Commissioner of Income-tax Vs. N.P. Singh and ors. - Court Judgment

Excerpt:
income-tax act, 1961 - section 256(2)--reference--claim of assessee of a certain amount (being the cost of two gear boxes fitted to the steamer m.v. (bridge) allowed as revenue expenditure by the c.i.t. and affirmed by tribunal-validity--held, the expenditure can only be a revenue expenditure--hence, no referable question of law arises out of the appellate order of the tribunal--petition filed by revenue under section 256(2) of the act was liable to be dismissed--(1989) 177 itr 377 (391)--ref. - - (bridge) and it was at best a revenue expenditure and so the said amount of rs. in other words, the expenditure incurred was for the better conduct and improvement of the existing business. 1. the revenue has filed this application under section 256(2) of the income-tax act, 1961. the respondent is an assessee to income-tax. the revenue prays that the following question formulated in paragraph 1 ofthe petition may be directed to be referred to this court by the income-tax appellate tribunal, patna bench, patna : 'whether, on the facts and in the circumstances of the case, the income-tax appellate tribunal was justified in affirming the order of the commissioner of income-tax (appeals), whereby it allowed the claim of the assessees of the amount of rs. 2,96,682 being the cost of two gear boxes fitted to the steamer m. v. (bridge) as revenue expenditure ?' 2. we heard learned counsel for the revenue. the matter relates to the assessment year 1981-82. during the year, the.....

Judgment:

1. The Revenue has filed this application under Section 256(2) of the Income-tax Act, 1961. The respondent is an assessee to income-tax. The Revenue prays that the following question formulated in paragraph 1 of

the petition may be directed to be referred to this court by the Income-tax Appellate Tribunal, Patna Bench, Patna :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in affirming the order of the Commissioner of Income-tax (Appeals), whereby it allowed the claim of the assessees of the amount of Rs. 2,96,682 being the cost of two gear boxes fitted to the steamer M. V. (bridge) as revenue expenditure ?'

2. We heard learned counsel for the Revenue. The matter relates to the assessment year 1981-82. During the year, the assessee-firm incurred an expenditure of Rs. 2,96,682 which it incurred as total costs for the new gear boxes fitted to its steamer M. V. (bridge). The Income-tax Officer held that the fitting of the gear boxes resulted in an enduring benefit to the assessee and so the said amount of Rs. 2,96,682 should be treated as capital expenditure. In appeal, the Commissioner of Income-tax (Appeals)-I, Patna, by his order dated April 15, 1988, found that the fitting of the two gear boxes did not result in any additional benefit from M. V. (bridge) and it was at best a revenue expenditure and so the said amount of Rs. 2,96,682 should be allowed as revenue expenditure. In appeal, at the instance of the Revenue, the Income-tax Appellate Tribunal, by order dated November 15, 1991, took the view that the two gear boxes fitted on L. C. T. M. V. (bridge) was to make it more efficient and for earning more income and it did not amount to benefit of an enduring nature which can be treated as capital in nature. The Tribunal relied on the decision of the Supreme Court in the case of Empire Jute Co. Ltd. v. CIT : [1980]124ITR1(SC) and held that the expenditure so incurred is only a revenue expenditure and affirmed the decision of the Commissioner of Income-tax (Appeals)-I, Patna. The Revenue filed an application under Section 256(2) of the Income-tax Act before the Tribunal to refer the questions of law, which according to it, arose out of the order of the Tribunal. The Appellate Tribunal declined to refer the question of law formulated by the Revenue. It is thereafter that the Revenue has moved this court in Taxation Case No. 20 of 1993 for a direction to the Income-tax Appellate Tribunal to refer the question of law as formulated in paragraph 1 of this application.

3. We heard learned counsel for the applicant. The Commissioner of Income-tax as also the Appellate Tribunal held that fitting of L. C. T. M. V. (bridge) with two gear boxes had rendered the machine more efficient, for earning more income and it is not a case where it resulted in an enduring benefit to the assessee. On a fair reading of the order of the Appellate Tribunal as a whole, it is evident that the Appellate Tribunal

was of the view that by incurring the expenditure in the instant case, there is only an improvement in the operation of the existing business and its efficiency and profitability. In other words, the expenditure incurred was for the better conduct and improvement of the existing business. We are of the view that in this perspective, in the light of the recent decision of the Supreme Court in Alembic Chemical Works Co. Ltd. v. CIT : [1989]177ITR377(SC) , the conclusion of the Appellate Tribunal that the expenditure incurred is revenue in character is unassailable. The Revenue has not assailed the finding of the Tribunal that the two gear boxes fitted in L. C. T. M. V. (bridge) rendered it more efficient and resulted in earning more income. In the light of the aforesaid finding, the expenditure can only be a revenue expenditure. We are of the view that no referable question of law arises out of the appellate order of the Income-lax Appellate Tribunal, Patna Bench, Patna.

4. Accordingly, we dismiss the petition filed by the Revenue under Section 250(2) of the Income-tax Act. There shall be no order as to costs.