Ramaswami, C.J:— In this case the assessee is a public limited company doing the business of manufacturing sugar. The factory in which the assessee manufactured sugar from sugarcane was at first situated at Sitalpur in the district of Saran. But the place was found to be disadvantageous for the manufacture of sugar. It suffered from inundation by floods. It was also found that good quality sugarcane was not available in sufficient quantity at Sitalpur. As a result of these disadvantages the factory suffered loss. In order to improve the business the assessee shifted the factory from Sitalpur in Saran district to Garaul in Muzaffarpur district. The total expenditure which the assessee Incurred in the process of dismantling the machinery and in erecting the same at Garaul amounted to a sum of Rs. 3,19,766. The details of expenditure are as follows:

Rs. 1. Dismantling and building machinery .. 61,632 2. Transport, including railway freight .. 10,906 3. Cost of refitting machine at Garaul .. 2,17,847 4. Transporting charges of machine-set .. 17,599 5. Miscellaneous, including traffic .. 11,782 Total .. 3,19,766

2. For the assessment year 1952-53 the assessee claimed the amount of Rs. 3,19,766 as expenditure wholly and exclusively laid out for the purpose of the business and as a permissible deduction under section 10(2)(xv) of the Income-tax Act. The assessee claimed in the alternative that, if the expenditure was considered to be a capital expenditure, the assessee should be given depreciation under section 10(2)(vi) of the Income-tax Act. The Income-tax Officer rejected the claim of the assessee and held that the amount of Rs. 3,19,766 was capital expenditure and cannot be deducted from the profits of the assessee. As regards the claim for depreciation, the Income-tax Officer held that there was no addition to the capital value of the machinery and, therefore, no depreciation could be given. The assessee took the matter in appeal before the Appellate Assistant Commissioner, who affirmed the order of the Income-tax Officer and dismissed the appeal. The assessee again presented an appeal before the Income-tax Appellate Tribunal. This appeal was also dismissed. As required by the assessee the Income-tax Appellate Tribunal has submitted the following questions of law to the High Court under section 66(1) of the Income-tax Act:

“1. Whether the expenditure of Rs. 3,19,766 incurred by the assessee in dismantling and shifting the factory from Sitalpur and erecting the factory and fitting the machinery at Garaul was expenditure of a capital nature and not revenue expenditure within the meaning of section 10(2)(xv) of the Income-tax Act?

2. Whether the assessee was entitled to claim depreciation on the said expenditure of Rs. 3,19,766?”

3. With regard to the first question learned counsel on behalf of the assessee put forward the argument that by shifting the machinery from Sitalpur to Garaul there was no permanent addition to the asset of the business. It was submitted that there was no acquisition or improvement of the capital asset of the company and so the expenditure iucurred should be properly treated as revenue expenditure and not as capital expenditure. I am unable to accept the argument addressed on behalf of the assessee as correct. In my opinion, the assessee procured two enduring advantages by shifting the factory from Sitalpur in Saran district to Garaul in Muzaffarpur district. In the first place, the assessee obtained immunity from the ravages of floods and, secondly, there was the permanent advantage of obtaining sufficient quantity of good sugarcane for the manufacture of sugar. Each of these considerations is, in my opinion, sufficient by itself to constitute the expenditure in question a capital expenditure and not a revenue expenditure. The legal touchstone to be applied to a case of this description is furnished by Viscount Cave in his classical judgment in Atherton v. British Insulated and Helsby Cables Ltd. 1925 10 Tax Cas. 155.. The test to be applied is was the expenditure 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 the trade? At page 192 of the report Viscount Cave has observed as follows in the course of his speech:

“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 there 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. For this view there is already considerable authority. Thus, moneys expended by a brewing firm with a view to the acquisition of new licensed premises (Southwell v. Savill Brothers 1901 4 Tax Cas. 430.); fitting expenses incurred in transferring a manufacturing business to new premises (Granite Supply Association v. Kitton 1905 5 Tax Cas. 168.); costs incurred in promoting a Bill which was dropped on the desired facilities being obtained by agreement (A.G Moore and Co. v. Hare 4); and expenditure incurred by a shipbuilding firm in deepening a channel and creating a deep water berth (not on their own property) to enable vessels constructed by them to put out to sea (Ounsworth v. Vickers 1915 6 Tax Cas. 671.), have been held to be in the nature of capital expenditure and not to be deductible under the Income Tax Acts; and Rowntree and Co. v. Curtis 1924 8 Tax Cas. 678. is to the same effect. I think that the principle to be deduced from this series of authorities rests on sound foundations and may properly be adopted by this House.”

