Feasibility expenses for a proposed new hotel business were not deductible against the existing travel agency business.

Expenditure incurred to examine the feasibility of entering hoteliering was treated as relating to a proposed new line of business, not to the carrying on of the existing travel agency business. Because hoteliering was a distinct activity on the facts stated, the feasibility outlay was not regarded as a business expense of the existing undertaking. The result was that the expenditure was held not allowable as a deduction against the assessee's current business income.

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Issues: Whether expenditure incurred on exploring the feasibility of setting up a hotel in Goa was an admissible deduction in the assessee's travel agency business.

Analysis: The expenditure was incurred for examining the viability of a new line of business, namely hoteliering, and not for the carrying on of the assessee's existing travel agency business. On the facts stated, hoteliering was a distinct business activity and the feasibility expenses related to a proposed new venture. Such expenditure could not be treated as a deductible business expense of the existing business.

Conclusion: The expenditure was not an allowable deduction and the answer was against the assessee and in favour of the Revenue.

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