Commissioner of Income Tax vs Madura Coats Ltd.

R. Jayasimha Babu, J.—The question is whether the expenditure incurred in shifting the offices from Madurai to Bangalore should be

regarded as capital or revenue. We are rather surprised that the Revenue should at all have taken the view that it amounts to capital expenditure. It

is obvious that the expenditure incurred was in relation to the continuing business of the company which was to be henceforth carried on so far as

the administrative control is concerned from Bangalore instead of Madurai. The fact that it was done after amalgamation cannot be regarded as

rendering it capital expenditure, as no enduring advantage can be said to have been received. Mere improvement in convenience, and increase in

efficiency does not mean a permanent advantage which has to be regarded as falling within the capital field.

We therefore, answer the question referred to us for the assessment year 1979-80, as to whether the Tribunal was right in holding that the sum

of Rs. 2,36,353 incurred by the assessee for shifting its administrative office from Madurai to Bangalore as a result of amalgamation of three

companies having a number of activities in various centres was allowable as a revenue expenditure in the computation of business income, in the

affirmative in favour of the assessee and against the Revenue.

The assessee shall be entitled to costs in a sum of Rs. 1,500.