4. It should be noticed that in the above passage Viscount Cave has expressly approved the decision of the Court of Exchequer (Scotland) in Granite Supply Association v. Kitton. In that case the assessee was a company established for the buying and selling of granite and had removed its business to larger premises and defrayed the whole cost of removal out of revenue. In calculating their profits for assessment under Schedule D, the assessee claimed a deduction for the expenses of carting granite from the old yard to the new, and of taking down and re-erecting two cranes. It was held by the Court of Exchequer of Scotland that these items were not allowable deductions. I think the ratio of this decision fully applies to the present case where the material facts are of similar character.

5. The same view has been expressed by the House of Lords in Bean v. Doncaster Amalgamated Collieries Ltd. In that case a colliery company was required by a local Drainage Act to execute or pay for works necessary to obviate or remedy any loss of efficiency in a drainage system due to subsidence caused by the company's workings. At a certain stage the company prepared a scheme for remedial work which involved considerable expenditure for its implementation. Before this could be worked out in detail, the Drainage Board had put forward a general drainage improvement scheme for the District, the effect of which was to eliminate the necessity for the remedial works contemplated by the company, and proposed that the company should bear a proportion of the cost approximately equivalent to the cost of the works it would have carried out independently. After negotiation the company agreed, by an agreement dated the 28th September, 1939, to pay the Drainage Board a certain sum towards the cost of the general scheme by sixty half-yearly instalments. It was contended by the company before the General Commissioners that the payments made were in respect of its statutory obligations, that no capital asset had been acquired and that the payments were admissible deductions in computing its profits for income tax purposes. The Crown contended, on the contrary, that the payments were not made in discharge of the company's statutory obligations but were contributions towards a general scheme of drainage improvement and resulted in the acquisition of a capital asset. The General Commissioners decided in favour of the company and held that the payments may be deducted. It was, however, held by the House of Lords that the payments to the Drainage Board were capital payments and accordingly, not admissible deductions in computing the company's profits for income tax purposes. At page 312 Viscount Simon stated as follows:

“The same conclusion may be reached if the payments made are not regarded as substituted for the discharge of obligations under the Act of 1929, but rather as sums paid to secure ‘an enduring advantage’ within the proper application of Lord Cave's phrase in Atherton v. British Insulated and Helsby Cables Ltd. ‘The result of the transaction’ said Uthwatt, J., in the Court of Appeal, ‘clearly was that the value of the particular coal measures—a capital asset remaining unchanged in character—was increased both for use and exchange.’ There was, therefore, as the result of the transaction, brought into existence, not indeed an asset, but ‘an advantage for the enduring benefit of’ the trade of the company.”

6. It is true that the border line between revenue and capital expenditure is sometimes difficult to draw. It is not possible to lay down any absolute tests for demarcating the boundary between the two categories of expenditure. Even Lord Cave's helpful phrase, “an advantage for the enduring benefit of the trade”, applied by him in Atherton's case, has been treated there by him not as an exhaustive definition but as a proper and useful guide. Another such useful guide is the statement of Lord Dunedin, Lord President, in Vallambrosa Rubber Co. Ltd. v. Farmer, that “capital expenditure is a thing that is going to be spent once and for all.” But these tests are merely useful guides and are not absolutely final or determinative. There is of course a marked distinction in Jaw between an item of capital expenditure and an item of revenue expenditure but the line may be difficult to draw in particular cases; between pure white on the one side and jet black on the other side, there is a penumbra of grey shading off gradually into black and white. As Mr. Justice Holmes used to say so often, it is the business of the court to decide in each particular case on which side of the line that case must be placed.

