Tribunal allows appeal, approves Rs. 1,70,000 expenditure for feasibility report on power station.

The Tribunal allowed the appeal and deleted the disallowance of Rs. 1,70,000 claimed by a public limited company for fees paid for a feasibility report on installing a captive power station at its factory. The Tribunal held that the expenditure should be treated as revenue expenditure as it was incurred for uninterrupted power supply, saving losses, and did not result in the creation of an enduring asset due to the project being abandoned.

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Issues:
- Disallowance of Rs. 1,70,000 as proper revenue expenditure or capital expenditure.

Analysis:
The judgment concerns the disallowance of Rs. 1,70,000 claimed by a public limited company for fees paid for a feasibility report on installing a captive power station at its factory. The company contended that the expenditure was incidental to the business as it aimed to avoid losses due to erratic power supply. The CIT (Appeals) disallowed the claim, citing a judgment of the Allahabad High Court. The company appealed, citing judgments from the Calcutta High Court. The revenue argued that if the power station had been installed, it would have been a capital asset, making the feasibility report expenses capital expenditure. The Tribunal considered various judgments and held that the expenditure should be allowed as revenue expenditure. The Tribunal distinguished the Calcutta High Court judgments cited by the company, emphasizing that the expenditure did not bring any enduring asset as the proposal was dropped due to high costs. The Tribunal relied on the Supreme Court's judgment in Empire Jute Co. Ltd. v. CIT, stating that expenditure facilitating trading operations or improving business efficiency is revenue expenditure. The Tribunal concluded that the feasibility report expenditure was incurred for uninterrupted power supply, saving losses, and thus should be treated as revenue expenditure. The Tribunal allowed the appeal and deleted the disallowance.

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