M/S. SITALI'UR SUGAR WORKS LTD. versus COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA

Citation: [1964] 3 S.C.R. 17 · Decided: 10-04-1963 · Supreme Court of India · Bench: S.K. DAS · Disposal: Dismissed

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Judgment (excerpt)

3 S.C.R.. 
SUPREME COURT REPORTS 
M/s. SITALI'UR SUGAR WORKS LTD. 
v. 
COMMISSIONER OF INCOME-TAX, 
BIHAR AND ORISSA 
17 
(S.K. DAS, A.K. SARKAR and M. HIDAYATULLAHjj.) 
-• 
Income Tax-Expenditure incurred on dismantling a 
factory at one place and setting it up at another-Capital expendi-
ture and not revenue expenditure-Depreciation on capital ex-
penditure-Depreciation not 
allowed on 
amount spent 
for 
acquiring an advantage-Indian Income-tax Act, 1922 (11 of 
1922), s. 10 (2) (vi). 
The appellant, a comp.any manufacturing sugar, shifted 
its factory from the old site to a new site and incurred a total 
expense of Rs. 3,19,766/- on the dismantling of buildings and 
machinery, transporting machinery 
from the original site to 
the new site ann refitting the same there. 
HeU that the appellant was not entitled to a deduction 
of this expense for income-tax purposes as an expense incurred 
for carrying on the concern or in earning profit, it was an 
expense incurred in effecting a permanent improven1ent in the 
profit-making machinery and was, therefore, an expenditure 
on capital account. 
The expense was on capital account also because it was 
made, -~not only once for all, but with a view to bringing into 
existence an asset or an advantage for the enduring benefit of 
a trade" within the dictum of Viscount Cave in Atherton v. 
Britith Insulated and Helsby Cables Ltd. In order that that 
dictum may apply it is not necessary that by the expenditure 
a material asset or a permanent right in the nature of capital 
should be acquired. There may be an expense incurred on 
capital account though nothing was thereby added to the 
capital value of an asset. 
Atherton v. British Insulated andHelsby Cables Ltxl. (1925) 
10 T. C. 155 Assam Bengal Cemenl Co. Ltd. v. The Comm;,,. 
sio••r of fncome-ta:x, 
West Bengal, [1955] 1 S. C. R. 972, 
GraniteS.,pply Association Ltd. v Kitton, (1905) 5 T. C. 168 
and Bea• v. Doncaater Amalgamated Collierie. Ltd. (!945) 27 
T. C. 29i, referred to. 
AFil JO 
1963 
$j/qJfJUt Suz• 
Works £14. 
18 
SUPRE~E COURf REPORTS [196'1] VOb. 
An expense would not be on revenue account simply 
because it was incurred to turn a losing concern into a J?rofi-
table one. 
... 
. 
C:.-"-Bi:;• 
Though the expense incurred by the appellant was of a ca· 
-.::;...., 
pita! nature, it was not entitled to any depreciation on it under 
s.10 (2) (vi) of the Income-tax Act br:cause no tangible asset had 
been acquired by the expenditure which can be said to have 
depreciated. Neither was the appellant entitled to deprecia-
tion undrr part V of. the Form of Return given in the Rules 
framed under the Act which dealt with a claim for deprecia· 
tion and by column 3 required a statement to be made for 
•-
"capital expenditure during the year for additions, altema-
tions, improvements and extensions," fo:1.· to be so entitled to 
deductions under this part there ha• to be an improvement of 
the capital asset or increase in its value and there is no evidence 
of any such improvement or increase. Further, no claim for 
depreciation on improvement to capita) asset had been made. 
CIVIL APPELLATE jURISDIOTION : Civil Appeal 
No. 350 of 1962. 
Appeal by special leave from the judgment and 
decree dated November 30, 1960, of the Patna High 
Court in Miscellaneous Judicial Case No. 799 of 1958. 
G. S. Pathak and G. O. Mathur, for the appe· 
llant. 
N. D. Karkhanis and R. N. Saahthey, for the 
respondent, 
1963, April 10. The Judg~ent of the Court 
was delivered by 
SARKAR J.-This case does not seem to us to 
present any real difficulty. It arises out of a reference 
to the High Court of Patna of two questions both of 
which were answered by the High Court against 
the assessee, the appellant in this Court. 
The appellant is a company manufacturing 
sugar. It had its factory originally at a place called 
.. 
I 
• 
• 
a S.C.R. 
SUPREME CbtJRT REPORTS 
19 
Sitalpur. That place was found to be disadvan-
tageous for the appellant's business as sugar cane of 
good quality was not available in sufficient quantity 
in the neighbourhood and also as it suffered from 
ravages of flood. 
With a view to improve its 
business the appellant removed its 
factory from 
Sitalpur to another place called Garaul and in the 
process of dismantling the building and machinery, 
transportation from Sitalpur to Garaul and refitting 
the machinery at the latter place, it incurred a total 
expense of Rs. 3,19, 766/- in the year of account. In 
the asses

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