Judgment

Kania, C.J.I.- This is an appeal from a judgment of the High Court at Bombay and it arises out of the opinion expressed by the High Court in respect of a question submitted to it by the Income-tax Tribunal. The material facts are these. The respondent is a textile mills company carrying on business of manufacturing and selling textile goods. For the assessment years 1943-44 and 1944-45, covering the accounting period ending with the calendar years 1941, 1942 and 1943, the respondent claimed the expenditure incurred by it in registering for the first time its trade marks which were not in use prior to 25-9-1937 as revenue expenditure and an allowable deduction out of its income for the said periods, under S. 10(2) (xv) Income- tax Act. Following the decision of the Bombay High Court in the Commissioner of Income-tax. Bombay v. Century Spinning and weaving and Manufacturing Co. Ltd., (1947) 15 1. T R. 105 (Bom.) the Tribunal allowed the claim of the assessee. At the desire of the appellant the Tribunal submitted the following question for the opinion of the High Court : "Whether, on the facts of the case, the expenditure incurred by the assessee company in registering for the first time its trade marks which were not in use prior to 25-2-1937 is revenue expenditure and an allowable deduction under S. 10 (2) (xv), Income-tax Act?" The High Court, following its previous decision and finding that the fact of the trade marks having come into use after 25-9-1937 made no difference in the result, answered the question in the affirmative. The Commissioner of Income-tax, Bombay, has come on appeal to us.

2. It was argued on behalf of the appellant that the question whether a certain disbursement was of a capital or revenue nature, has to be decided according to the principle laid down in British Insulated and Helsby Cables Ltd. v. Atherton, 1926 A. C. 205. In that case the Company which carried on the business of manufacturers of insulated cables established a pension fund for its clerical and technical salaried staff. The fund was constituted by a trust deed which provided that members should contribute a percentage of their salaries to the land and that the company should contribute an amount equal to half the contributions of the members; and further that the company should contribute a sum of £ 31,784 to form the nucleus of the fund and to provide the amount necessary in order that past years of service of the then existing staff should rank for pension. That sum was arrived at by an actuarial calculation on the basis that the sum would ultimately be exhausted when the object for which it was paid was attained. The House of Lords held that this payment was in the nature of capital expenditure and was therefore not an admissible deduction. Although in the opinions expressed by the different members of the House of Lords the line of approach is not completely the same, the principle stated by Lord Cave in his speech has been accepted as a safe test to distinguish capital expenditure from revenue expenditure. It was recognised that a sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency, and in order indirectly to facilitate the carrying on of business, may yet be expended wholly and exclusively for the purposes of the trade. The Lord Chancellor observed that the question appeared to be a question of fact which was proper to be decided by the Commissioners upon the evidence brought before them in each case. The test that capital expenditure is a thing that is going to be spent once and for all and income expenditure is a thing that is going to recur every year was considered an useful element in arriving at the decision but was not certainly the decisive fact. The Lord Chancellor observed as follows : "But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an