LAWS(CAL)-1982-8-15

INDIAN EXPLOSIVE LTD Vs. COMMISSIONER OF INCOME TAX

Decided On August 30, 1982
INDIAN EXPLOSIVES LTD. Appellant
V/S
COMMISSIONER OF INCOME-TAX Respondents

JUDGEMENT

(1.) This consolidated reference under Section 256(1) of the I.T. Act, 1961, relates to assessment years 1965-66, 1966-67 and 1968-69, the corresponding previous years ending respectively on the 30th September, of the calendar years 1964, 1965 and 1967. The facts found and/or admitted in the reference are as follows : Indian Explosives Ltd., the assessee, carries on business of manufacture of explosives. Its factory is situated at Gomiah, in the district of Hazaribagh within the State of Bihar. For the convenience of executives who had to travel between Gomiah and Calcutta frequently in connection with the assessee's business, the assessee decided to construct an airstrip in the neighbourhood of Gomiah and purchase an aircraft to be used for such journeys. The assessee entered into an agreement in writing dated 3rd May, 1968, with the National Coal Development Corporation (hereinafter referred to as the Corporation), under which a licence and/or permission was granted to the assessee in respect of a plot of land at Gomiah belonging to the Corporation measuring about 18'25 acres on, inter alia, the following terms and conditions:

(2.) Pursuant to the said agreement the assessee constructed an airstrip in the said land incurring expenditure of Rs. 3,76,542, Rs. 17,315 and Rs. 32,082 in the respective assessment years 1965-66, 1966-67 and 1968-69. The said expenditure was debited in the assessee's miscellaneous expenses account and written off successively in its profit and loss account as follows: <FRM>JUDGEMENT_392_ITR147_1984Html1.htm</FRM>

(3.) The above amounts were claimed by the assessee to be allowable deductions in the said assessment years. The ITO in the proceedings before him held that the construction of the airstrip conferred on the assessee a benefit of an enduring nature and was a capital asset and, therefore, no part of the expenditure was revenue expenditure. He disallowed the claim for deduction.