B.K. Mehta, J.
1. In all four questions have been referred to us : two at the instance of the Commissioner of Income-tax, Gujarat, and two at the instance of the assessee. The questions are as under :
By the Commissioner :
'(1) Whether, on the facts and in the circumstances of the case, the pontoons are covered by the expression 'ship' and, therefore, are entitled to development rebate at a higher rate of 40% instead of 25% on the basis of plant
(2) Whether, on the facts and in the circumstances of the case, the Tribunal has been right in law in allowing relief under section 80J of the Income-tax Act, 1961, in respect of Sikka 4th Expansion Unit, Bombay Cement Mills 1st Expansion, and Asbestos Products Division 1st Expansion Unit
By the assessee :
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the expenditure of Rs. 78,000 being fees paid to M/s. Indopal British Consulting Enterprises was not a revenue expenditure
(4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing relief under section 80M on the net amount of dividend and not on the gross amount of dividend ?'
2. The necessary relevant facts which give rise to these questions are as under :
The assessment year under reference is 1971-72. The assessee is a limited company, which carries on business, inter alia, of manufacturing and sale of cement. It has got its factory situated at village Seeka, near Jamnagar. The assessee claimed before the Income-tax Officer development rebate at the rate of 40% on pontoons, since in the submission of the assessee-company, the pontoons, for all intents and purposes, were ships. This claim did not find favour with the Income-tax Officer, who was of the opinion that pontoons could not be treated as ships, since they are incapable of movement by themselves because they have no engines. He, therefore, allowed development rebate at the rate of 25% instead of 40%, treating pontoons as 'plant'.
3. Another claim which has given rise to question No. 2 in the present case (at the instance of the Commissioner) relates to the relief under section 80J of the income-tax Act, 1961, in respect of Sikka Factory, 4th Expansion Unit, Bombay Cement Mills 1st Expansion and Asbestos Products Division 1st Expansion Unit. The Income-tax Officer held that these units were not qualified for the relief under section 80J, since they are merely the expansion of the existing units. The assessee, therefore, carried the matter in appeal before the Appellate Assistant Commissioner, who, following his decision in respect of earlier assessment years, held that these three expansion units are entitled to relief under section 80J of the Act. The Revenue carried the matter in appeal before the Appellate Tribunal from the order of the Appellate Assistant Commissioner allowing the relief in respect of the three units. It should be recalled at this stage that the Appellate Tribunal had, by its earlier order of August 16, 1965, in appeal preferred by the Department in respect of the allowance of the same reliefs for the assessment years 1964-65 to 1970-71, affirmed the view of the Appellate Assistant Commissioner that the assessee-company was entitled to the relief under section 80J in respect of Bombay Cement Mills First Expansion Unit, since the appeal which was preferred by the Department was by way of a test-case in respect o this unit only. This view of the Tribunal in respect of the assessment years 1964-65 to 1970-71 was confirmed by this court in CIT v. Shree Digvijay Cement Co. Ltd. : 144ITR532(Guj) . In that state of affairs, when the Department preferred the appeal in respect of all these three units for the assessment year with which we are concerned, namely, 1971-72, the Tribunal affirmed the view of the Appellate Assistant Commissioner that the assessee-company is entitled to the relief under section 80J of the Income-tax Act, 1961, in respect of all the three units on the concession of the parties that the earlier decision of the Tribunal holding that the assessee-company is entitled to section 80J relief in respect of Bombay Cement Mills First Expansion Unit would also govern the claim arising in respect of all the three units in assessment year 1971-72. It is in this fact situation that the Commissioner of Income-tax, Gujarat, sought reference of two questions and the questions set out above were referred to us for our opinion.
