K.L Roy, J.:— By this Reference under Section 66(1) of the Indian Income-tax Act, 1922, the Income-tax Appellate Tribunal has referred the following two questions to this Court, namely:—

“1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that extra shift depreciation allowance in the case of the assessee company must also be calculated with reference to the actual number of days on which the extra shifts had worked during the previous years to the assessment years 1958-1959 and 1959-602?

2. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the contribution of Rs. 19,220/- made by the assessee company towards road development was a capital expenditure and as such not admissible as an expenditure in computing its business income for the assessment year 1959-1960?”

2. The assessee is a company deriving income from certain sugar Mills in the Uttar Pradesh. The assessment years involved are 1958-1959 and 1959-1960, the corresponding previous years being the years ending on the 31st October, 1957 and the 31st October 1958 respectively. For both these years the assessee company claimed extra shift depreciation allowance equal to the normal depreciation in respect of the machinery and plant utilised in the sugar manufacturing business. There is no dispute that the assessee's factories are seasonal factories which worked only during that part of the year when sugar cane is available. The Income-tax Officer disallowed Rs. 12,259 in the first year and Rs. 15,898 in the second year out of this claim for extra shift allowance. The disallowance was upheld in appeal by the Appellate Assistant Commissioner and also on further appeal by the Tribunal. For the assessment year 1959-1960, the assessee claimed deduction of a sum of Rs. 19,220, being the amount contributed by the assessee company to a Co-operative Society for the purpose of development of the roads giving access to the factories of the assessee company as well as other sugar mills of the locality. The Tribunal has stated that as a result of a conference of the representatives of the State Government, the cane growers and the sugar factory owners held at Nainital sometime in June 1954, a co-operative Sodety was formed for the purpose of taking up development of roads in the area. These roads were constructed by the Co-operative Sodety partly on land owned by the assessee company but were meant for common use by the cane growers as well as for transport purposes of the factory owners.

3. The claim for deduction of this amount was rejected by the Income-tax Officer as he was of the opinion that the expenditure was a capital expenditure. But he allowed rebate under Section 15-B of the Act. The Appellate Assistant Commissioner, on appeal by the assessee, concurred with this view of the Income-tax Officer, On further appeal by the assessee to the Tribunal, the Tribunal was of the opinion that as the roads were of substantial construction and as, on the assessee's own admission, at least a part of such net-work of roads fell within the area comprising the assessee's mills, though the roads might not literally belong to the assessee, the contributions made towards the development of such roads were evidently of a capital nature. The Tribunal accordingly rejected the assessee's appeal.

4. At the instance of the assessee the questions mentioned above have been referred to this Court by the Tribunal.

5. Allowance for depredation for plant and machinery used for the purposes of the business is provided for in Section 10(2)(vi) of the Act. In respect of depreciation of such buildings, machinery, plant or furniture, being the property of the assessee, a sum equivalent to such percentage on the written down value thereof as may in any case or class of cases be prescribed is allowable as deduction. The conditions for the allowance and the percentages are prescribed in Rule 8 of the Indian Income-tax Rules, 1922 which is as follows:—

“8. The allowance under Section 10(2)(vi) of the Act in respect of depredation of buildings, machinery, plant or furniture shall be at percentages of the written down value or original cost, as the case may be, equal to one twelfth the number shown in the corresponding entry in the second column of the following statement:

Provided that if the buildings, machinery, plant or furniture have been used by the assessee in his business for not less than two months during the previous year, the percentage shall be increased proportionately according to the number of complete months of user by the assessee:

Provided further that in the case of a seasonal factory worked by the assessee during all the working seasons of the previous year the percentage shall be increased as if the buildings, machinery plant or furniture had been in use throughout the period the assessee was the owner thereof during the previous year.”

