COMMISSIONER OF INCOME TAX Vs. TARA PRASAD LODHA

JUDGEMENT

(1.) IN this reference under Section 256(1) of the INcome-tax Act, 1961, the INcome-tax Appellate Tribunal, Patna Bench, has referred the following question to this court:

(2.) THE relevant facts necessary for the disposal of this reference are very short. THE assessee runs a group of collieries called Centulia seams. In the year in question, namely, assessment year 1962-63, corresponding to the accounting year 1961-62, fire broke out in the adjoining seam, and the assessee was required by the Coal Board in its own interest and for the protection of its seams to dig a trench so that the fire may not extend to the seams in question. In digging this trench, which was 500 yards in length and in breadth 40 feet at its bottom and 80 feet at its surface, the total expenditure incurred by the assessee was about Rs. 27,000. Out of this amount, the Coal Board sanctioned an amount of Rs. 11,398, and to that extent the assessee was reimbursed, and the balance of the expenditure incurred had to be borne by the assessee. This balance amount was claimed by it as revenue expenditure under the head" protection charge ". THE Income-tax Officer rejected this claim, holding that the benefit accruing to the assessee being of an enduring nature, the expenditure under this head could not be brought within the term" revenue expenditure " but as an item of capital expenditure. On appeal by the assessee, the Appellate Assistant Commissioner affirmed the decision of the assessing authority. On further appeal to the Tribunal, the Tribunal held that from the facts of the present case it was clear that it was in the interest of the assessee itself to protect its mines and it had to incur the expenditure whether the Coal Board sanctioned it or not. THE Tribunal further held that there was a threat to the coal seams and it was necessary to incur this expenditure. On having been asked by the Commissioner of Income-tax, the Tribunal has framed the question of law aforesaid for answer by this court.

(3.) IN the Madras case, relied upon by the learned standing counsel, again it was held that the amount in question spent for acquiring capital assets had none of the elements of "rent" nor even of "premium" and as such the payment of those sums could not be treated as rent or revenue expenditure.