L.B. SUGAR FACTORY & OIL MILLS (P) LTD. PILIBHIT versus C.L.T. U.P., LUCKNOW

Citation: [1981] 1 S.C.R. 523 · Decided: 26-08-1980 · Supreme Court of India · Bench: P.N. BHAGWATI, A.P. SEN, E.S. VENKATARAMIAH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

' . 
523 
L.B. SUGAR FACTORY & OIL MILLS (P) LTD. PII.IBHIT 
v. 
C.l.T. U.P., LUCKNOW 
August 26, 1980 
[P. N. BHAGWATI, A. P. SEN AND E. S. VENKATARAMIAH, JJ.] 
Capital Expenditure and Revenue Expenditure, test of-Contribution made 
lby the assessee towards the construction of dam and later on contributing 1 /3rd 
.cost towards the laying down of the road in the area around the factory ur.der 
oa Sugarcane Development Scheme, 
whether capital expenditure 
and 
hence 
.deductible expenditure under s. 10(2)(xv) of the Indian Income Tax Act, 1922. 
The appellant, assessee· is a private limited company carrying on business 
<>f manufacture and sale of crystal sugar in a factory situated in Pilibhit in 
·the State of Uttar Pradesh. During the accounting year ending 30th September, 
A 
B 
c 
1955,' the assessee contributed a sum of Rs. 22,332 towards the construction of 
D 
"Deoni dam-Majhala Road at the request of the Collector and a further sum 
<>f Rs. 50,000, being 1 /3rd share of the cost of construction of roads in the 
·area around its factory under a Sugar Cane Development Scheme, to the State· 
·of Uttar Pradesh. These two sums were claimed by the assessee as deductible 
·expenditure under s.. 10(2)(xv) of . the Indian Income Tax Act, 1922 · in its 
return for the assessment year 1956-57, but. disallowed by the Income Tax Officer. 
Having lost in appeal before the Revenue Authorities and in reference before 
E 
'the High Court, the appellant came. up in appeal by certificate. 
Alfowing the appeal in part, the Court 
HELD : (1) An expenditure incurred by an assessee can aualify flJr deduc-
tion under s. 10(2)(xv) of the Indian Income-tax Act, 1922 onlYo if it i~ incurred 
wholly and exclusively for purpose of his business, but even if it fulfils this 
requirement, it is not enough, it must further be of revenue as distinct from 
-capital expenditure. [526 CJ 
(2) The test laid down in Atherton's case for treating an item of expen~iture 
as capital expenditure is not of universal application and it must yield where 
there aw spedal circumstances leading to a contrary conclusion. 
If the. ad-
-vantage consists rperely in facilitating the assessee"s business operations or enabl-
ing the management and conduct of the assessee's business to be carried on 
more profitably while leaving the fixed capital untouched, the expenditure would 
'be on revenue account, even though the advantage may endure for an indefinite 
'future. 
Further, in cases of this kind, where the question is whether a parti-
·cular expenditure incurred by an assessee is on capital account or revenue 
.account, the decision must ultimately depend on the facts of each- case. 
No 
two cases are alike and quite often emphasis on one aspect or the other may 
tilt the balance in favour of capital expenditure or revenue expenditure. · 
1527 F, 528 C, 530 CJ 
, 
Commissioner of Taxes v. Nohanga Consolidated Copper Mines Ltd, [1965] 
:58 ITR 241; Empire Jute Co. Lta. v. C.1.T. [1980] 3 SCR; applied. 
F 
G 
H 
I 
524 
SUPREME COURT REPORTS 
f 1981] 1 S.C.R. 
A 
British Insulated and Helsby Cable'S Ltd. v. Atherton; 10 Tax Cases 155 p • 
. 189; explained. 
B 
c 
D 
E 
F 
G 
H 
(3) In the instant case : (i) The amount of Rs. 22,332 was rightlyi dis-
allowed as deductible expenditure under s. 10(2)(xv) of the Act. The amount 
was apparently contributed by the assessee without any legal obligation to do 
· so purely as an act of good citizenship and it could not be said to have been 
laid down wholly and exclusively for the purpose of the business of the assessee; 
and (ii) So far as the expenditure• of the sium of Rs. 50,000 is concerned it 
was in the nature of revenue expenditure laid out wholly and exclusively for 
the purpose of the assessee's business and was. therefore. allowable as a deduc-
tion iunder s. 10(2)(xv) of the Act. 
[526 F, 531 A] 
Lakshmi;; Sugar Mills Co. P. Ltd. v. C.l.T.; 82 I.T.R. 736; Distinguished. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 298 of 1973. 
From the Judgment and Order dated 28-7-1971 of the Allahabad 
High Court in Income Tax Ref. No. 335 / 66. 
J. P. Goyal and S. K. Jain for the Appellant. 
D. V. Patel, J. Ramamurthy and Miss A. Subhaslrini for the Res-
, pondent. 
The Judgment of the Court was delivered by 
BHAGWATI, J.~ The tlispute in this appeal by certificate relates to 
two items of expenditure incurred by the assessee during the assess-
ment year 1956-57 for which the ~elevant accounting year was the 
year end

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