TaxTMI 
TaxTMI 
1989 (1) TMI 18
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....alls for consideration in Income tax Reference No. 104 of 1983 relates to the assessment year 1967-68. At the instance of the Revenue, the following two questions of law have been referred in Income-tax References Nos. 42 to 47 of 1982 for the decision of this court : " 1. Whether, on the facts and in the circumstances of the case, the expenses incurred in investigation, research and feasibility study are revenue expenditure or capital expenditure ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right and reasonable in holding that the above expenditure is not a capital expenditure having any enduring benefit to the assessee ?" The respondent is a limited company. It is wholly owned by the Government of K....
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....e by making available the information to various entrepreneurs to start new industries. The company is authorised to carry on all kinds of exploration business. It is also authorised to search for projects, examine and explore mines and grounds supposed to contain minerals or precious stones. In order to enable new entrepreneurs to start industries or persuade them to undertake prospective industries, feasibility reports are essential. The expenses incurred on investigation, research and feasibility studies in respect of those industries which materialise are collected from the entrepreneurs and treated as profits of the years in which they are received. During the relevant assessment years, the respondent/assessee claimed deduction of the ....
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....erialised and included the same as their income in the year of receipt. The Appellate Tribunal also found that the income of the assessee being the interest, guarantee commission and dividends derived from industries started by entrepreneurs with the information made available to them by the assessee, the expenses on investigation, research and feasibility report are incurred with the object of creating the possibilities of enlargement of its income. On these premises, it was held that the expenditure incurred, on the above count, is a revenue expenditure laid out wholly and exclusively for the purpose of the business of the assessee and so admissible as deduction under section 37(1) of the Income-tax Act in computing the income under "prof....
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....ssible for the assessee to carry on the business and that the expenses incurred on this count under investigation, research and feasibility study are incurred with the object of creating the possibilities of enlargement of its income, are accepted by both the parties. In the light of the above findings, the answer to the questions referred to us are obvious. The expenses incurred under investigation, research and feasibility studies can only be business expenditure or revenue expenditure. They are not capital expenditure. As to whether, in a particular case, an expenditure incurred by the assessee for the purpose of the business is really a business expenditure or a capital expenditure is a mixed question of fact and law. The ultimate conc....
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....nue and in favour of the assessee. Income-tax References Nos. 42 to 47 of 1982 are disposed of with the above answers. We now come to Income-tax Reference No. 104 of 1983. Herein, at the instance of the Revenue, the following question has been referred for the decision of this court : "Whether, on the facts and in the circumstances of the case, the amount of Rs. 26,507 paid by the assessee to the Labour and Industrial Bureau is an allowable deduction ?" The matter relates to the assessment year 1967-68. The Appellate Tribunal, by order dated December 14, 1982, held that the amount of Rs. 26,507 is an allowable deduction. In rendering the said decision, the Appellate Tribunal followed its earlier decision dated February 12, 1981 in I. T.....