K SANKARANARAYANA IYER Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN these references u/s 256(1) of the INCOME TAX Act, 1961, the following question of law has been referred :

(2.) IN the manufacture of bricks the assessee takes out the mud from the earth. The assessee claims that the removal of the mud depreciates the value of the land, and therefore the estimated value should be allowed as deduction. IN the assessee's own case fort eh earlier asst. yrs. this court held in T.C. Nos. 406 of 1971, 10 of 1972 and 226 of 1972 in the judgment dated 20th September, 1976, the assessee's claim could not be accepted. IN the course of the Judgment it was observed after referring to a decision of the Supreme Court in CIT West Bengal v. Hantapara Tea Co. Ltd. that the Supreme Court was not considering claim like the present one where the notional value for the mud taken out from a capital asset was claimed as a deduction for arriving at the business income of the assessee. Unless there is a provision providing for depreciation allowance, on the land from which mud is taken for making bricks, the assessee would not be eligible for getting any such allowance. An allowance can be had for expenditure. The word 'expenditure' had been understood in INdian Molasses Co. v. CIT as follows : "Expenditure' is what is paid out or away is something which is gone irretrievable." *

(3.) IN Coltness Iron Co. v. Black the House of Lords pointed out that the profits from capital which was consumed and exhausted in the process of realisation may nonetheless in taxable as income. The Privy Council in dealing with a mining case in Kamakshya Narain Singh v. CIT observed :