Assessee's Lease Payment for Raw Material deemed Revenue Expenditure; Chimney Construction Issue Deferred

The High Court held that the lease money paid by the assessee was a revenue disbursement for obtaining raw material, allowing it as an allowable expenditure against income from the brick-kiln. The Court relied on established principles and case law to support its decision. However, the Court refrained from ruling on the expenditure for the construction of a chimney due to the non-appearance of the assessee during the proceedings.

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Issues Involved:
1. Entitlement to deduction of lease money as allowable expenditure.
2. Allowability of expenditure on construction of a chimney as revenue expenditure.

Summary:

Issue 1: Deduction of Lease Money
The primary issue was whether the assessee is entitled to the deduction of 1/7th or any other portion of the lease money paid for taking the land on lease as an item of allowable expenditure against the income derived from the brick-kiln. The Tribunal found that the lease money was an advance payment for obtaining raw material (earth) for manufacturing bricks, and thus, it was a revenue disbursement rather than a capital outlay. The High Court concurred, emphasizing that the payment ensured a regular supply of raw material over seven years without conferring any enduring benefit or interest in the land itself. The Court referred to the principles laid down in "Benarsidas Jagannath's case [1947] 15 ITR 185 (Lah) [FB]" and other relevant cases, concluding that the expenditure was revenue in nature.

Issue 2: Expenditure on Construction of Chimney
The second issue was whether the expenditure incurred by the assessee on the construction of a chimney for its brick-kiln business is allowable as an item of revenue expenditure. The Tribunal had disallowed this claim, and the assessee sought a reference to the High Court. However, the assessee did not appear at the hearing. The High Court, citing various precedents, including "M. M. Ispahani Ltd. v. CEPT [1955] 27 ITR 188 (Cal)" and others, held that if the party at whose instance the reference was made does not appear, the Court is not required to answer the question. Consequently, the Court refrained from answering this question due to the non-appearance of the assessee.

In conclusion, the High Court affirmed that the lease money paid by the assessee constitutes revenue disbursement for acquiring raw material for manufacturing bricks and refrained from answering the second question due to the absence of the assessee.

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