A.D.V. Reddy, J.
1. This reference under Section 256(1) of the Income-tax Act of 1961, at the instance of the assessee, is to answer the question:
' Whether, on the facts and in the circumstances of the case, the expenditure was a capital expenditure or a revenue expenditure '
2. The expenditure referred to is a sum of Rs. 10,370 incurred in connection with one of the directors of the assessee-company, one G. D. Thirani, going on a tour to Japan with the object of negotiating a technical collaboration with M/s. Mitsubishi Shoji Kaisha Ltd., Tokyo, for the manufacture of scooters, light three-wheelers, heavy three-wheelers and motor cycles in India.
3. This expenditure was disallowed by the assessment officer as it has been of a capital nature, while the Appellate Assistant Commissioner on appeal held that it was deductible as it was revenue expenditure. The Appellate Tribunal on the other hand set aside the order of the Appellate Assistant Commissioner on appeal, and held that it was a capital expenditure. Hence, this reference.
4. The assessee has been manufacturing steel furniture, refrigerator, cabinets, 'All-cut' machines and also dealing in body-building of buses, etc. It is obvious that the expenditure now incurred in financing the tour of a director to Japan is not in connection with any of these businesses that the company is already carrying on and will not enter into the ascertainment of trading profits connected therewith but it is in connection with a new business that they are seeking to start with Japanese collaboration. It is not enough if the articles sought to be manufactured are similar to what are already being made in the sense that the firm is engaged in making goods out of steel, like refrigerator, cabinets, furniture.bus-body building, etc., and scooters, motor cycles, two and three-wheelers sought to be manufactured are also of steel. From such slender similarities it cannot be contended that the expenditure incurred is in connection with the expansion of the old business. If it is an expenditure incurred in connection with the business already carried on, it can be construed to be revenue expenditure as it is intended to bring in more profits. But, if it is a new venture that they were seeking to start, even though it may not have ended successfully at that stage, it is for the initiation of a new business and if they had started it it would have brought them benefit of an enduring nature. Even intangible initial outlay for the initiation of a new line of business, when the business is started, would be of enduring benefit to the assessee. It is, therefore, in the nature of capital expenditure and not revenue expenditure. We, therefore, in the view that what they sought to start was a new line of business, are of the opinion that the expenditure should be treated as capital expenditure and not revenue expenditure. Therefore, the deduction claimed by way of revenue expenditure cannot be allowed.
5. The reference is, therefore, answered in favour of the department. The assessee will bear the costs of the department. Advocate's fee, Rs. 250.