LAWS(P&H)-2006-11-133

COMMISSIONER OF INCOME TAX Vs. SHREYANS INDUSTRIES LTD.

Decided On November 08, 2006
COMMISSIONER OF INCOME TAX Appellant
V/S
Shreyans Industries Ltd. Respondents

JUDGEMENT

(1.) CHANDIGARH Bench 'B', Chandigarh in ITA Nos. 597/Chandi/1999 and 529/Chandi/1999, for the asst. yr. 1996 -97, proposing following substantial questions of law :

(2.) THE assessee was running a paper mill which generated effluents. It was under an obligation to arrange discharge of the said effluents. An agreement was reached with the forest department allowing the assessee to build a drain for discharge of effluents in Tallewal drain. The assessee built such a drain by spending Rs. 70,79,862. The assessee claimed the said amount as revenue expenditure, which was disallowed but the CIT(A) allowed the said claim which has been upheld by the Tribunal. It was observed by the AO :

(3.) BASIS of the finding of the Tribunal is that the assessee neither acquired ownership of the land nor unlimited use thereof; there is no increase in the profit -earning capacity of the assessee; the assessee did not acquire any enduring benefit; the assessee was required to keep the drain in a condition that there is no seepage or leakage of effluents. Finding of the Tribunal is as under : "Thus, we are of the opinion that by incurring an expenditure on the construction of drain on the forest land, the assessee has neither acquired any capital asset nor benefit of enduring nature in the commercial sense. The fact that assessee was allowed exclusive use of land for discharge of effluents was immaterial as the assessee can use such land only for a limited purpose. It is also not relevant whether the benefit for using the drain for discharge of effluents was to run for a number of years or for a short period. The expenditure incurred has neither increased the profitability of the assessee nor its production. The expenditure so incurred was necessarily for the purpose of its business and is allowable as revenue expenditure. We, therefore, confirm the order of learned CIT(A) and dismiss this ground of appeal of the Revenue."