JUDGMENT This appeal by Revenue has arisen from decision of Income-tax Appellate Tribunal dated January 31, 2014. assessment year to which appeal relates is assessment year 2008-09. following questions of law have been formulated on behalf of Revenue: "(1) Whether Tribunal erred in law in deleting addition made on account of disallowance under section 14A of Incometax Act, 1961, read with rule 8D of Income-tax Rules, 1962, without appreciating language and provision of these sections, more so when expenditure was with respect to amount of interest expenses which was directly attributable to dividend income and which did not form part of total income? (2) Whether Tribunal erred in law in deleting addition made under section 36(1)(iii) ignoring fact that assessee was not charging interest on funds given as loans and advances to its sister concerns/subsidiaries when there was no specific business purpose for which these interest-free loans and advances were given? (3) Whether Tribunal erred in law and fact in deleting disallowance made by Assessing Officer on account of expenses incurred on transmission lines and contribution paid to Uttar Pradesh Power Corporation Ltd., without appreciating fact that these expenses were in nature of capital expenditure as they were for providing enduring benefits to assessee and would remain asset with assessee for indefinite period, hence, these were not deductible as per provisions of section 37(1) of Act? and (4) Whether Income-tax Appellate Tribunal erred in law and facts in allowing appeal with respect to computation of book profit under section 115JB of Act made by Assessing Officer as result of disallowance of interest and other expenses under section 14A of Act amounting to Rs. 66,79,000 in computation of book profit under section 115JB?" Re question No. 1 assessee is engaged in business, inter alia, of manufacture and sale of sugar, chemicals and power, and has distillery. return of income was initially processed under section 143(1). case was selected for scrutiny and resulted in order under section 143(3) of Assessing Officer dated December 27, 2010. Assessing Officer held that assessee had invested some of its funds in shares and dividend income which had been or was receivable on these investments did not form part of total income. Holding that certain expenses, such as on account of interest, were directly attributable to exempt income, Assessing Officer came to conclusion that such expenditure could not have been debited to profit and loss account in view of provisions of section 14A of Act. Assessing Officer made disallowance of Rs. 67.75 lakhs. In appeal, Commissioner (Appeals) deleted disallowance. Commissioner (Appeals) observed that certain shares of Kashipur Sugar Mills Ltd. were acquired in 1993 out of own funds of assessee. term loans on which interest was paid during year under consideration were received for specific purposes and cash credit account was used for working capital of business. Hence, it was held that disallowance under section 14A read with rule 8D of Rules could not be justified. In regard to investment which was made by assessee in Dhampur Distillery Pvt. Ltd., Commissioner (Appeals) held that there was no material which would establish that investment in shares was made out of interest bearing funds but that it was made from fresh share capital raised in period under consideration. finding of Commissioner (Appeals) can conveniently be extracted herein below: "The facts reveal that investment in Dhampur Distillery Pvt. Ltd. was not direct investment in form of liquid capital. assets including land, plant and machinery in business premises, etc., were acquired out of share capital raised during year. This fact was submitted by assessee along with evidence for source of investment made by its promoters before Assessing Officer. Therefore, finding of Assessing Officer that assessee invested certain amount of fund in shares of above company and any income received or receivable on these investments in form of dividend would not form part of total income and expenses in form of interest paid which were directly attributable to exempt income would not be eligible for deduction by virtue of section 14A of Act was factually not correct. Assessing Officer did not dispute source of investment by appellant in Dhampur Distillery Pvt. Ltd. appellant furnished evidence of raising fresh share capital during year for purpose of funding its ethanol unit. There is nothing on record which could establish that Assessing Officer gathered any evidence to substantiate his funding that appellant made investment in share capital of Dhampur Pvt. Ltd. out of interest bearing funds. As matter of fact, Assessing Officer applied provisions of section 14A without establishing requirement of law. provisions of section 14A(2) lay down that if Assessing Officer, having regard to accounts of assessee, is not satisfied with correctness of claim of assessee in respect of such expenditure in relation to income which does not form part of total income under this