Law:

Section:

JUDGMENT A.N. Sen, J. - A short, though not quite simple, question of law arises for consideration in the present reference. The question, whether a particular expenditure is of a capital nature or not, may prove ticklish and intricate in the facts of a particular case. In the instant reference, such a question falls for determination. The point for consideration in the present reference is whether the expenditure incurred by the assessee on renovating the buildings, reconditioning the machinery and clearing the land of debris in one of its collieries, known as South Samla Colliery, for restarting the operation of digging coal there from, after a long lapse of time, during which period this colliery had remained under military occupation, is in the nature of capital expenditure of not. The assessee is a registered firm which owned several collieries in West Bengal and Bihar. One of such collieries owned by the assessee is known as South Samla Colliery. South Samla Colliery was under military occupation since 1942 and was derequisitioned in 1955. This colliery could not be worked by the assessee during these years of military occupation. Expenses, however, had been claimed by the assessee during the period of military occupation on account of minimum royalty, surface rent and salary for watch and ward purposes of this colliery and had been allowed as business expenditure of the assessee by the taxing authority. The relevant assessment year is 1959-60, the corresponding previous year, i.e., the accounting year of the assessee being the Gujrati Dewali 2014 (beginning with 24th of October, 1957, and ending on 12th of November, 1958). During the relevant period under consideration, the assessee incurred certain heavy expenses amounting in all to Rs. 1,61,742 on renovating the buildings, reconditioning the machinery and clearing the land of the debris that had accumulated for over a number of years at the said South Samla Colliery for the purpose of putting the machinery in working order as well as the whole of that colliery in general to a state of resumption of mining operations from the said colliery. The assessee had claimed deduction of the said entire amount as…

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