the Government and for construction and upkeep thereof the assessee was one of the contributors. THE accent of the Supreme Court decision was on the fact that the assessee did not get any advantage of an enduring benefit to itself.