Act then he shall not allow deduction in respect of such expenditure incurred by assessee. source of investment in shares of Dhampur Distillery Pvt. Ltd. was clearly proved by assessee with explanation that it was invested from fresh share capital raised in period under consideration. This explanation of assessee was not disputed by Assessing Officer. In view of such facts and circumstances of case and position of law, denial of claim of deduction of expenses in form of interest on ground that they were attributable to exempt income, was not sustainable." In appeal, Tribunal has confirmed finding. Tribunal has observed that findings of Commissioner (Appeals) were not controverted on behalf of Revenue. Once it was duly established that no borrowed funds on which interest was paid had been invested for earning tax free income, no disallowance was permissible under section 14A. Tribunal has observed that under rule 8D(2)(ii), proportionate disallowance out of interest expenditure would be made in respect of interest expenditure which is not directly attributable to any particular income or receipt. Since entire interest expenditure, in present case, was attributable to business in which resultant income was assessable to tax, disallowance could not be made. Tribunal, consequently, deleted disallowance to extent of Rs. 66.79 lakhs out of total disallowance of Rs. 67.75 lakhs made by Assessing Officer under section 14A, sustaining balance of Rs. 0.96 lakhs on account of other expenditure to extent of 0.5 per cent. of average value of investment. order of Tribunal in regard to disallowance of Rs. 0.96 lakhs has been confirmed by this court by judgment dated September 1, 2014, in appeal (Dhampur Sugar Mills Ltd. v. CIT I. T. A. No. 131 of 2014 reported in [2015] 370 ITR 187 (All)) filed by assessee. We have no reason to differ with view which has been taken by Commissioner (Appeals) and which has now been affirmed by Tribunal. Under sub-section (1) of section 14A, no deduction can be allowed in respect of expenditure incurred by assessee in relation to income which does not form part of total income under Act. Sub-section (2) of section 14A enables Assessing Officer to determine amount of expenditure incurred in relation to such income which does not form part of total income under Act in accordance with method as prescribed under Rules, if Assessing Officer is not satisfied with correctness of claim of assessee. In present case, specific finding of Tribunal is that as regards disallowance of Rs. 67.75 lakhs which was made under section 14A by Assessing Officer, interest expenditure was attributable to business of which income was assessable to tax. Once this be position, view of Tribunal is consistent with provisions of section 14A and does not warrant any interference. Re question No. 2 In so far as this question is concerned, Tribunal has observed that in assessment years 2003-04, 2004-05 and 2005-06, same issue was before Tribunal in regard to disallowances made by Assessing Officer, of interest paid on borrowed funds. learned counsel appearing on behalf of assessee has placed on record judgment of Division Bench of this Court dated April 28, 2005, pertaining to assessee in CIT v. Dhampur Sugar Mills Ltd. Income Tax Reference No. 65 of 1996, which has been followed by another Division Bench in judgment dated December 16, 2013, in CIT v. Dhampur Sugar Mills Ltd. Income Tax Appeal No. 443 of 2011. judgment of Division Bench dated December 16, 2013, decides same issue in question No. 3 which has been answered as follows: "Question No. 3 Whether, on facts and in circumstances of case, Tribunal is justified in law in deleting disallowance made by Assessing Officer out of interest paid on borrowed capital? question is covered by Income Tax Reference No. 65 of 1996, CIT v. Dhampur Sugar Mills Ltd. decided on April 28, 2005, inter party. question is decided in favour of assessee and against Revenue." learned counsel appearing on behalf of Revenue has been unable to make any distinction that would warrant this court to take different view for year under consideration. Re question No. 3 principal bone of contention in appeal has been in relation to this issue. During year under consideration, assessee made payment of Rs. 8.48 crores to UPPCL towards construction of transmission line and other supporting work. assessee started generating power which had to be sold to UPPCL which was only customer. Agreements were entered into by assessee in similar terms on August 11, 2006, in relation to its three units which stipulated that entire expenditure for erection and installation of power transmission lines, towers and ancillaries from point of power generation to sub grid station would be incurred by assessee. UPPCL was to ensure quality control of equipment and material and work was to be carried out subject to its supervision and prior approval. agreement stipulated that entire power transmission line including towers, after erection, would be property of UPPCL which would provide for subsequent supervision and