4. As regards the two questions referred to us at the instance of the assessee, a few relevant facts may be noticed again. A question arose in the course of the assessment of the year under reference in respect of admissibility of The expenses to the tune of Rs. 78,000 paid by the assessee company to M/s. Indopal Limited a consulting enterprise, for execution of industrial project;, for preparing feasibility report, for a shipyard, etc. The assessee claimed this as a revenue expense which claim did not find favour with the Income-tax Officer, who held that it was of a capital nature, inasmuch as it was incurred for the purpose of setting up of a shipyard project, which of course did not materialise and was not laid out wholly and exclusively for purposes of the business. The assessee, therefore, carried the matter in appeal before the Appellate Assistant Commissioner, where it was contended on behalf of the assessee-company that it owned and engaged a large fleet of crafts for the movement of raw materials such as sea-sand and also for loading of finished products into the steamers, and in order to Increase the manoeuvrability of the fleet, the consultancy firm was engaged for studying the feasibility of setting up of a shipyard and, therefore, it was laid out in the course of the business and should be allowed as revenue expenses The Appellate Assistant Commissioner accepted this contention and held that the impugned amount was allowable as revenue expenditure and, therefore, directed the Income-tax Officer to allow the same. The Department carried the matter in appeal before the Tribunal, which following the decision of the Supreme Court in Sitalpur Sugar Works Limited v. CIT : 49ITR160(SC) and the decision of the Delhi High Court in State Trading Corporation of India Ltd. v. CIT  94 ITR 496, held that since the impugned expenditure was directly linked with the construction of a ship and, it was incurred with a view to obtain an advantage of enduring nature and, therefore, the Income-tax Officer was right in disallowing it as revenue expenditure. The assessee has, therefore, sought the reference in respect of this claim, which has been granted as question No. 3 at the instance of the assessee.
5. The second question which has been referred to us at the instance of the assessee arose in the following circumstances :
Before the Income-tax Officer, the assessee claimed relief under section 80M of the Income-tax Act, 1961, in respect of its dividend income on gross basis, namely, Rs. 15,76,971, which claim did not end favour with the Income-tax Officer who granted the relief only on the basis of the net amount of Rs. 12,23,279. The assessee, therefore, carried the matter in appeal before the Appellate Assistant Commissioner, who accepted the appeal and directed grant of relief on gross basis. The Appellate Assistant Commissioner while allowing the appeal in respect of the assessment year 1971-72 followed his earlier decision in respect of the assessment years 1968-69 to 1970-71 in respect of similar claims under section 80M of the Act. The Department, therefore, carried the matter in appeal before the Tribunal, which following the decision of this court in Add. CIT v. Cloth Traders (P.) Ltd. : 97ITR140(Guj) , held that the assessee was entitled to the relief under section 80M on the basis of net dividend income, i.e., Rs. 12,23,279. It should be recalled that in an appeal preferred by the Department in respect of allowance of the claim by the Appellate Assistant Commissioner in respect of the assessment years 1968-69 to 1970-71, the Tribunal has allowed the appeal and directed that section 80M relief is allowance on net basis, with the result that the assessee has sought reference which was granted, the Reference No. being 160 of 1976, to this Hon'ble Court. That reference was not disposed of by this court at the time when the appeal of the Department was allowed in respect of the assessment year 1971-72, with which we are concerned in this reference. It is in this context, when the claim of the assessee was disallowed, that the assessee sought reference of the second question, which has been granted as question No. 4 and which has been set out above.
6. At the outset, we may say that question No. 2, which is at the instance of the Commissioner of Income-tax, Gujarat, and question No. 4, which is at the instance of the assessee, are admittedly covered by the decision of this court. Question No. 2 is covered by the decision of this court against the Revenue in ClT v. Shree Digvijay Cement Co. Ltd.  144 ITR 53. We have, therefore, to answer question No. 2 in the affirmative, i.e., in favour of the assessee and against the Revenue. Similarly, question No 4 is covered by the decision of this court in Shree Digvijay Cement Co. Ltd. v. CIT : 138ITR45(Guj) against the assessee and, there-fore, we have to answer question No. 4 in the affirmative, i.e., in favour of the Revenue and against the assessee. We answer question No. 2 and question No. 4 accordingly.
7. We are left with questions Nos. 1 and 3, which have been referred to us at the instance of the Commissioner of Income-tax, Gujarat, and the assessee, respectively. We will deal with these questions one after another.
8. The dispute raised by question No. 1 lies in a short compass. If the pontoons are covered by the expression 'ship', they would be entitled to development rebate at the rate of 40%. If they are not, they are entitled to development rebate of 25% on the basis of they being 'plant'. In other words, the question is whether a pontoon can be considered to be a ship in its ordinary meaning and not in the meaning given to it by the legislature for the different purposes under the Income-tax Act. The ordinary dictionary meaning of the term 'pontoon' is 'Flat-bottomed boat used as ferry-boat, etc.' (See The New Oxford Illustrated Dictionary, Volume 2, page 1310; Webster's New Twentieth Century Dictionary, unabridged, 2nd edition, page 1400). The dictionary meaning of the word 'ship' is 'Any large sea-going vessel, propelled by sails, steam, or other mechanical means' (See The New Oxford Illustrated Dictionary, Volume 2, page 1563). In Webster's New Twentieth Century Dictionary, unabridged, 2nd edition, at page 1675, the meaning given to the word 'ship' reads as under :
'Any vessel of considerable size navigating in deep water and not propelled by oars, paddles, - or the like I distinguished from boat...'
