Statutory fund contribution for molasses regulation treated as revenue expenditure where no enduring capital advantage arose.

Contribution to the Molasses Storage Reserve Fund under the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 was treated as revenue expenditure because it was made under a statutory scheme for business regulation and storage of molasses, and no capital asset or enduring advantage accrued to the assessee. The payment was incurred under compulsion of law for business purposes and did not augment or improve the capital structure. The Revenue's factual challenge that no contribution had been made was outside the referred question and was not entertained.

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Issues: Whether the contribution to the Molasses Storage Reserve Fund created under the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 was allowable as revenue expenditure.

Analysis: The assessment year was 1980-81 and the contribution was made pursuant to the statutory scheme for regulation and storage of molasses. The Court noted that the Tribunal had not found that the assessee acquired any capital asset or obtained any advantage of an enduring nature by reason of the payment. The expenditure was incurred under compulsion of law for business purposes and did not augment or improve the assessee's capital structure. The Revenue's attempt to contend that no contribution had in fact been made raised a factual issue not referred for decision and could not be entertained in the reference.

Conclusion: The contribution was held to be revenue expenditure and the question was answered in the affirmative, in favour of the assessee.

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