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TMI Blog1985 (8) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... reign tour of the managing director, Shri P. S. Murdia. The case of the assessee is that the tour was undertaken to the U.S.A. mainly on the following two grounds: " 1. To take direct dealership for the supply of steel to Hindustan Zinc Ltd., Udaipur, against their annual enquiry. There was an invitation from M/s. McLouth Steel Corporation, 300, South Livernois Avenue, Detroit, Michigan (USA). 2. To study the equipments such as Test Bench, Automiser Repair Bench and important tools required for the repairs and calibration of PT pumps of Commins Engines and to take practical training in the same. " Before the Income-tax Officer, the assessee submitted a detailed note on February 18, 1978. The Income-tax Officer after considering the evidence on record and contentions of the assessee opined that the tour was undertaken primarily in connection with the fabrication of the Test Bench. In these circumstances, the Income-tax Officer held, vide his order dated February 21, 1978, that such expenditure was of capital nature. He, therefore, disallowed it. An appeal was taken. The Appellate Assistant Commissioner on the basis of the material on record concurred with the finding of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner for holding that the expenditure incurred by the assessee on the foreign tour of the managing director was of capital nature. On the other hand, Mr. J. L. Daga, learned counsel for the assessee, supported the order of the Tribunal and while adopting the reasons given by it pressed for our consideration that the Tribunal was justified in allowing the amount of Rs. 11,039 spent on the foreign tour of the managing director as revenue expenditure. We have given our anxious consideration to the rival contentions of the learned counsel for the parties. Section 37 of the Act lays down that any expenditure (not being expenditure of the nature described in sections 30 to 36 and section 80VV and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head " Profits and gains of business or profession ". In other words, in section 37 of the Act, if any amount has been spent by the assessee wholly and exclusively for the purpose of carrying on of the business, it is an allowable deduction or an allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. The Tribunal has correctly stated that the assessee company by sending its managing director to the U.S.A. only wanted to augment its income and in such a case, the expenditure incurred by the assessee on the foreign tour of its managing director to the U.S.A. was of a revenue nature and was, thus, an allowable expenditure under section 37(1) of the Act. The aforesaid conclusion of ours stands fortified by the decisions mentioned hereunder. A Division Bench of the Gujarat High Court in CIT v. Alembic Glass Industries Ltd. [1969] 71 ITR 752, while considering the question of capital expenditure or business expenditure in connection with an expenditure on obtaining the benefit of technical assistance for running the assessee's business more efficiently so as to earn more profits with the improved knowledge and technique which trainees had acquired, held that a payment made with a view to obtain the benefit of technical assistance for running the assessee's business more efficiently so as to earn more profit and not by way of transfer of fruits of research, once and for all can be treated as an item of revenue expenditure. In Security Printers of India (P.) Ltd. v. CIT [1970] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred the expenses is to increase its own income by expanding the existing business or starting a new business for the managed company, then in doing so the assessee does not acquire any capital asset nor had any benefit of an enduring nature accrued to it. Reference was made therein to Tata Sons Ltd. v. CIT [1950] 18 ITR 460 (Bom), wherein it was observed that while deciding the question whether a particular deduction claimed by the assessee company as a deduction is an expenditure laid out or expended wholly and exclusively for the purpose of its business, one has not to take an abstract or academic view of what is proper expenditure laid oat or expended wholly and exclusively for the purpose of one's business but one has got to take into consideration questions of commercial expediency and the principle of ordinary commercial trading and the main consideration that has got to weigh with the court is whether the expenditure was a part of the process of profit-making and further that if the expenditure helps or assists the assessee in making or increasing the profits, then undoubtedly that expenditure would be expended wholly and exclusively for the purpose of business. In ClT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also of no avail to the learned counsel for the Revenue. So far as Hyderabad Allwyn Metal Works Ltd. v. CIT [1975] 98 ITR 555 (AP) is concerned, the assessee in that case was manufacturing refrigerators, steel furniture and building bus bodies. The expenditure which was claimed to be revenue expenditure was incurred in connection with one of its directors going on a tour to Japan because the assessee intended to manufacture scooters, motor-cycles, light and heavy three-wheelers. The court was of the view that if it is an expenditure incurred in connection with the business already carried on, it can be construed to be revenue expenditure as it is intended to bring in more profits, but if it is a new venture that they were seeking to start, even though it may not have ended successfully at that stage, it is for the initiation of a new line of business, and when the business is started, would be of enduring benefit to the assessee. It is, therefore, in the nature of capital expenditure and not revenue expenditure. Having read the decision of the Andhra Pradesh High Court in Hyderabad Allwyn Metal Works Ltd.'s case [1975] 98 ITR 555, we have not been able to persuade ourselves to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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