1969 (9) TMI 24

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.... contribution to the Cane Central Roads Development Fund. The assessee claimed these two amounts as deduction under section 10(2)(xv) of the Act. The claim was disallowed by the Income-tax Officer. This decision was upheld in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the request of the assessee, the Tribunal has referred the following question of law to this court: " Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 40,000 in the assessment year 1956-57 and Rs. 3,000 in the assessment year 1957-58 were rightly treated as capital expenditure?" The assessee attempted to bring his case under section 10(2)(xv) of the Act. Clause (xv) is : " any expenditure. . .a....

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.... into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure." We now proceed to apply that test to the present case. In order to decide whether the two payments for the two assessment years were in the nature of capital expenditure or revenue expenditure it is necessary to ascertain the true character of the payment. The assessee's claim was considered by the Income-tax Officer under two separate heads -(1) repairs of roads, and (2) contribution to Cane Centre R....

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....ansport difficulties to the assessee. Government was not prepared to meet the expenses for repairing the road. The assessee thereupon offered to contribute a sum of Rs. 39,770 for improvement of the approach road. It was held that the money was spent not so much to bring about any asset or advantage of enduring benefit to itself but to run the business efficiently and conveniently. Expenditure was allowable expenses under section 10(2)(xv) of the Act. There is much resemblance between the facts of the present case and the facts in Commissioner of Income-tax v. Hindustan Motors Ltd. But there is one important difference. In that case the assessee contributed money for repairing an existing road. In the present case the assessee's contribu....