maintenance. assessee claimed entire expenditure as deduction under section 37(1). Assessing Officer held that, in present case, since work of transmission line and other ancillary work was carried out at business premises of assessee and it could not be used by any other person except assessee, it was absolutely clear that it would be property of assessee. On this ground, Assessing Officer made disallowance. Commissioner (Appeals), while deleting disallowance, observed as follows: "As discussed above, assessee has right to use power line for transmitting power generated in its factory to UPPCL but it would not enjoy ownership right on asset. ownership on asset would be with UPPCL in future. Thus, assessee acquired right to make use of asset for facilitating efficient conduct of its business and making it more profitable but without getting any advantage of enduring benefit to itself. He did not acquire any asset as envisaged in section 32 of Act. Therefore, expenditure incurred was of revenue nature...." view of Commissioner (Appeals) has been confirmed by Tribunal. Now, it is trite law as laid down by House of Lords in British Insulated and Helsby Cables Ltd v. Atherton [1925] 10 TC 155 (HL), that where expenditure is made not only once and for all but with view to bringing into existence asset or advantage for enduring benefit of trade, there is very good reason, in absence of special circumstances leading to opposite conclusion, to treat it as expenditure properly attributable not to revenue but to capital. In Empire Jute Co. Ltd v. CIT [1980] 124 ITR 1 (SC), Supreme Court held that true test is to consider nature of advantage in commercial sense and it is only where advantage is in capital field that expenditure would be disallowable (page 10): "There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none less, be on revenue account and test of enduring benefit may break down. It is not every advantage of enduring nature acquired by assessee that brings case within principle laid down in this test. What is material to consider is nature of advantage in commercial sense and it is only where advantage is in capital field that expenditure would be disallowable on application of this test. If advantage consists merely in facilitating assessee's trading operations or enabling management and conduct of assessee's business to be carried on more efficiently or more profitably while leaving fixed capital untouched, expenditure would be on revenue account, even though advantage may endure for indefinite future. test of enduring benefit is, therefore, not certain or conclusive test and it cannot be applied blindly and mechanically without regard to particular facts and circumstances of given case." In other words, if advantage which had accrued to assessee was to facilitate its trading operation or conduct of its business while leaving fixed capital untouched, expenditure would be on revenue account. same principle was laid down in decision in L. H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT [1980] 125 ITR 293 (SC), where before Supreme Court, there was case in which assessee had made contribution for meeting cost of construction of roads in area around its sugar factory under sugarcane development scheme. Supreme Court held as follows (page 298): "Now, it is clear on facts of present case that by spending amount of Rs. 50,000, assessee did not acquire any asset of enduring nature. roads which were constructed around factory with help of amount of Rs. 50,000 contributed by assessee belonged to Government of Uttar Pradesh and not to assessee. Moreover, it was only part of cost of construction of these roads that was contributed..." This decision was sought to be distinguished on behalf of Revenue by contending that in that case, only part of expenditure was contributed by assessee. We are unable to make any distinction based on that ground. true test is whether expenditure which has been incurred by assessee is for purpose of obtaining commercial advantage in capital field. In present case, it is clearly evident that power transmission lines which were laid by assessee were, upon erection, to constitute exclusive property of UPPCL. UPPCL was only consumer of electricity generated by assessee. assessee incurred expenditure to facilitate its own business. fixed capital of assessee was untouched and there was no capital accretion for assessee. This was exactly position before Supreme Court in L. H. Sugar Factory (supra). At this stage, it would be appropriate for court to also make reference to decision of Gujarat High Court in CIT v. Gujarat Mineral Development Corporation [1981] 132 ITR 377 (Guj) where assessee had laid out expenditure which was paid over to Gujarat Electricity Board for laying electric transmission lines and other ancillary facilities. Gujarat High Court took note of fact that transmission lines were to be property of Board and that assessee was not acquiring benefit of enduring nature. Applying test laid down by Supreme Court in Empire Jute Co. Ltd. (supra), Gujarat High