1991 (11) TMI 35

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....ans to manufacture soda ash from industrial salts and, for that purpose, it obtained a techno-economic feasibility report from Industrial Consulting Bureau Private Limited, to whom it paid a fee of Rs. 15,000. It also consulted Dr. G. M. Pandya for the manufacture of soda ash and paid him a fee of Rs. 500. In the course of income-tax assessment for the assessment year 1973-74, the assessee claimed deduction of the aforesaid two amounts, namely, Rs. 15,000 and Rs. 500, as revenue expenditure. The Income-tax Officer prepared a draft assessment order and called upon the assessee, by his letter dated February 12, 1976, to show cause why the aforesaid two amounts should not be disallowed as capital expenditure. The assessee, by its reply dated M....

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.... the same business carried on by the assessee. This view taken by the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner. In the further appeal to the Income-tax Appellate Tribunal ("the Tribunal" for short), it was urged on behalf of the assessee that the assessee was already manufacturing industrial salts and it merely wanted to expand its activities by manufacturing soda ash in which industrial salts would be used. Therefore, according to the assessee, the establishment of a new unit would not constitute a new business as such. On the other hand, it was urged on behalf of the Revenue that it was unnecessary to consider whether the new soda ash plant contemplated was a new business or part of the old busine....

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....It must be expenditure in the nature of revenue expenditure and not in the nature of capital expenditure. (ii) It must be laid out or expended wholly and exclusively for the purpose of the business or profession. (iii) It must not be of the nature described in sections 30 to 36 and section 80VV of the Act (vide CIT v. Navsari Cotton and Silk Mills Ltd. [1982] 135 ITR 546 (Guj)). In the instant case, the finding of the Tribunal is that the assessee proposed to establish a new unit for the manufacture or production of soda ash and it was for the purpose of establishment of this new unit that it had incurred expenditure for obtaining a techno-economic feasibility report and also consulted Dr. Pandya . The Tribunal has found that the e....