TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 1202
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....,000/- on account of depreciation on 'Geographical Report' ? ii) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in directing to allow depreciation on Geographical Report as intangible asset and by not considering expense on Geographical Report under Section 35E of the Income Tax Act, 1961? iii) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in deleting the additions on expenses on Road belonging to Zilla Parishad amounting to Rs. 3,57,45,560/- ? 2. Two issues arise for consideration in the case on hand. Firstly, whether the Geographical Report is only a document and not an asset and no deduction is permissible under Section 35E (2) of the Act. This issue will cover substantial questions of law No. 1 and 2. The second issue is whether the Tribunal was correct in deleting the additions on the expenses incurred by the assessee for development of a road belonging to Zilla Parishad. 3. We have heard Ms. Smita Das De, Learned Senior Standing Counsel for the appellant and Mr. J. P. Khaitan, learned Senior Advocate and Ms. Nilanjana Banerjee Pal, learned Advocate appearing for th....
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....llowed to the extent indicated. The revenue by way of this appeal seeks to restore the order passed by the Assessing Officer. In order to appreciate the correctness of the stand taken by the Tribunal, we directed the copy of the Geographical Report to be placed before us. The learned Advocate appearing for the respondent assessee filed copy of the paper book which was filed before the Tribunal in which the Geographical Report was appended. On a perusal of the report, we find it is a very elaborate report and contains 7 chapters, the first of which being introduction, the second geology, the third geological structure, fourth coal seams, fifth description and quantity of coal seams, sixth research and seventh environmental aspects. The report is a highly technical report and we find that the Tribunal had rightly appreciated the scope of the report. Huge expenditure had been incurred by the assessee to acquire the report as the report is the basic document based on which the assessee gets a right to mine apart from assessing, the quantity of mineral that can be exploited from the said mines, the formation of dyke and other technical details. Therefore, we are of the view that the Tri....
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.... quite a variety of articles, objects or things have been held to be "plant". But it is unnecessary to deal with all those cases and a reference to three or four decisions, in our view, would suffice. The classic definition of "plant" was given by Lindley L.J. in Yarmouth v. France [1887] 19 QBD 647, a case in which it was decided that a cart-house was plant within the meaning of Section 1(1) of the Employers' Liability Act, 1880. The relevant passage occurring at page 658 of the Report runs thus: "There is no definition of plant in the Act: but in its ordinary sense, it includes whatever apparatus is used by a businessman for carrying on his business,- not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movables, live or dead, which he keeps for permanent employment in his business." In other words, plant would include any article or object fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. In order to qualify as plant, the article must have some degre....
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....number of sheets of paper, parchment, etc., with writing or printing on them, fastened together along one edge, usually between protective covers; literary of scientific work, anthology, etc., distinguished by length and form from a magazine, tract etc. (vide Webster's New World Dictionary). But apart from its physical form, the question is whether these documents satisfy the functional test indicated above. Obviously, the purpose of rendering such documentation service by supplying these documents to the assessee was to enable it to undertake its trading activity of manufacturing theodolites and microscopes and there can be no doubt that these documents had a vital function to perform in the manufacture of these instruments: in fact it is with the aid of these complete and up-to-date sets of documents that the assessee was able to commence its manufacturing activity and these documents really formed the basis of the business of manufacturing the instruments in question. True, by themselves, these documents did not perform any mechanical operations or processes but that cannot militate against their being a plant since they were in a sense the basic tools of the assessee's trade ha....
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....erefore, the tribunal agreed with the assessee and dismissed the cross-objection filed by the revenue. The decision of the Hon'ble Supreme Court in Sugar Factory & Oil Mills (P.) Ltd. Versus CIT, U.P. 1980 125 ITR 293 will clearly support the case of the assessee. In the said case, the Court found that the roads under the scheme were undoubtedly advantageous to the business of the said assessee as they facilitated the transport of sugarcane to the factory and the outflow of manufactured sugar from the factory to the market centres, and therefore, it facilitated the business operations of the said assessee and enabled the management to conduct the assessee's business in a more efficient and profitable manner. The operative portion of the decision read as follows: But the position is different when we come to the second item of expenditure of Rs. 50,000. There the assessee is clearly on firmer ground. The amount of Rs. 50,000 was contributed by the assessee under the Sugarcane Development Scheme towards meeting of the cost of construction of roads in the area around the factory. Now, there can be no doubt that the construction of roads in the area around the factory was considerabl....
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.... must be remembered that this test is not of universal application and, as the parenthetical clause shows, it must yield where there are special circumstances leading to a contrary conclusion. The non-universality of this test was emphasized by Lord Radcliffe in Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd. [1965] 58 ITR 241 (PC), where the learned Law Lord said in his highly felicitous language that it would be misleading to suppose that in all cases securing a benefit for the business would be, prima facie, capital expenditure, "so long as the benefit is not so transitory as to have no endurance at all". No it is clear on the facts of the present case that by spending the amount of Rs. 50,000, the assessee did not acquire any asset of an enduring nature. The roads which were constructed around the factory with the help of the amount of Rs. 50,000 contributed by the assessee belonged to the Government of Uttar Pradesh and not to the assessee. Moreover, it was only a part of the cost of construction of these roads that was contributed by the assessee, since under the sugarcane development scheme, one-third of the cost of construction was to be borne by the Centra....