Bharat Forge Co. Ltd. Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
income tax act, 1961 - section 2(29a) - expenditure incurred on resurfacing kaccha roads inside factory premises - allowable as a revenue expenditure.;that expenditure incurred by the assessee on resurfacing the kaccha road inside its factory premises is allowable as revenue expenditure. - code of criminal procedure, 1973 [c.a. no. 2/1974]. section 41: [ swatanter kumar, cj, smt ranjana desai & d.b. bhosale, jj] arrest of accused - held, a police officer or a person empowered to arrest may arrest a person without intervention of the court subject to the limitations specified under the provisions of the code. the provisions of section 41 of the code provides for arrest by a police officer without an order from a magistrate and without a warrant. a distinct and different power under section 44 of the code empowers the magistrate to arrest or order any person to arrest the offender. under section 44 of the code, that power is vested in the court of the magistrate when an offence is committed in his presence. if the legislature has taken care of providing such specific power under section 44 of the code, then there could be no reason for such a power not to be specified under the provisions of chapter xii of the code. in terms of section 41, a police officer may arrest a person without a warrant or order from the magistrate for any or all of the conditions specified in that provision. language of this provision clearly suggested that the police officer can arrest a person without an order from the magistrate. thus, there appears to be no reason why on the strength of section 156(3) of the code, any restriction should be read into the power specifically granted by the legislature to the police officer. of course, freedom of investigation is the essence of these provisions but in order to suppress the mischief it is sufficiently indicated under different provisions of the code that the arresting officer should exercise his power or discretion judiciously and should be free of motive. some kind of inbuilt safeguard is available to the accused in the cases where the magistrate directs investigation under section 156 (3) of the code by taking recourse to the provisions of section 438 of the code by approaching the court of session or the high court for such relief. thus, during the course of investigation of a criminal case, an accused is not remediless and that would further buttress the above view. [jagannath singh v dr. ajay upadyay & anr 2006 cri lj 4274; 2006 (5) air bom r held per incuriam].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.