C.N. Ramachandran Nair, J.

This is an appeal filed by the Revenue under Section 260A of the Income Tax Act against the order of the Income Tax Appellated Tribunal rejecting departmental appeal. The question raised is whether the contribution of Rs. 25 lakhs paid by the assessee to the State irrigation Department being part of cost invurred for cement lining of a irrigation cannal serving sugarcance cultivators is allowable as revenue expenditure under Section 37(1) of the I.T.Act. We have heard senior counsel appearing for the respondent-assessee.

2. The Tribunal has extracted the minutes of the Board Meeting of the respondent-assessee which explains the nature of contribution made. It is clear from the minutes that the amount was paid at the suggestion of the Minister to the assessee to meet the cost of expenditure incurred by the irrigation Department for improving an irrigation canal which supplies water to an area under sugarcane cultivation. The total cost was stated to be Rs. 112 lakhs and the assessee’s contribution was Rs.25 lakhs. The canal until improvement under the scheme was earth canal and the purpose of cement lining was to prevent loss of water in transit