COMMISSIONER OF INCOME TAX Vs. JAMSHEDPUR ENGINEERING AND MACHINE MFG COMPANY LIMITED

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The assessment year in question is 1972-73. The assessee is a private limited company.

(2.) ON October 3, 1970, the board of directors resolved to shift the head office from Jamshedpur to Calcutta. In connection with that shifting, the company incurred huge expenses. ONe item of the expenditure was a sum of Rs. 3,000 incurred on account of payment to the lawyers. The assessee at the time of assessment asserted that this expenditure was revenue in nature and, therefore, he was entitled to deduction of this amount. The Income-tax Officer rejected the claim of the assessee, holding that the expenditure incurred on account of the shifting of the head office from Jamshedpur to Calcutta was expenditure of capital nature.

(3.) LEARNED counsel for the assessee submitted that since the factory of the assessee-company remained static at Jamshedpur, the principles of the aforesaid Supreme Court case are not attracted in the instant case. In that case, the factory itself had been shifted and that was taken to be an enduring advantage. We regret, the ratio of the Supreme Court case is that where the expenditure enables a trader to prosper and secure advantage that could last for ever, the expenditure would be capital in nature. In the instant case as well, the advantages of shifting were to last for ever. Whether there was shifting of the factory or shifting of the head office was inconsequential. The distinction attempted to be made is more ethereal than real.