ORDER
1. The Revenue is aggrieved by an order dt. 12th Nov., 2002 passed by the Tribunal, Delhi Bench F, in ITA No. 3007/Del/1997 relevant for the asst. yr. 1994-95.
2. The Revenue has raised two issues. Insofar as the first issue is concerned, learned Counsel for the respondent fairly concedes that a substantial question of law has been framed by this Court in several other cases and, therefore, he does not contest the first issue. On this basis we frame the following substantial question of law:
Whether the Tribunal was correct in law in deleting interest under Section 234B of the IT Act, 1961?
3. Insofar as the second issue is concerned, we are of the view that no substantial question of law arises and, therefore, we dismiss the appeal in that regard.
4. The assessed is engaged in the business of manufacturing pipes. It manufactures pipes used for oil and gas sector, re-rolling of SS strips and manufacturing of cold roll SS strips of thicker gauge from hot rolled SS strips. It has three running units.
The fourth unit that we are concerned with is somewhere close to Nasik.
The assessed, for the purposes of its fourth unit, requested the Maharashtra State Electricity Board (hereinafter referred to as MSEB) to set up a service line for supplying electricity. MSEB supplied the electricity lines (the ownership in the cables being with the MSEB) and the assessed spent an amount of about Rs. 52 lakhs towards service charges paid to MSEB. Since the assessed had not commenced production, being a new unit, it claimed the amount as a revenue expenditure. This was objected to by the AO who came to the conclusion that the benefit derived by the assessed was of an enduring nature and, therefore, was a capital expenditure.
Feeling aggrieved, the assessed preferred an appeal before the CIT(A) who, by his order dt. 27th Feb., 1997 rejected the appeal.
Feeling aggrieved, the assessed approached the Tribunal which decided in its favor and that is how the matter is before us under Section 260A of the IT Act, 1961 (hereinafter referred to as the Act).
5. The contention of learned Counsel for the Revenue was that the laying of the service line was a benefit of an enduring nature for the assessed and, therefore, it was in the nature of a capital expenditure and the view taken by the AO was correct in law. Secondly, it was submitted that the assessed had not commenced his business and, therefore, the expenditure incurred was of a capital nature.
6. Our attention has been drawn to Hindustan Times Ltd. v. CIT , which is a decision rendered by a Division Bench of this Court. In that case, the assessed was getting supplies of direct current from the Municipal Committee to work its machines in its business premises. The cables were replaced at the instance of the assessed by alternating current and for this purpose, the assessed had paid some amount to the Municipal Committee being the cost of laying cables which belonged to the Municipal Committee. The Tribunal held that the expenditure incurred was of a capital nature but this view was upset by this Court. The Division Bench was of the view that the word “enduring” has a special significance. It adopted the view expressed by the House of Lords in IRC v. Canon Co. (1968) 45 Tax Cases 18 (HL), at p. 74 that what matters is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be capital in nature. “If the advantage consists merely in facilitating the assessed’s trading operations or enabling the management and conduct of the assessed’s business to be carried on more efficiently and profitably, leaving the fixed capital untouched, the expenditure will be on revenue account even though the advantage may endure for an indefinite future.”
7. Insofar as the present case is concerned, we find that the decision of this Court is clearly applicable to the facts of the case. The admitted position is that the service lines did not belong to the assessed but belonged to MSEB and were laid so as to enable the assessed to conduct its business more efficiently, which may perhaps be an enduring advantage, but intended to enable the assessed to carry on its business more efficiently and profitably leaving the fixed capital untouched.
8. Reference has also been made to CIT v. Excel Industries Ltd. , wherein the same principle was adopted and it was held that though the service lines were laid for the benefit of the assessed being the property of the Gujarat Electricity Board, that did not mean that the assessed had acquired any capital asset or an enduring benefit or advantage and the object of making the payment was purely one of commercial expediency. On this basis, it was held that the payment made to the Gujarat Electricity Board towards the cost of laying the overhead service lines constituted revenue expenditure and was an allowable deduction.
9. Our attention has also been drawn to CIT v. Madras Auto Service (P) Ltd. , wherein the Supreme Court summarized the law as laid down in Assam Bengal Cement Co. Ltd. v. CIT in the following words:
1. Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment.
2. Expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade…. If what is got rid of by a lump sum payment is an annual business expense chargeable against revenue, the lump sum payment should equally be regarded as a business expense, but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether.
3. Whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business. Again, it is to be seen whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital.”
The decision of the Supreme Court proceeded on the basis, as has been recorded in the judgment, that the expenditure of demolishing and reconstructing the building was incurred by the assessed itself but the asset in question did not belong to the assessed. On that basis, it was held that the only advantage which the assessed derived by spending the money was that it got a lease of the new building and from the business point of view, it also got a benefit of reduced rent. It was, therefore, held that the High Court had rightly considered this as obtaining a business advantage and, therefore, the expenditure would be a revenue expenditure.
10. Insofar as the case that we are dealing with is concerned, it is correct that the assessed had spent an amount of about Rs. 52 lakhs towards laying of service lines but the cables did not belong to the assessed but belonged to MSEB and, therefore, applying the ratio laid down by the Supreme Court, the benefit that the assessed got was of a commercial nature and a business advantage. Consequently, the expenditure incurred by the assessed should be treated as a revenue expenditure.
11. The issue whether the assessed started a new business or not should not detain us for long because the admitted position is that the assessed is one entity for the purposes of taxation although it may have more than one unit. In the instant case, the assessed has four units. In Veecumsees v. CIT , the assessed ran two businesses, that is, one being a jewellery business and the second being exhibition of cinematographic films. The Supreme Court held that even though the two ventures were distinct from each other, but insofar as the assessed was concerned, there was only one business being carried out by the assessed in the sense that it was a composite business of the assessed that of running a jewellery business and that of running a business of exhibition of cinematographic films.
12. Similarly, in CIT v. Modi Industries Ltd. (No. 3) , the assessed was carrying on the manufacture of various commodities like sugar, vanaspati, soaps, paints and varnish, torch and lantern, etc. It started manufacturing a new commodity, that is, special alloy wire and billets. This was held by this Court to be an extension of the same business because there was a common fund utilized by the assessed and what was done by the assessed was only to start manufacturing a new item altogether. It was held to be an extension of the existing business and not the start of a new business.
13. Applying the ratio laid down by the Supreme Court as well as by this Court, we have no doubt that the fourth unit established by the assessed was merely an extension of its business.
14. For these reasons, we are of the view that the second issue raised by the Revenue does not raise any substantial question of law which would warrant our consideration.
15. Paper books be filed in respect of the first issue (the only substantial question of law) in accordance with the High Court Rules.