TMI Blog1986 (1) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... g and experience in running an aluminium factory. For this purpose the company entered into an agreement with Kaiser of U.S.A., the company which had given to the assessee the know-how, etc., for the factory. It also entered into an agreement with each of the 28 employees who were being sent for practical training to U.S.A. The agreement with the employees, inter alia, provided that after coming back from the United States, they shall work with the company at least for a period of 5 years at the settled remuneration of Rs. 570 per month. In order to effect this practical training, the assessee incurred an expenditure of Rs. 7,16,916 during the accounting period ending December 31, 1962. The assessee spread this expense over period of 5 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pense and, therefore, not allowable as a deduction under section 37 of the Income-tax Act, 1961 ? " In regard to the first question, the Tribunal held that the expenditure incurred by the assessee in prospecting and searching for bauxite mines was not incurred in connection with earning profit but was incurred only with a view to finding out the source from where the assessee could get raw material for its aluminium plant which was yet in the construction stage. Construction of the plant had been completed and its production actually started on May 14, 1962. It was not quite correct to say that this expenditure was incurred in its entirety during the construction stage or prior to the production stage. A part of it was undoubtedly spent s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction stage is not conclusive and decisive of the matter. The expenditure was incurred not for the purpose of bringing into existence an asset or advantage for the enduring benefit of the business. It was incurred for the purpose of creating an advantage for the more beneficial running of the business. The aim and object being integrally linked with the efficient running of the business with a view to produce better profits, its character would be revenue and not capital. From this point of view, it was not very material whether the expense was incurred at the pre-production or post-production stage. The Tribunal held that the portion of the expenditure incurred on the training of the employees after May 14, 1962, i.e., after the productio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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