Law: Income Tax Act, 1961

Section: 37,37(1)

[Indian Income Tax Act, 1961]........Section 37(1)-Business expenditure Revenue or capital expenditure-Expenditure on roads-Conversion of katcha roads to metalled roads-Expenditure incurred mainly to ensure supply of fresh sugarcane to assessees mills-Expenditure whether allowable-Held yes There is no clear-cut test on the basis of which capital expenditure may be distinguished from revenue expenditure. The question has to be decided from the practical and business point of view. The assessee, the Punipat Co-operative Sugar Mills, spent Rs. 6 lakhs on the conversion of the katcha approach roads to its mills into metalled roads. It contended that the expenditure had been incurred mainly to ensure that the sugarcane supplied to its mills were fresher. On the question whether the expenditure was allowable as revenue expenditure : Held, that though a road becomes comparatively more permanently restored by metalling, the conversion of a katcha road into a metalled one does not amount to the construction of a new road. The roads did not belong to the assessee nor could it have any control over them. The expenditure was incurred on account of business expediency, namely, the effort to get fresh sugarcane which yielded higher percentage of sugar. The katcha road was a permanent inconvenience and the expense incurred by the assessee to get rid of this inconvenience cannot be held to have brought to it a lasting advantage. The metalling of the roads in the instant case amounted to their repair and the expenditure incurred was revenue expenditure allowable under Section 37(1) of the Income Tax Act, 1961. Lakshmiji Sugar Mills Co. P. Ltd. V. CIT[1971] 82 ITR 376 (SC) followed. Dewan Sugar and General Mills Pvt. Ltd. v. CIT [1970] 77 ITR 572 (All), H.R. Sugar Factory v. CIT [1970] 77 ITR 614 (All) and Laxmi Sugar and Oil Mills v. CIT [1972] 84 ITR 439 (All), distinguished. Cases referred to : Addl. CIT v. Rohit Mills Ltd. [1976] 104 ITR 132 (Guj), Assam Bengal Cement Co. Ltd. v. CIT[1955] 27 ITR 34 (SC); CIT v. Ashok Leyland Ltd. [1972] 86 ITR 549 (SC) ; CIT v. Associated Cement Companies Ltd. [1974] 96 ITR 650 (Bom); CIT v. Hindustan Motors Ltd. [1968] 68 ITR 301 (Cal);…

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