TMI Blog2013 (9) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... rred is capital in nature – Decided in favor of Revenue. - Income Tax Appeal No.-203 of 2000 - - - Dated:- 3-9-2013 - Hon'ble Sunil Ambwani And Hon'ble Surya Prakash Kesarwani,JJ. For the Appellant : B. J. Agrawal, S. Chopra For the Respondent : Piyush Agarwal, R. R. Agarwal, R. S. Agarwal, Suyash Agarwal ORDER 1. We have heard Shri Shambhu Chopra for the revenue. Shri Rupesh Jain assisted by Shri R.S. Agrawal appears for the respondent-assessee. 2. This Income Tax Appeal filed under Section 260-A of the Income Tax Act arises from an order of Income Tax Appellate Tribunal "E" Bench, Calcutta dated 7.3.2000 in I.T.A. NO.2965 (Cal) of 1992 in respect of assessment year 1988-89. 3. The appeal has been preferred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It has relied upon judgment in CIT vs. Graphite India Ltd 221 ITR 420 in which the same view is taken by the jurisdictional High Court in so far as the question of project report is concerned. So far as the question of foreign expenses is concerned, the Tribunal has relied on the judgment of the ITAT, Calcutta Bench in I.T.A. No.920 (Cal) of 1992 for the assessment year 1977-78 in respect of the assessee. 6. Shri Shambhu Chopra submits that the assessee had proposed a new project, which could not take of and was abandoned. The expenditure incurred for preparation of the project report thus cannot be treated as revenue expenditure. Since it was a new project and would have given enduring advantage to the assessee, the expenditure was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining whether or not there is an expansion of an existing business. The nature of the business could be as distinct as a jewellery business and a business of cinematographic films; it could be as different as manufacture of metal alloys and manufacture of rubber products. What is of importance is that the control of both the ventures, the existing venture as well as the new venture, must be in the hands of one establishment or management or administration. The place of business of the existing business and the new business may not be in close proximity - it could be as far apart as Baroda and Bangalore. However, the funds utilised for the management of both the concerns must be common as reflected in the balance sheet of the company. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of a new business but expansion or extension of the business already being carried on by the assessee, expenses in connection with such expansion or extension of the business must be held to be deductible as revenue expenses. One has to consider the purposes of the expenditure and its object and effect. The finding of the Tribunal in this case is that there was an expansion or extension of the existing business of the assessee. The assessee is a manufacturer of cement. In addition to its factory in Andhra Pradesh, it proposed to start another cement factory in Rajasthan. There is one business. Although the factory at Rajasthan was not set up in the previous year relevant to the assessment year, this fact, in our view, is not a relevant fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said plant was to incorporate a separate technology to be obtained from Regional Research Laboratory, Hyderabad for which M/s Davy Powergas Services were requested to submit a detailed techno- economic-feasibility report. 11. The facts presented before A.O do not indicate that there were any plan of expansion or extension of the existing business of manufacturing chemicals. Even if the product sought to be manufactured was a chemical, it was a new project for which the project report was prepared and consultancy charges were charged by the consultancy firm. 12. So far as the foreign travels is concerned, the details given by the AO clearly demonstrate that the foreign travels were made by the officers of the assessee to Japan, U.S.A., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that the project was for the purpose of expansion and extension of existing business in the same line. The foreign trips also did not demonstrate that the discussions were held for setting up plant to expand or extend the existing manufacturing facility of chemicals. 14. In the result we find that the expenditure incurred of preparation of project report and expenses on foreign travel were of capital nature and was not of revenue nature and decide both questions no.1 and 3 in favour of revenue and against the assessee. 15. So far as the question no.2 is concerned, the matter was remanded and thus the question is not required to be decided. 16. The Income Tax Appeal is decided accordingly. - - TaxTMI - TMITax - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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