TaxTMI 
TaxTMI 
1992 (7) TMI 2
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....pellate Assistant Commissioner, by his order dated September 19, 1974, held, inter alia, that the expenditure in question was a revenue expenditure but, since the assessee had paid the betterment charges in ten equal instalments with interest, instead of payment in a lump sum of the entire amount of Rs. 2,02,907, a sum of Rs. 14,434 only since paid by the assessee by way of instalment in the year of assessment should be deducted from income. The contention of the assessee that, since the method of accounting of the assessee was mercantile, the entire amount of Rs. 2,02,907 should be deducted and not the yearly instalment of Rs. 14,434, was not accepted. The assessee thereafter preferred a cross appeal against the order of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal in I.T.A. No. 133 (AHD) of 1974-75. The Tribunal held, inter alia, that the betterment charge was not a revenue expenditure. Hence no deduction on account of the betterment charge was allowable. The Tribunal, however, did not interfere with the deduction of Rs. 14,434 since allowed by the Appellate Assistant Commissioner. At the instance of the assessee, the following question of law wa....
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....nal. On a reference, the Madras High Court held, inter alia, that, on a reading of the various provisions of the Madras Town Planning Act, it was evident that the betterment contribution was a compulsory levy made by the Corporation and the precondition for such levy was that, consequent upon making any Town Planning Scheme, the value of the property in the scheme has increased or is likely to increase. Hence, the payment of betterment contribution did not result in any increase in the value of the property but, because of the increase in the value of the property as a result of the making of the Town Planning Scheme, the owner of the property was required to make a contribution which was called betterment contribution. Since there was no direct nexus between the expenditure incurred by the Corporation and the increase in the value of the property, the expenditure incurred by the assessee for payment of betterment charge must be held to be revenue expenditure. It has been further held by the Madras High Court that commercially considered, the expenditure which has been so incurred for facilities such as roads, drainage facility, etc., for the enjoyment of the property would be laid....
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....h Court. Mr. Salve has referred to the decision of the Privy Council in Mohanlal Hargovind v. CIT [1949] 17 ITR 473. In consideration of certain sums payable, a short-term licence was granted to acquire tendu leaves for manufacturing beedis (country made cigarettes). The Privy Council held that such expenditure was revenue expenditure and not capital expenditure. Mr. Salve has also referred to a decision of this court in the case of L. H. Sugar Factory and Oil Mills P. Ltd. v. CIT [1980] 125 ITR 293. In the said case, the assessee, private company, was carrying on business in the manufacture and sale of sugar. During the relevant accounting period, the assessee paid two amounts : (i) contribution of certain sums at the request of the Collector of the District towards the construction of the Deoni-Dam-Majhala Road ; (ii) a contribution of Rs. 50,000 to the State of U. P. towards meeting the cost of construction of roads in an area around the factory under sugarcane development scheme. Under the said Scheme, one-third of the cost was to be borne by the State Government, one-third by the Central Government and the remaining one-third by the sugarcane growers and the owners of sugar ....
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....ue expenditure made for the better running of the business. He has submitted that, since the construction of the road in and around L. H. Sugar Factory had nexus with the running of the business more efficiently and profitably, this court, in the said L. H. Sugar Factory's case [1980] 125 ITR 293, has held that a contribution of Rs. 50,000, even when such contribution was not in the nature of a compulsory payment but a pure and simple voluntary contribution, was a revenue expenditure and as such it was deductible from the income of the assessee. Mr. Salve has, therefore, submitted that the impugned decision of the Gujarat High Court must be held to be erroneous and the reference should be answered in favour of the assessee by allowing the betterment charges paid by the assessee company as a deductible expenditure. Learned counsel appearing for the respondent has, however, contended that, unless it can be demonstrated that the expenditure is exclusively for business purposes, the same cannot be held to be a revenue expenditure and as such deductible from the income of the assessee. Learned counsel has contended that there must be a direct connection with the business activities and....
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....submitted that the Madras High Court has failed to appreciate that the expenses incurred by making payment of betterment fees was in essence an expenditure on account of increase in the value of the land of the assessee and such expenditure has no direct nexus with the day-to-day running of the business. In the aforesaid circumstances, learned counsel for the respondent has submitted that no interference is called for in this appeal and that the same should be dismissed. After considering the respective contentions of learned counsel for the parties, it appears to, us that under the Bombay Town Planning Scheme, the lands of different owners including the land of the assessee were treated as if included in a common pool and various improvements have been effected for the better enjoyment of the lands under the Scheme. For such improvements by way of laying down roads, making provision for drainage, etc., under the scheme, the owner got the advantage of betterment of the land in question and there is no manner of doubt that the value of the land had increased because of the improvements effected on the land. Simply because such improvement has also resulted in providing better facil....