SITALPUR SUGAR WORKS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) RAMASWAMI, C. J. - In this case the assessee is a public limited company doing the business of manufacturing sugar. The factory in which the assessee manufactured sugar from sugarcane was at first situated at Sitalpur in the district of Saran. But the place was found to be disadvantageous for the manufacture of sugar. It suffered from inundation by floods. It was also found that good quality sugarcane was not available in sufficient quantity at Sitalpur. As a result of these disadvantages the factory suffered loss. In order to improve the business the assessee shifted the factory from Sitalpur in Saran district. The total expenditure which the assessee incurred in the process of dismantling the machinery and in erecting the same at Garaul amounted to a sum of Rs. 3,19,766. The details of expenditure are as follows : <FRM>JUDGEMENT_796_ITR41_1961Html1.htm</FRM>

(2.) FOR the assessment year 1952-53 the assessee claimed the amount of Rs. 3,19,766 as expenditure wholly and exclusively laid out for the purpose of the business and as a permissible deduction under section 10 (2) (xv) of the Income-tax Act. The assessee claimed in the alternative that, if the expenditure was considered to be a capital expenditure, the assessee should be given depreciation under section 10 (2) (vi) of the Income-tax Act. The Income-tax Officer rejected the claim of the assessee and held that the amount of Rs. 3,19,766 was capital expenditure and cannot be deducted from the profits of the assessee. As regards the claim for depreciation, the Income-tax Officer held that there was no addition to the capital value of the machinery and, therefore, no depreciation could be given. The assessee took the matter in appeal before the Appellate Assistant Commissioner, who affirmed the order of the Income-tax Officer and dismissed the appeal. The assessee again presented an appeal before the Income- tax Appellate Tribunal. This appeal was also dismissed. As required by the assessee the Income-tax Appellate Tribunal has submitted the following question of law to the High Court under section 66 (1) of the Income-tax Act :

(3.) IN the facts and circumstances of this case I am of opinion that the expenditure of Rs. 3,19,766 was made by the company for procuring an advantage for its "enduring benefit", within the principle laid down by viscount Cave in Athertons case and it was, therefore, a capital expenditure which cannot be deducted under the provisions of section 10 (2) (XV) of the INcome-tax Act.