Expenditure incurred wholly and exclusively for the purpose of business and not of capital nature is allowable as revenue expenditure.

( 1 ) THE Tribunal has referred the following question of law to this court under Section 250 (1) of the Income-tax Act, 1961 :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the contribution to Molasses Storage Reserve Fund created under the U. P. Sheera Niyantran (Sansodhan) Adesh, 1974, as a revenue expenditure"

( 2 ) THE assessment year is 1980-81 for which the relevant accounting year ended on June 30, 1979. The facts found by the Tribunal are as under:"the assessee is a limited company. The assessment year involved is 1980-81. The business of the assessee-company is manufacture and sale of sugar. During the relevant accounting year, the assessee-company made a reserve of Rs. 47,084 under the head "molasses Storage Reserve Fund" and claimed the same as revenue expenditure. The Income-tax Officer did not entertain the claim of the assessee in that regard. "

( 3 ) ON appeal, the Commissioner of Income-tax (Appeals) held as under:"contribution to Molasses Storage Reserve Fund Rs. 47,084 There is no change in the facts and/or in law. Following my orders for the earlier assessment years, I direct the Income-tax Officer to allow similar relief in the assessment year under consideration also. "

( 4 ) THE Revenue went up to the Tribunal and the Tribunal held as under:"addition of Rs. 15,05,815 on account of alleged undervaluation of closing stock of sugar and of Rs. 47,054 on account of contribution to Molasses Storage Fund made by the Income-tax Officer while framing the assessment of the assessee-company for the assessment year 1980-81, has been deleted by the Commissioner of Income-tax (Appeals ). Hence, the Department is in appeal on both the scores. "

( 5 ) ON behalf of the respondent, Mr. Bajoria, learned advocate, has drawn our attention to the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964, which is an Act to provide in the public interest for the control of storage, gradation and price of molasses produced by sugar factories in Uttar Pradesh and the regulation of supply and distribution thereof.

( 6 ) CHAPTER III of the Act provides for various regulations relating to preservation of molasses, preservation against adulteration, removal of adulterated molasses, application for molasses and also sale and supply of molasses. Section 10 lays down the procedure for fixing the maximum price of molasses.

( 7 ) SECTION 10a provides as under :"10a. Funds for regulation of adequate storage facilities.--Every occupier of a sugar factory shall from the price prescribed in the Schedule referred to in Sub-section (1) of Section 10 for different grades of molasses, place in a separate fund the amount mentioned below or such other amount as the State Government may notify in that behalf for being utilised for provision and maintenance of adequate storage facilities in accordance with general or special orders issued from time to time by the Controller: grade I molasses Re. 0. 33 per 100 kilograms, grade II molasses Re. 0. 27 per 100 kilograms, grade III molasses Re. 0. 20 for every 40 kilrgrams of reducing sugar content therein. "

( 8 ) THERE is no finding by the Tribunal that the assessee has gained any advantage of enduring nature or acquired any capital asset as a result of the contribution made under compulsion of law. There cannot be any dispute that the expenditure was incurred wholly and exclusively for the purpose of business. The expenditure is not of capital nature in any way. The contribution made by the assessee and the other sugar mill owners may be utilised for creating storage facilities. But the result of the expenditure will not augment or improve the capital structure of the assessee-company in any way.

( 9 ) ON behalf of the Revenue, it was contended that the assessee has not made any contribution under this statute but has merely created a reserve in this account. This argument appears to be misconceived.

( 10 ) THE only question raised in