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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 - Assessment years 1956-57 - Whether contribution by assessee-mill to roads development funds for construction of roads for improving transport facilities, must be classed as capital expenditure even if land on which roads were constructed did not belong to assessee - Held, yes FACTS During the accounting periods the assessee-company paid Rs. 40,000 and Rs. 3,000 as contribution to the Roads Development Fund for constructing roads and assessee claimed these two amounts as deduction under section 10(2)(xv) in the assessments for the years 1956-57 and 1957-58. The claim was disallowed by the Income-tax Officer. This decision was upheld in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. On reference : HELD The two payments in question, made to the State Government, were the assessee's contribution to the fund for constructing new roads for improving transport facilities. When new roads are constructed, a capital asset comes into existence. It may be that the land, on which roads in question were constructed, did not belong to the assessee. But that circumstance did not alter the fact that the contribution made by the assessee brought assets of capital nature into existence. Such expenditure must, therefore, be classed as capital expenditure. The Tribunal was right in not treating the expenditure as permissible expenditure under section 10(2)(xv). Note : The decision was in favour of the revenue. CASES REFERRED TO CIT v. Hindustan Motors Ltd. [1968] 68 ITR 301 (Cal.) and Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34; [1955] 1 SCR 972 (SC) JUDGMENT V.G. Oak, CJ.-This is a reference under the Indian Income-tax Act, 1922. Messrs. Dewan Sugar and General Mills P. Ltd., Meerut, are the assessee. The assessment years are 1956-57 and 1957-58. The relevant previous years ended on June 30,1954, and June 30,1955, respectively. During the two accounting periods the assessee-company paid two sums of Rs. 40,000 and Rs. 3,000 as contribution to the Cane Centre Roads Development Fund. The…

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