6. In Item III, which provides for the percentage of depreciation on machinery and plant, there is a note allowing depredation for double and triple shift working of the machinery and plant. The note provides that

“an extra allowance up to a maximum of 50 per cent of the normal allowance will be allowed by the Income-tax Officer where a concern claims such allowance on account of double shift working and satisfies the Income-tax Officer that the concern has actually worked double shift. An extra allowance up to a maximum of 100 per cent of the normal allowance instead of 50 per cent will be allowed in the assessments for five years commencing with the assessment for the year 1949-1950, where a concern proves that there has been triple shift working. The calculations of the extra allowances for double shift and for triple shift shall be made separately, ‘proportionate to the number of days during which there was only double shift working’ and during which there was triple shift working. For the purpose of granting this extra allowance the normal number of working days throughout the year will be taken as 300……. This applies to all concerns whether the general rate or any special rate applies to them, (underlining (herein ‘ ’) by us).

Explanation—For this purpose the normal allowance means the amount of depredation allowance for the year calculated in accordance with Rule 8, but excluding the extra depreciation allowance for multiple shift working or for new plant and machinery.”

7. Dr. Pal submitted that as the assessee's factory is a seasonal factory, the second proviso to Rule 8 would apply to the assessee's case and the assessee would be entitled to the normal depredation under Section 10(2)(vi) as if its machinery and plant had been in use throughout the previous year. So far there is no dispute. Dr. Pal further submitted that this principle which was applicable to seasonal factories should also be applied while computing the extra shift depreciation allowance and the maximum of 50 per cent of the normal depreciation should be allowed irrespective of the number of days in which the assessee's plant and machinery had been worked. We are unable to accept this contention of Dr. Pal. The note to Clause III of Rule 8 makes it quite clear that the maximum of the extra depreciation allowable for working double shift is 50 per cent while that of triple shift is 100 per cent of the normal depreciation calculated for the whole year. To this maximum is to be applied the proportion of the actual number of days for which the plant and machinery had been working extra shift to 300, 300 being taken as the normal number of working days in any year. It is made expressly clear that this principle would apply to all concerns Whether the general rate or any special rate applies to them. Therefore, there is no scope for the application of the principle of the second proviso to the main Rule 8 in calculating the allowances for extra shift depreciation in the case of seasonal factories. The authorities below and the Tribunal was right in disallowing the assessee's claim to the full amount of 50 per cent of the normal depreciation as extra shift allowance and the first question must be answered in the affirmative and against the assessee.

8. Dr. Pal submitted that the second question referred was covered by a very recent decision of this Court in Commissioner Of Income-Tax, West Bengal v. Hindusthan Motors Ltd.*, (1968) 68 ITR 301 (Cal). In that case the assessee. Which was manufacturing motor cars, had its factory near Uttarpara. There was an approach road connecting the factory to a main trunk road. The approach road was a public road belonging to the State Government but on account of lack of repairs for a long period the condition of the road had deteriorated and caused transportation difficulties to the assessee. The Government was not prepared to meet the expenses for the repairs of the road unless the assessee had contributed towards the costs of such repairs. The assessee paid an amount of Rs. 39,770/-, being the amount of such repairs, to the Government, as a consequence of which the road was repaired. This amount was claimed by the assessee as a deduction under Section 10(2)(xv). This Court observed;—

“The money was spent not so much to bring about any asset or advantage of enduring benefit to itself but to run the business efficiently and conveniently, that is to say by not being hampered by Blow and possibly dangerous locomotion of cars, produced in the factory, while moving on a disrepaired and ill-conditioned road. As a matter of business prudence, there was justification on the part of the assessee to expend this amount so as to induce the Government to repair the road, which it could not itself repair, not being the owner of the road…. If the road was the own road of the assessee, Mr. Gupta in his fairness did not dispute, the annual expenditure for its repair would have been revenue expenditure. We do not think that because the road was not its own the moneys spent for inducing the owner of the road to repair the same would turn out to be capital expenditure.”

9. Dr. Pal submitted that in this case also neither the road nor the land on which the road was constructed belonged to the assessee. He contended that in this case also the money was spent by the assessee for the “development” of the road as in the case of Hindusthan Motors. Dr. Pal referred to the decision of the Supreme Court in Bombay Steam Navigation Co.. (1953) Private Ltd. v. Commissioner of Income-tax, Bombay. (1965) 56 ITR 52 : (AIR 1965 SC 1201) and relied on the following observation at pages 59-60 (of ITR) : (at p. 1205 of AIR):—

“Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure.”

