LexC.I.T. WEST BENGAL II, CALCUTTA versus COAL SHIPMENT (P) LTD.
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A B c D E 1089 C.I.T. WEST BENGAL II, CALCUTTA v. COAL SHIPMENT (P) LTD. October 14, 1971 [1<. S. HEGDE, A. N. GROVER AND H. R. KHANNA, JJ.J Income-tax Act, (II of 1922)." 10(2)(xv)-Payments made to rival trader to ward off cofnpetition-When constitutes revenue or capital expen•diture. In pursuance of an agreement . between the assessee-respondent and another firm L & ·Co., by which, L agreed to assist the respondent in procuring coal for export whenever asked to do so and not to export any coal during the subsistence of the agreement, L supp1ied various quanti- ties of coal to the respondent and tm respondent made .payments as per the agreement. The respondent claimed the payments as admisstuk ex- penditure under s. 10(2) (xv) of thi> Income-tax Act. 1922, duting the relevant assessment years. The Department held that they were payments. to secure a monopoly and were therefore not allowable as reve11ue •x· penditure. The Tribunal found that the respondent did not acquire any monopoly rights, that the payments were only made to carry on trade in a more facile and profitable mannel', that the arrangement was a tempo- rary measure liable to be terminated at will, that the respondent did not derive any advantage of an enduring character and that therefot e. the· expenditure was attributable to revenue and not to capital. and held in favour of the assessec. The High Court, on reference, agre~ing with the· findings of the Tribunal and holding that the consideration was not ouid once for all but was related to uncertain shipments to be mad~, decided io· favour of the assessee. In appeal to tnts Court it was contended tb.at though the payment for assistance to the respondent i11 procuring coal was an item of revenue- expenditure, that part of the payment which was made because of L agreeing,, not to export coal during the subsistence of the agreement con- stituted a L:apital expenditure and not a revenue expenditure. F Dismissing the appeal, HELD : Although payments made to ward off competition in business to a rival dealer would constitute capital expenditure if the object of mak- ing that payment is to derive an advantage by eliminating the competition over some length. of time, the same result would not follow if the·re is no. certainty of the duration of the advantage and the same can be put to an end at any time. How long the period of contemplated advantage should G be in order to constitute an enduring benefit would depend upon the cir- cumstances and facts of each individual case. An enduring benefit need not be of an everlasting character, but it should not, at the same time, be- so transitory and ephemeral that it can be terminated at any time at the· volition of any of the parties. [1096 B; 1097 B-'C] H Further, the payments were relaied to the. actual shipments of coal in tbe course' of the trading activities of the respondent and had no relation to the capital value of the assets. The payments were not related t<i or tied up irl any way to any llMd sum agreed between the p~tties. lt was not a case .of mtin<!p(Jly value J1SYtnents bei11g permitted to be paid in instal- ments giving a false apj!eatsttcd elf periodicity. [1fJtJ1 F-G; 1099 0-Hl .. 1090 SUPREME COURT REPORTS [1972] l S.C.R. Travancore Sugars and Chemica/.r Ltd. v. C.l.T., Kerala 62 I.T.R. 566, followed. Atherton v. British Insulated and Halaby Cables Ltd. 10 T.C. 155, Robert Addie and Sons' Collieries Ltd. v. Commissioners of Inland Reve- nue, 8 T. C 67 I, Assam-Bengal Cement Co. Ltd. v. C. I. T., West Bengal, i1 I.T.R. 34, Com111issioner of Taxes v. Nchanga Consolidated Copper Mines Ltd. 58 l.T.R. 241 and Hanrikesen (Inspector of Taxes) v. Grafton Hotel Ltd., JI I.T.R. 10, referred to. C1v1L APPELLATE JURISDICTION : Civil Appeals Nos. I 494 to 1498 of 1971. Appeals by special leave from the judgment and order dated November 15, 1967 of the Calcutta High Court in Income-tax A B Reference No. 13 of 1963. C S. T. Desai, S. K. Ai.var, R. N. Sachthey and B. D. Sharma, for the appellant (in all the appeals). N. A. Palkhivala,. T. A. Ramachandran and D. N. Gupta, for the respondent (in all the appeals). The J udgm~nt of the Court was delivered by - Khanna, J. This judgment would dispose of five Civil Appeal Nos. 1494 to 1498 of 1971 by Special Leave filed by the Commissioner of Income-tax, West Bengal against the judgment of Calcutta High Court whereby the question refe
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