Ramachandra Raju, J.
1. The question referred by the Income-tax Appellate Tribunal is :
' Whether, on the facts and in the circumstances of the case, the payment made to Mr. Jeen Roy, or any part of it, could be treated as capital in nature '
2. The assessee is a private limited company established for the production of wines. The assessee appointed one Mr. Jeen Roy of France, for rendering necessary help in setting up a modern and up to date plant for the manufacture of wines. The assessee and Mr. Roy entered into an agreement. Under the agreement, Mr. Roy was to supervise the erection of plant and render help in processing and blending of wines. As it would appear from the order of the AAC, the expenditure incurred on Mr. Roy by the assessee was Rs. ,20,478 up to April 3, 1968 (on which date the production of the assessee-company started) and, Rs. 77,446 subsequent to April 3, 1968. The question is whether these two amounts incurred by the assessee are to be treated as incurred towards capital expenditure, or towards revenue expenditure. The ITO and the AAC held that these two amounts would come as capital expenditure and not as revenue expenditure. On further appeal filed by the assessee, the Income-tax Appellate Tribunal allowed the appeal by holding that both the said items would come as revenue expenditure, and not as capital expenditure. Hence, this reference at the instance of the department.
3. It is the contention of the department, that, by means of; the expenditure incurred, the assessee got an advantage of an enduring nature and, therefore, it is a capital expenditure. The expenditure incurred by the assessee was on account of salary paid to Mr. Roy and the boarding and lodging expenses incurred on his account, as also the air fare incurred for his travel from Paris to Hyderabad and Hyderabad to Paris. There is absolutely no evidence to substantiate the plea of the department that the assessee had obtained any technical know-how from Mr. Roy which is of an enduring nature. In considering whether an expenditure is of revenue nature or of capital nature, the court has to consider the nature, the ordinary course of business, and the objects for which the expenditure has been incurred. So far as the amount which was incurred by the assessee on Mr. Roy, up to April 3, 1968 (on which date the production started), is con-concerned, there cannot be any difficulty. Obviously it is capital in nature as, till then, it cannot be said that there was any business transaction. But, as regards the amount incurred subsequent to April 3, 1968, on which date the production and business of the assessee started, there is no clear evidence that by incurring that expenditure on Mr. Roy, the assessee got an advantage of an enduring nature. It is, therefore, not possible to say that the said expenditure is not revenue in nature but capital in nature. If that is so, whatever the actual amounts spent on Mr. Roy during the relevant periods may be, we hold that the expenditure incurred by the assessee up to April 3, 1968, on Mr. Roy is capital in nature, and the expenditure incurred by it subsequent to April 3, 1968, is revenue in nature. We answer the reference accordingly. In the circumstances, the parties are directed to bear their own costs. Advocate's fee Rs. 250.