Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenditure of Rs. 1,51,260.71 relating to dismantling, loading and unloading of machinery and equipment was not allowable as a deduction ?

N.V. Balasubramaniam, for the Revenue : P.P.S. Janarthana Raja, for the Assessee

RANGARAJAN, J.:

In these cases, the first common question referred at the instance of the Revenue is as follows : “Whether, on the facts and in the circumstances of the case, the provision made for monetary value of the availed leave salary of the employees should be allowed as a deduction in computing the total income of the assessee-company for the asst. yrs. 1972-73, 1973-74 and 1974-75 ?” At the time of hearing, this question was not pressed by the Revenue. Hence, we return this question unanswered.

2. For the asst. yr. 1974-75, the third question, referred at the instance of the Revenue, is as follows : “Whether, on the facts and in the circumstances of the case, the donation of Rs. 1,25,000 made by the assessee to M/s Paramakalyani Education Society for the asst. yr. 1974-75 is entitled to deduction under s. 80G of the IT Act, 1961 ?”

3. It is fairly stated by learned counsel for the Revenue that the above question is concluded by the decision of this Court in CIT vs. Bimetal Bearings Ltd. (1984) 40 CTR (Mad) 141 : (1985) 152 ITR 85 (Mad). Hence, we answer this question in the affirmative and against the Revenue.

4. At the instance of the assessee, the following four questions have been referred :

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the expenditure of Rs. 1,51,260.71 relating to dismantling, loading and unloading of machinery and equipment was not allowable as a deduction ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that 50% of the expenditure incurred on boarding and lodging was not allowable as expenditure ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transit insurance premia relating to the machinery was not allowable as a deduction ? (4) Whether the Tribunal was right and had sufficient material to hold that all the above items of expenditure were not allowable as a deduction ?”

On the same facts, the Revenue has also raised a question and it is as follows : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to the deduction of Rs. 5,23,789 out of Rs. 7,05,832 representing expenses incurred in the shifting of the assessee’s factory from Madras to Coimbatore ?”

The facts relating to these questions are that the assessee had to shift the factory from Sembiam to Coimbatore due to certain labour unrest. The ITO disallowed the entire expenditure as capital expenditure. On appeal, the appellate authority disallowed the expenditure relating to the shifting of the machinery and allowed only such expenditure as relating to the shifting of the employees. This was confirmed on appeal by the Tribunal.

Learned counsel for the Revenue pointed out that this bifurcation has been approved by the High Court in the case of India Pistons Repco Ltd. vs. CIT (1983) 143 ITR 424 (Mad). In view of that decision, we see nothing wrong in the order of the Tribunal, treating the expenditure relating to the shifting of the machinery as capital expenditure and the expenditure relating to the shifting of the employees as revenue expenditure. We, therefore, answer the second question against the Revenue. We answer all the questions raised by the assessee in the affirmative. No costs.

Decision in favour of Assessee Partly, Revenue Partly.

[Citation : 210 ITR 945]