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Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-Tax Act, 1922] - Business expenditure - Allowability of CASE REVIEW Atherton v. British Insulated and Helsby Cables Ltd. (1925) 10 Tax Cas. 155 andGranite Supply Association Ltd. v. Kitton (1905) 5 Tax Cas 168 followed and relied upon. JUDGMENT Ramaswami, CJ.-In this case the assessee is a public limited company doing the business of manufacturing sugar. The factory in which the assessee manufactured sugar from sugarcane was at first situated at Sitalpur in the district of Saran. But the place was found to be disadvantageous for the manufacture of sugar. It suffered from inundation by floods. It was also found that good quality sugarcane was not available in sufficient quantity at Sitalpur. As a result of these disadvantages the factory suffered loss. In order to improve the business the assessee shifted the factory from Sitalpur in Saran district to Garaul in Muzaffarpur district. The total expenditure which the assessee incurred in the process of dismantling the machinery and in erecting the same at Garaul amounted to a sum of Rs. 3,19,766. The details of expenditure are as follows : Rs. 1.Dismantling and building machinery... 61,632 2.Transport, including railway freight... 10,906 3.Cost of refitting machine at Garaul... 2,17,847 4.Transporting charges of machine-set... 17,599 5.Miscellaneous, including traffic... 11,782 Total... 3,19,766 For the assessment year 1952-53 the assessee claimed the amount of Rs. 3,19,766 as expenditure wholly and exclusively laid out for the purpose of the business and as a permissible deduction under section 10(2)(xv) of the Income-tax Act. The assessee claimed in the alternative that, if the expenditure was considered to be a capital expenditure, the assessee should be given depreciation under section 10(2)(vi) of the Income-tax Act. The Income-tax Officer rejected the claim of the assessee and held that the amount of Rs. 3,19,766 was capita] expenditure and cannot be deducted from the profits of the assessee. As regards the claim for depreciation, the Income-tax Officer held that there was no addition to the capital value of the…

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