COMMISSIONER OF INCOME TAX Vs. ANAND GUM INDUSTRIES

JUDGEMENT

(1.) THIS is an application under Section 256(2) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), praying that the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short "the Tribunal"), may be directed to submit a statement of the case and refer the following question of law arising out of the order of the Tribunal dated June 30, 1978, to this court for its opinion :

(2.) THE assessee is a registered partnership firm engaged in the manufacture of guwar gum and pulses used as cattle feed. In the accounting year relevant to the assessment year 1974-75, the assessee incurred an expenditure of Rs. 18,501 in the installation of poles and additional power lines. THE assessee was having a 40 H.P. electric connection. On its request, the Rajasthan State Electricity Board sanctioned a load of 290 H.P. to the assessee, in order to cope with the heavy load required for manufacturing purposes. THE Board decided to extend the 11 KV line up to the premises of the assessee. On account of the extension of 11 KV line, the assessee was required to pay the aforesaid sum of Rs. 18,501 to the Electricity Board. THE installation remained the property of the Electricity Board. THE assessee claimed deduction in respect of the expenditure incurred in the installation of poles and additional power line to the extent of Rs. 18,501 as revenue expenditure. THE ITO refused to allow the deduction on the ground that the said expenditure was of capital nature. On appeal, the AAC, Jodhpur, by his order dated April 12, 1977, held that the payment of the aforesaid amount of Rs. 18,501 by the assessee to the Electricity Board for installation of poles and laying of additional power line was in the nature of revenue expenditure, as it provided additional facility to the assessee and did not result in the creation of any new asset. On further appeal by the ITO, the Tribunal, by its order dated June 30, 1978, affirmed the order passed by the AAC and held that the expenditure was excludible as revenue expenditure because the same was incurred with a view that the existing set up of the assessee could function more efficiently.

(3.) IN CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC), Bhagwati J., speaking for the Supreme Court, observed as under (p. 42);