7. In the facts and circumstances of this case I am of opinion that the expenditure of Rs. 3,19,766 was made by the company for procuring an advantage for its “enduring benefit”, within the principle laid down by Viscount Cave in Atherton's case , and it was, therefore, a capital expenditure which cannot be deducted under the provisions of section 10(2)(xv) of the Income-tax Act.

8. An alternative argument was submitted on behalf of the assessee that, even if deduction cannot he allowed under section 10(2)(xv) of the Income-tax Act, the assessee could claim a deduction under section 10(1) of the Income-tax Act. It was contended that the categories of permissible expenditure enumerated in section 10(2) of the Income-tax Act were not exhaustive. In support of this argument reliance was placed on Badridas Daga v. Commissioner Of Income Tax. It was submitted on behalf of the assessee that, even though the expenditure was of a capital nature, it was permissible to deduct it under section 10(1) of the Income-tax Act. I am unable to accept this argument as correct. It is true that the categories of permissible expenditure enumerated in section 10(2) of the Income-tax Act are not exhaustive in nature. That is the view expressed by the Supreme Court in Badridas Daga v. Commissioner Of Income Tax. It was laid down by the Supreme Court in these two authorities that the expression “profits and gains” in section 10(1) of the Income-tax Act has to be understood in its commercial sense and there can be no computation of such profits and gains until the expenditure which is necessary for the purpose of earning the receipts is deducted therefrom. But these authorities do not suggest that even though the expenditure is of a capital nature, it was permissible to make deduction under section 10(1) of the Income-tax Act. I agree with learned counsel for the assessee that the categories of permissible deductions mentioned in section 10(2) of the Income-tax Act are not exhaustive. But even for a deduction to be made under section 10(1) of the Income-tax Act it is, in my opinion, necessary that the expenditure must not be a capital expenditure and must be stamped with a revenue character. It is manifest that the test laid down by Viscount Cave in Atherton's case should still be applied and the expenditure must be scrutinized from the standpoint whether it is revenue or capital disbursement. For the reasons I have already given I hold that the expenditure incurred by the assessee in the present case is capital expenditure and so it cannot be deducted also under section 10(1) of the Income-tax Act.

9. With regard to the second question, it was contended on behalf of the assessee that depreciation should be allowed under section 10(2)(vi) of the Income-tax Act. On this point the Income-tax Officer and the Appellate Assistant Commissioner took the view that depreciation cannot be allowed because there was no tangible asset created. Reference was made to rule 8 of the Income-tax Rules, which requires tangible assets before any claim for depreciation could be entertained. The Tribunal also has taken the view that there is no substance in the assessee's claim. In my opinion the assessee cannot claim depreciation because no tangible asset was created, though the assessee got an advantage of an enduring nature by shifting the factory to a new place. It was, however, an intangible asset and no depreciation can be allowed to the assessee under the Income-tax Act or the rules made under that Act.

10. Accordingly I hold that both the questions of law referred by the Income-tax Appellate Tribunal should be answered against the assessee and in favour of the Income-tax Department. The Income-tax Department is entitled to costs of this reference. Hearing fee Rs. 250.

11. Lastly, it was submitted on behalf of the assessee that in any event the assessee was entitled to deduct the cost of erection materials to the extent of Rs. 10,906 under section 10(2)(v) of the Income-tax Act. Learned counsel for the assessee referred in this connection to the order of the Income-tax Officer, on page four of the paper-book, where it is said that the amount of Rs. 3,19,766 includes a sum of Rs. 10,906 as “erection cost”. Learned counsel submitted that the amount of Rs. 10,906 was really the cost of the materials and this amount should be deducted under section 10(2)(v) of the Income-tax Act. It is, however, not possible to entertain this argument of the assessee at this stage. No such claim was made by the assessee with regard to Rs. 10,906 before the Income-tax Appellate Tribunal, nor was such a claim made by him in his application under section 66(1) of the Income-tax Act. In my opinion the question does not arise out of the order of the Tribunal and it is not open to the assessee to debate this question at this stage. I would, therefore, reject the argument of learned counsel for the assessee on this point.

Kanhaiya Singh, J.:— I agree.

12. Reference answered accordingly.