Actual cost and revenue deduction principles applied to allow foreign tour and football tournament expenses for tax purposes

Expenditure reasonably referable to the acquisition of machinery, plant and related assets was treated as part of their actual cost for depreciation and development rebate purposes, and the foreign tour expenses of company officers were included on that basis. Expenditure incurred in organising football tournaments was also treated as a revenue deduction and not as capital outlay. The reference was answered in favour of the assessee on both questions, with each claim accepted under the income-tax law.

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Issues: (i) Whether the expenditure incurred on foreign tours of company officers was includible in the actual cost of machinery, plant and related assets for the purposes of depreciation and development rebate; (ii) whether the expenditure incurred in organising football tournaments was allowable as a revenue deduction.

Issue (i): Whether the expenditure incurred on foreign tours of company officers was includible in the actual cost of machinery, plant and related assets for the purposes of depreciation and development rebate.

Analysis: The questions were treated as covered by the decision in the connected reference. On that footing, the expenditure reasonably referable to acquisition of the assets was regarded as part of their actual cost for the purposes of depreciation and development rebate.

Conclusion: The question was answered in the affirmative, in favour of the assessee.

Issue (ii): Whether the expenditure incurred in organising football tournaments was allowable as a revenue deduction.

Analysis: The expenditure on the football tournament was held to be a permissible deduction under the revenue head and was not disallowed as capital in nature.

Conclusion: The question was answered in the affirmative, in favour of the assessee.

Final Conclusion: The reference was answered by accepting the assessee's claims on all referred questions, with the parties left to bear their own costs.

Ratio Decidendi: Expenditure that is reasonably referable to the actual cost of assets may be included for depreciation and development rebate, and business expenditure of a revenue character is deductible under the income-tax law.

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