COMMISSIONER OF INCOME TAX Vs. N P SINGH

JUDGEMENT

(1.) THE Revenue has filed this application under Section 256(2) of the Income-tax Act, 1961. THE respondent is an assessee to income-tax. THE Revenue prays that the following question formulated in paragraph 1 of the petition may be directed to be referred to this court by the Income-tax Appellate Tribunal, Patna Bench, Patna :

(2.) WE heard learned counsel for the Revenue. The matter relates to the assessment year 1981-82. During the year, the assessee-firm incurred an expenditure of Rs. 2,96,682 which it incurred as total costs for the new gear boxes fitted to its steamer M. V. (bridge). The Income-tax Officer held that the fitting of the gear boxes resulted in an enduring benefit to the assessee and so the said amount of Rs. 2,96,682 should be treated as capital expenditure. In appeal, the Commissioner of Income-tax (Appeals)-I, Patna, by his order dated April 15, 1988, found that the fitting of the two gear boxes did not result in any additional benefit from M. V. (bridge) and it was at best a revenue expenditure and so the said amount of Rs. 2,96,682 should be allowed as revenue expenditure. In appeal, at the instance of the Revenue, the Income-tax Appellate Tribunal, by order dated November 15, 1991, took the view that the two gear boxes fitted on L. C. T. M. V. (bridge) was to make it more efficient and for earning more income and it did not amount to benefit of an enduring nature which can be treated as capital in nature. The Tribunal relied on the decision of the Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 and held that the expenditure so incurred is only a revenue expenditure and affirmed the decision of the Commissioner of Income-tax (Appeals)-I, Patna. The Revenue filed an application under Section 256(2) of the Income-tax Act before the Tribunal to refer the questions of law, which according to it, arose out of the order of the Tribunal. The Appellate Tribunal declined to refer the question of law formulated by the Revenue. It is thereafter that the Revenue has moved this court in Taxation Case No. 20 of 1993 for a direction to the Income-tax Appellate Tribunal to refer the question of law as formulated in paragraph 1 of this application.