10. Dr. Pal submitted that the expenditure Incurred by the assessee in this case was an expenditure incurred to facilitate the carrying on of the assessee's business in that the supply of raw cane to the assessee's factory by the cane-growers an well as the delivery by the assessee of the finished product would be accelerated. The development of the road was so related to the carrying on and the conduct of the assessee's business that it might be regarded as an integral part of the profit-earning process and so the expenditure must be held to be revenue in nature. Dr. Pal pointed out that the above exposition of the law by the Supreme Court was reaffirmed in its decision in India Cement Ltd. v. Commissioner on Income-tax, Madras, (1966) 60 ITR 52 : (AIR 1966 SC 1053).

11. Mr. B.L Pal, learned Counsel for the Revenue, on the other hand submitted that as by this expenditure a system of roads came into existence, the assessee acquired an asset of enduring nature and as such the expenditure was a capital expenditure, Mr. Pal referred to the following observation of Lord Cave in Atherton's case which had been quoted With approval by the Supreme Court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, West Bengal, (1955) 27 ITR 34 : (AIR 1955 SC 89), namely:—

“But when an expenditure 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, I think that is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.”

12. Mr. Pal argued that in order to constitute a capital expenditure it is not necessary that a tangible material asset belonging to the assessee would come Into existence. So long as by the expenditure the assessee acquires an advantage which gives an enduring benefit to his business the expenditure would be within the above test for capital expenditure. It was further submitted that “enduring” does not mean for ever. The Supreme Court in Assam Bengal Cement Co.'s case (supra) observed that the expression “enduring benefit” had been judicially interpreted and after referring to several English and Australian decisions it held that the payment made in that case which freed the assessee from any competition for a certain number of years was an enduring benefit for the whole of the business of the assessee and came well within the test laid down by Viscount Cave, L.C A very recent decision of the House of Lords in Stock (Inspector of Taxes) v. Regent Oil Co. Ltd., 1966 AC 295 was also cited where Lord Reid rejected the contention that the word enduring had come to be interpreted so as to include any benefit which lasted for more than one year. He was of the opinion that as the quality of the asset is different in different cases, all relevant factors must be considered in each particular case to determine the nature of an “enduring benefit”. We are unable to accept the contention of Dr. Pal that as the roads and the land on which the roads were built did not belong to the assessee the case came within the ratio of the decision in Hindusthan Motors' case (supra). In Hindusthan Motors' case there was a put lie road already in existence which the assessee and the members of the general public were entitled to use as on right. Due to neglect and want of repairs the condition of the road deteriorated to such an extent that the assessee found if difficult to convey the cars manufactured by it to the main road. The assessee had to contribute an amount in order to induce the Government to repair the road and this Court held that by this expendture no asset or enduring benefit came Into existence and the expenditure was Incurred in the usual course of the assessee's business. In the case before us the sugar mills in a certain area were experiencing difficulty either in obtaining cane or despatching finished product. At a tripartite conference between the State Government, the owners of the sugar mills and the representatives of the cane growers, it was decided to form a co-operative society to whom contributions would be made by the sugar mills to develop and build roads which would be used both by the mills and by the cane growers and would facilitate the movement of both cane and sugar. Here the expenditure brought into existence a new asset, viz., the roads which facilitated the carrying on of the assessee's business. The use of the roads would be of “enduring benefit” to the assessee's business in the sense that the expression has been interpreted both by the Supreme Court and by the House of Lords and the assessee's expenditure would be a capital expenditure within the ratio of Lord Cave's definition in Atherton's case (supra). The authorities below and the Tribunal were, therefore, justified in rejecting the assessee's claim for deduction of the amount of Rs. 19,220 under Section 10(2)(xv) for the assessment year 1959-1960 and the second question referred must also be answered in the affirmative and against the assessee. The assessee is to pay the costs of this reference.

S.P Mitra, J.:— I agree.

BDB/D.V.C

13. Reference answered.