The total companyt to be shared by the four companypanies was Rs.
The assessee companypany sought to deduct this amount from its total income c aiming this as revenue expenditure for the year in question.
The High Court held that the assessee in this case ob tained an advantage of an enduring nature by the companystruc tion of the road and, therefore, the amount companytributed was capital expenditure.
The Income tax Officer disallowed the claim holding that the assessees companytribution was capital expenditure.
From the Judgment and Order dated the 24th August, 1971 of the Kerala High Court in I.T.R.No.
26,100/ being the respondents companytribution to government for companystructing a road as a permissible deduction under section 37 1 0f the Income Tax Act, 1961.
26,100/ .
1,04,550/ and the assessees share came to Rs.
265 of 1972.
The authorities both in this companyntry and in England have pointed out the difficulties in formulating precise rules for distinguishing capital expenditure from revenue expendi ture.
25 of 1969.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The Appellate As sistant Commissioner took the same view.
It was agreed that the Government of Kerala would bear the companyt of the acquisition of the land and 25 per cent of the companyt of companystruction.
The Appellate Tribunal, mainly relying on the decision of the Calcutta High Court in Commissioner of Income tax v. Hindustan Motors Limited, 1 held that the assessee was entitled to deduct the amount as revenue expenditure.
The assessee companypany is engaged in the manufacture of chemicals it had been receiving and despatching materials required for and produced in its factory through lorries.
The assess ment year in question is 196465, the relevant accounting period being the financial year ended March 31, 1964.
The Judgment of the Court was delivered by GUPTA, J. The question for decision in this case is whether the money companytributed by the assessee, public limit ed companypany, for the companystruction of a new road in the area where its factory is located to improve transport facilities is capital expenditure or revenue expenditure.
B. Pai, K.J. John for M s Dadabhanji Co., for the Appel lant.
At the instance of the Commissioner of Income tax, Kerala, Ernakulam, the Tribunal referred the following question to the High Court of Kerala under section 256 1 of the Income Tax Act,1961 Whether, on the facts and in the circum stances of the case, the Appellate Tribunal was legally justified in allowing the expendi ture of Rs.
B.B. ,Ahuja and R.N. Sachthey for Respondent.
The assessee along with three, other public undertaking approached the Government of Kerala for laying a new road from kalamasseri to Udyogamanndal this area where the assessees factory is situate was number at the material tune served by pucca roads.
