TMI Blog1996 (5) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of deduction of Rs. 1,38,000 as revenue expenditure ? " The assessee is a company carrying on a business of manufacturing of petroleum coke. But for some reasons, the assessee-company found that the said calcination plant at Budge Budge was not going well since 1979, and the assessee-company explored the possibility of manufacturing of cement. For that purpose, the assessee-company entrusted the two companies, namely, J. C. B. Pvt. Ltd., and J. R. C. I. Ltd., to submit a feasibility report for converting the existing coke kiln to a cement plant without making any disturbances of the existing plant and for that purpose for obtaining the feasibility report the assessee-company defrayed expenses of Rs. 38,000 and Rs. 1,00,000 in to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue, and Dr. Saraf, learned counsel appearing on behalf of the assessee-company. Mr. Joshi submits that the cement plant is quite different from the existing coke plant and conversion of the existing plant to a cement plant is nothing but an establishment of a new plant and if it is a new plant, the amount of any expenditure to make such an establishment will be capital expenditure and not a revenue expenditure. Learned counsel further submits that it is not possible to convert the existing coke plant to a cement plant without making addition of new machinery. So for all practical purposes conversion would amount to a new establishment of a new plant. Besides, the conversion could not be materialised in view of the report, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by diversion of the business without doing much harm to the existing plant, in our opinion, it will be an existing plant with improvement. It cannot be said to be a new plant when some modification is made to the existing plant. The assessee's endeavour was to manufacture cement by using the same kiln and the assessee wanted to know whether it was possible and for that purpose the aforesaid two companies had been appointed, though the feasibility report said that it was not possible. In our opinion, the assessee was to make improvement by converting the existing plant to a cement plant with little modification. Most of the machinery and superstructure was not to be disturbed as per the assessee-company. Dr. Saraf has drawn our attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sending the director abroad was held to be the revenue expenditure and thus deduction was allowed. In our opinion, in this case also the very idea of the assessee was to find out the feasibility for converting the existing plant to the cement plant without much disturbing the existing plant. Therefore, in our considered view, this expenditure incurred in obtaining the feasibility report will be a revenue expenditure and not a capital expenditure. In view of the above, we answer both the questions in the affirmative, in favour of the assessee and against the Revenue. A copy of this judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal. In the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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