Foreign tour expense apportionment upheld where part related to existing business and part to hotel projects under construction.

Foreign tour expenditure incurred for directors was not wholly deductible as revenue outlay where the technical collaboration agreement was composite and related both to the existing hotel business and to hotel projects under construction. Expenditure linked to the running hotel business was revenue in nature, but the portion attributable to hotels under construction was capital in nature. On that basis, full allowance was denied and the apportionment made by the income-tax authorities was upheld, with the issue answered against the assessee and in favour of the Revenue.

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Issues: Whether the expenditure incurred on the foreign tour of two directors was wholly allowable as a revenue deduction, or whether it had to be apportioned between existing business and proposed hotel projects under construction.

Analysis: The technical collaboration agreement was composite and related both to the operation of the existing hotel business and to construction of future hotels. Expenditure referable to the existing hotel was revenue in nature, while expenditure attributable to hotels under construction was capital in nature. In these circumstances, complete allowance of the foreign tour expenditure as revenue outlay was not justified, and the allocation adopted by the income-tax authorities was upheld.

Conclusion: The expenditure could not be allowed in full as a revenue deduction; the apportionment was sustained and the question was answered in the negative, in favour of the Revenue.

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