Law:

Section:

Section 37(1) of the income-tax act, 1961-Business expenditure-Expenses on levelling land for playground for workers and staff members-Whether allowable as revenue expenditure-Held, yes Facts The assessee-company incurred an expenditure of Rs. 7,000 for levelling land to be used as a playground by its workers and staff members. It was disallowed by the ITO as revenue expenditure. This disallowance was upheld by the AAC who held that the assessee had acquired an asset in the form of a playground and that it was a capital expenditure. The Tribunal also confirmed AAC's order. On reference : Held By mere levelling land for being used as a playground, no enduring benefit has accrued and no capital asset has come into existence nor has it resulted in the appreciation of the value of the land. Hence, the expenditure was revenue in nature as being incidental to the assessee's activities. Case referred to Teksons (P.) Ltd. v. CIT (No. 1) [1979] 120 ITR 738 (Bom.). JUDGMENT Chandurkar, J.- At the instance of the assessee the following two questions have been referred to us under section 256(1) of the Income-tax Act, 1961? "(1)Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 7,000 incurred by the appellant in preparing the playground for the workers and members of the staff was a revenue expense permissible under section 37(1) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the moiety of the book profits were includible in the capital employed in the industrial undertaking in accordance with rule 19(5) of the Income-tax Rules, 1962?" The second question stands concluded by a decision of this court in the case of the assessee for the earlier assessment year 1964-65 which was the subject-matter of Income-tax Reference No. 122 of 1969 (Teksons P. Ltd. v. CIT ( No. 1)) decided on 28th July, 1978 (since reported in [1979] 120 ITR 738 (Bom.)). An identical question referred for the assessment year 1964-65 has been answered after a detailed discussion of facts and law in favour of the assessee. It is not disputed even on behalf of the revenue that the second question will have to be identically…

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