Donation deduction and factory shifting costs: machinery-related expenditure is capital, employee-shifting costs are revenue.

Donation to an educational society was held allowable under section 80G, following the court's earlier view, and the assessee succeeded on that issue. Expenditure incurred in shifting a factory was bifurcated: the part attributable to dismantling, loading and unloading of machinery, and related transit costs was treated as capital expenditure, while the component relating to shifting employees, including boarding and lodging, was treated as revenue expenditure and allowed accordingly. The Tribunal's bifurcation was upheld as consistent with prior authority, leaving the assessee successful on the allowable portion of the claim.

---

---

Issues: (i) Whether the assessee was entitled to deduction of the donation made to an educational society under section 80G of the Income-tax Act, 1961. (ii) Whether the expenditure incurred in shifting the factory, including dismantling, loading and unloading of machinery, boarding and lodging, and transit insurance premia, was deductible as revenue expenditure or was capital in nature.

Issue (i): Whether the assessee was entitled to deduction of the donation made to an educational society under section 80G of the Income-tax Act, 1961.

Analysis: The donation issue stood concluded by an earlier decision of the same court. The question was answered in the affirmative, meaning the donation qualified for deduction under the statutory provision.

Conclusion: The deduction was allowable and the issue was decided in favour of the assessee and against the Revenue.

Issue (ii): Whether the expenditure incurred in shifting the factory, including dismantling, loading and unloading of machinery, boarding and lodging, and transit insurance premia, was deductible as revenue expenditure or was capital in nature.

Analysis: The expenditure relating to shifting the machinery was treated as capital expenditure, while the expenditure relating to shifting the employees was treated as revenue expenditure. The bifurcation of such expenditure had already been accepted in prior authority, and the Tribunal's view was found to be consistent with that approach. The assessee's claims on the related items of expenditure were answered in its favour.

Conclusion: The Tribunal's bifurcation was upheld, the machinery-related expenditure remained capital in nature, and the assessee succeeded on the allowable portion of the shifting expenditure.

Final Conclusion: The decision upheld deduction on the donation issue and sustained the bifurcation of shifting expenditure between capital and revenue components, leaving the assessee successful on the substantial part of the controversy.

Ratio Decidendi: Where shifting expenditure is divisible, the component attributable to moving machinery is capital expenditure, while the component attributable to shifting employees is revenue expenditure and may be allowed accordingly.

---