P L D 1967 Supreme Court 46 (PLP)

MUHAMMAD YAQUB ALI, J.‑The decision in this appeal by the Commissioner of Income‑tax turns on whether certain premium paid by Messrs Tangail General Trading and Transport Corporation Limited, assessee respondent, to the Postal Department under a mail carrying contract at the rate of Rs. 5,000 per month and in lieu whereof they were allowed by the R. T. A. concerned to run twenty trips per month extra between Mymensingh and Tangail for one month during the account year 1952‑53 and eleven months during 1953‑54 was capital expense in that it brought about a change in the structure of their business or was it an item of revenue expense incurred on the operation of the assessee's business within the scope of clause (xvi) section 10 (2) of the Income‑tax Act. Mr. Afzalul Haque who appeared for the Department urged that the premium paid by the respondent to the Postal Department was capital expense which changed the' existing structure of their business previously confined to running ten trips in a month between Mymensingh and Tangaii to running thirty trips in a month with consequential increase in earnings, In the opinion of learned counsel it was a case of acquiring the right to carry an business of twenty extra trips a month. He relied in this behalf on the case of Henrikven (Inspector of Taxes) v. Grafton Hotel, Ltd. (2 1 T R 10 (Supp.)). That was a case of monopoly value for a period of seven years as distinguished from annual licence on the basis that the thing that is paid for is of a permanent quality, although its performance being conditioned by the length of the term is short lived. The learned Judges of the Court of Appeal placed the payment in the same class as the payment of a premium on the grant of a lease which was admittedly not deductable though if the parties had chosen they might have suppressed the premium and made a corresponding increase in the rent which would be deductable. There was thus "no revenue quality in a payment made to acquire such an asset as a term of years". The distinction is brought out more clearly in the following observations appearing at page 22 of the Report: "The case stated does not give the reasons for the decision of the Commissioners. If they had found as a fact that the justices had on either of the last two applications decided that 190 a year was the amount to be paid for the licence to trade during that year, it seems to me that it would have been difficult for any Court to interfere with their decision. In the absence of any such finding, we must come to the conclusion that the justices did that which was their duty and fixed a capital sum as the value of the monopoly. If that be so, the company is not entitled to have the amount of an instalment of a capital sum allowed as, a deduction in calculating its yearly profits, any more than it would be if it had entered into a contract with the owners to rebuild or to make structural alterations (as distinct from repairs) which the licensing justices might require during the currency of the lease." The Commissioners bad found in favour of the assessee, but their decision was reversed by a learned Judge of the High Court. The decision in the case was based on a large number of decided cases in United Kingdom, such as, are quoted in the judgments delivered by Lord Greene M. R. and Du Parcq L. J. It is, however, unnecessary to advert to those cases or to cases decided in our own jurisdiction, for example, Messrs Assam Bengal Cement Co. Ltd. v. The Commissioner of Income‑tax, Dacca (P L D 1962 S C 295) because the legal position which emerges from the facts stated in the instant case is too plain for a detailed exami nation. The assessee held stage‑carriage permits under the Moton Vehicles Act for plying motor. buses on various routes including the route between Mymensingh and Tangail. The conditions which could be imposed on the permit at the time of grant by,, the Regional Transport Authority are specified in section 48 of the Act which do not appear to warrant the restriction that the vehicle will not undertake more than a specified number of trips in a month. The only condition which was relied upon by Mr. Afzalul Haque in this respect was the provision that the, R. T. A. may regulate the time‑table. "Time‑table" would in this context appear to mean times fixed by the clock and not by the days of the week. The capital lay out of the assessee's business therefore did not comprise of the expense incurred on the purchase of the motor bus and a limited number of trips which it could run in accordance with the conditions of the permit in a month. The restriction to run ten trips in a month on a particular route was an administrative measure which limited the operation of the respondent's business and did not in law form part of its structure. If the traffic increased on this route or the number of the buses plying on it decreased for one reason or other the number of trips for each bus would presumably have been correspondingly increase by the R. T. A., without alteration of the licence fee: This would not have therefore altered in any manner the structure of the respondent's business. It followed that the premium pair to the Postal Department by the respondent on annual basis was ` not the value of a durable asset, such as, premium paid for a term of lease or for acquisition of a monopoly. In this view the High Court was right in answering the reference in favour of the assessee and we hereby dismiss the appeal with costs. A. H. Appeal dismissed.