TaxTMI 
TaxTMI 
2006 (8) TMI 172
X X X X Extracts X X X X
X X X X Extracts X X X X
....respondent/assessee-company is engaged in the business of dyeing and processing of cloth and it filed its return of income for the assessment year 1992-93 declaring "nil" income. In the said return, the assessee claimed a sum of Rs. 6,80,908, being the expenses incurred for shifting the factory from Kovilpatti to Cuddalore, as revenue expenditure. But, the Assessing Officer, by an assessment order dated February 29, 2000, disallowed the claim of the assessee and treated the same as capital expenditure by relying upon the decision of the apex court in Sitalpur Sugar Works Ltd. v. CIT [1963] 49 ITR (SC) 160 and a decision of this court reported in CIT v. Bimetal Bearings Ltd. [1994] 210 ITR 945, against which an appeal was preferred by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CIT [1963] 49 ITR (SC) 160, dealt with the case of shifting of factory to improve the business, whereunder the expenditure for shifting the factory was incurred in dismantling and refitting the existing plants at a better site. In the said case, the assessee-company was manufacturing sugar in its factory situated originally at Sitalpur and that place suffered from the ravages of floods, and good quality sugarcane was not available there in sufficient quantities. With a view to improve its business, the assessee therein shifted the factory to Garaul and in the course, the assessee dismantled the building and machinery and transported the same and erected them at Garaul incurring an expenditure, which was treated as a capital expenditu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o invited to the observation of this court in the case of India Pistons Repco Ltd. v. CIT [1983] 143 ITR 424 that the enduring benefit is often regarded as the hallmark of capital expenditure. The Revenue, in those cases, relied upon the dictum of Viscount Cave in Atherton's case [1925] 10 TC 155 (HL), whereunder it was held that whatever brings into existence an asset or an advantage of an enduring benefit must be regarded as capital expenditure. In Atherton's case [1925] 10 TC 155 (HL), at page 192, it was also held as follows : ". . . when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f being in the proximity of Loyal Textile Mill Ltd., which was providing job work for dyeing and the raw material and the finished products, therefore, had to be reshifted from Kovilpatti to Cuddalore and back to Kovilpatti, and thus, it is obvious that the shifting had only worked to the disadvantage of the respondent/assessee. 10. Another compelling circumstance for shifting, concededly, is that the respondent/assessee-company did not have any option but to shift the factory due to the opposition by public against letting out of the sewage water. even though, the assessee tried its best to treat the waste water and to remove the effluents, the public was not satisfied with the same, as they insisted upon shifting of the factory. of cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nnot be equated with that of the objection of the public in the present case, because the labour unrest in a factory is nothing but a part and parcel of the internal affair of the assessee's industrial management, but, on the other hand, the objection of the public against letting out of sewage water and the consequential demand by the public for shifting of the factory is a matter of external pres-sure brought on the assessee's industrial management. 12. There cannot be any second opinion that the shifting of the factory due to the labour unrest could definitely fall under capital expenditure as viewed by this court in CIT v. Bimetal Bearings Ltd. [1994] 210 ITR 945 (Mad) and India Pistons Repco Ltd. v. CIT [1983] 143 ITR 424 (Mad....