Court held as follows (page 388): "Applying test laid down by Supreme Court in Empire Jute Co.'s case [1980] 124 ITR 1 (SC) to facts before us, it is clear that even if securing electric supply for period of seven years and longer, if agreement to supply is not terminated by Electricity Board, is benefit of enduring nature, if advantage consisted in facilitating assessee's trading operation and enabled assessee to conduct its business more efficiently and more profitably, then expenditure would still be on revenue account and not on capital account. peculiar feature in this case is that amount was spent for securing electric supply for Beneficiation Plant which was intended to enable assessee-company to carry on its business more efficiently and more profitably. It was business which was being previously carried on by assessee-company, namely of extracting fluorspar ore and selling it but in order to enable it to carry on that business more efficiently and more profitably, Beneficiation Plant was proposed to be installed and electric cables and supply lines were laid for that Beneficiation Plant as has been pointed out by Tribunal in its order. Once purpose of Beneficiation Plant is properly understood, it is obvious that advantage consisted merely in facilitating conduct of assessee's business and enabling assessee to carry on its business more efficiently or more profitably but capital, in sense of block capital was remaining untouched by expenditure of this amount of Rs. 20.46 lakhs Hence, in commercial sense, it was not advantage in capital field. Since it left fixed capital of assessee employed for main business of mining untouched and advantage was not in capital field, it could not be said to be expenditure of capital nature. As we have pointed out, while arriving at this conclusion, we are prepared to proceed on footing that advantage which assessee-company got was advantage of enduring nature, but applying test culled out by Supreme Court in Empire Jute Co.'s case [1980] 124 ITR 1 (SC), it is obvious that, in spite of presumption, it can be held on facts and circumstances of this case that expenditure was not of capital nature but was of revenue nature." decision of Gujarat High Court has been confirmed by Supreme Court in CIT v. Gujarat Mineral Development Corporation [2001] 249 ITR 787 (SC). similar principle has been laid down in Division Bench judgment of Madras High Court in CIT v. Coats Viyella India Ltd. [2002] 253 ITR 667 (Mad), where expenditure incurred by assessee by way of contribution to Government for building new bridge for providing access to factory of assessee was held to be on revenue account. Madras High Court held as follows (page 668): "Here, bridge is one, which is built across river. bridge is not owned by assessee. It is built by Government, and assessee does not acquire any rights of ownership over bridge in short-term or in long run by reason of contribution that it agreed to pay towards construction of bridge. So far as assessee is concerned, payment made is outgo in return for which it receives no addition to value of any of assets owned by it. bridge merely facilitates movement of workmen to gain access to assessee's factory and to return home, and also for movement of goods over bridge. facts of this case are such as to bring it within ratio of decision in case of L. H. Sugar Factory and Oil Mills (P.) Ltd. v. CIT [1980] 125 ITR 293 (SC). We, therefore, do not see any justification for calling for reference. Tribunal has rightly held that amount is to be treated as revenue expenditure. assessment year is 1991-92. petitions are dismissed." Similarly, in judgment of Rajasthan High Court in CIT v. Hindustan Zinc Ltd. [2009] 221 CTR (Raj) 637, it was held that erection of power lines by assessee was for facilitating its routine operations and for smooth functioning of its business. power lines remained property of Electricity Board. Rajasthan High Court came to conclusion that assessee had not acquired capital asset or any enduring benefit or advantage. Following principle of law which has been laid down by Supreme Court, we hold that expenditure which was incurred by assessee in laying of transmission lines was clearly on revenue account. Upon erection of transmission lines, they were to vest absolutely in UPPCL. expenditure which was incurred by assessee was for facilitating efficient conduct of its business since assessee had to supply electricity to its sole consumer UPPCL. This was not advantage of capital nature. Tribunal was, in these circumstances, correct in affirming view of Commissioner (Appeals). Re question No. 4 learned counsel appearing on behalf of Revenue fairly states that question No. 4 is merely consequential to first question. In view thereof, question has not been separately canvassed on behalf of Revenue. For these reasons, we hold that appeal will not given rise to any substantial question of law. appeal is, accordingly dismissed. There shall be no order as to costs. *** Additional Commissioner of Income-tax v. Dhampur Sugar Mill P. Ltd.