Judgment:
Ranjana desai, J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question of law to this court for opinion, at the instance of the assessee :
'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the expenditure incurred on asphalting the existing kaccha road within the factory brought into existence a new asset or an advantage of an enduring nature and hence was of capital nature ?'
2. The facts, which are relevant for the purposes of this reference, are as under :
The assessee is a company. The assessment year is 1982-83 for which relevant accounting year ended on September 30, 1981. The assessee had spent an amount of Rs. 10,00,000 on the repairs of the road in the factory premises. It was submitted before the Inspecting Assistant Commissioner of Income-tax, Pune, that the roads within the factory premises were kaccha roads and the assessee had spent the amount of Rs. 10,00,000 for converting them into tar roads. It was further submitted that even after these repairs, after every three years the repairs will have to be carried out because these roads do not last for a long time. The Inspecting Assistant Commissioner of Income-tax held that the assessee had substantially renovated the roads and hence the expenditure can be classified as a capital expenditure. According to him, the life of these roads would be much more than what was stated by the assessee. He, therefore, held that the expenditure was a capital expenditure. He allowed depreciation at the rate of 5 per cent. He rejected the claim for deduction as revenue expenditure.
3. The assessee filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) held that the assessee had constructed new roads where nothing existed before. Therefore, a new asset came into being in the form of pucca roads. He held that theInspecting Assistant Commissioner of Income-tax had rightly treated the expenditure as capital expenditure.
4. The assessee filed an appeal before the Income-tax Appellate Tribunal. The Tribunal held that the work done was not current repairs to maintain the roads in their then working condition. The work constituted conversion of kaccha roads into asphalt roads thereby bringing into existence a new asset or an advantage of enduring nature. The Tribunal, therefore, held that the expenditure was not a revenue expenditure and confirmed the disallowance. It is against this background that the present reference is filed.
5. We have heard Mr. P. Vaidya, learned counsel for the assessee, and Mr. R. V. Desai and Mr. P. S. Jetley, learned counsel for the Revenue. Learned counsel for the parties are agreed that the present controversy is now covered by the decision of this court dated September 24, 1993, in Income-tax Reference No. 236 of 1982 in CIT v. Chemaux Ltd. (1994) 74 Taxman 201, wherein, it was held that, expenditure on repairs and resurfacing of roads could not be treated as capital expenditure. In that case also the controversy was whether the expenditure incurred by the assessee on resurfacing the kaccha roads inside its factory premise was allowable as revenue expenditure. This court held that it was a revenue expenditure. Following the same, the question referred to us is answered in the negative, i.e., in favour of the assessee and against the Revenue.
6. Reference is disposed of accordingly with no order as to costs.