9. It is, therefore. difficult to consider pontoons as ships in its ordinary literal sense. We have, therefore, to consider as to whether the Tribunal was right in treating pontoons as ships for the purpose under the Income-tax Act, including that of development rebate.
10. The Appellate Assistant Commissioner accepted the submission of the assessee-company that pontoons should be treated for all intents and purposes under the Income-tax Act as ships. The Revenue was resisting this claim on the ground that the pontoons by themselves were motionless since they were not self-propelled. This counter-submission of the Revenue did not impress the Appellate Assistant Commissioner. While rejecting this counter-submission, he recorded his finding in the following terms :
'In the Income-tax Rules, depreciation has to be allowed on ships which are ocean ships or inland ships. In the category of inland ships as per the Income-tax Rules 4(b), item (iii) (sic) is described as 'Iron or steel flats for cargo'. It is evident from item (iii) that the flats for cargo are categorised under inland ships, pontoons in the case of the appellant company are used for transporting cargo and, in my opinion, the pontoons clearly fall within the category of ship.'
11. The Appellate Tribunal while agreeing with the view of the Appellate Assistant Commissioner referred to the classification under the head 'Ships' as set out in the rules governing depreciation. In this connection, the Tribunal referred to rule 5 of the Income-tax Rules, 1962, where ships have been classified into two broad categories, namely, (1) ocean-going ships, and (2) vessels ordinarily operating in inland waters. Now, this second category of vessels for inland navigation are further sub-divided into subcategories, namely, (1) speed boats, and (2) other vessels. The Tribunal referred to the dictionary meaning as given in Shorter Oxford English Dictonary, where the word 'pontoon' has been defined as 'a flat-bottomed boat used as a lighter ferry-boat or the like'. The Tribunal observed that pontoon being a flat-bottomed boat used as a lighter ferry boat, etc., operate in inland waters and, therefore, it is entitled to be included in the term 'ships'.
12. It is no doubt true that so far as the term 'ships' is concerned, there is no legislative dictionary in the Income-tax Act. It is also equally true that in its ordinary literal meaning, a pontoon cannot be considered as ship. But having regard to the legislative intent, as clearly manifested in the Income-tax Rules, 1962, since the Appellate Tribunal referred to the material part of the amended rule 5 of the said Rules, inserted by the Income-tax (Sixth Amendment) Rules, 1969, which came into force with effect from April 1, 1970, it is clear that the sub-category of other vessels takes in its sweep all the vessels including pontoons, which are being operated in inland waters. There is an inherent indication in the broad classification which fortifies our view. The broad classification is ocean-going ships and vessels operating in inland waters and the term 'vessels' means crafts or ships, and crafts are not necessarily self-propelled (See Shorter Oxford English Dictionary, page 2351). The Tribunal, therefore, was justified in treating pontoons as ships for purposes of deciding as to what should be the appropriate rate of development rebate. We should remind ourselves that the Appellate Assistant Commissioner has referred to these very rules before they were amended by the Income-tax (Sixth Amendment) Rules 1969. At that time, rule 4(b)(iii) (sic) included in the category of inland ships 'Iron or steel flats for cargo' which, in the opinion of the Appellate Assistant Commissioner, did not warrant the view of the Department that pontoons in order to be within the meaning of the term 'ships' should be self-propelled. In other words, the legislative intent appears to be that such boats, whether they are flat-bottomed or otherwise, if they are capable of floating and used in inland navigation, including in the use for transport of cargo inside the harbour, as contra-distinguished from ocean-going ships, partake of the character of ships. The concept which was sought to be introduced by the Income-tax Officer that they should be self-propelled is not warranted from the scheme of the classification adopted by the Legislature in the Income-tax Rules. We, therefore, answer question No. 1 referred to us at the instance of the Commissioner, that pontoons are covered by the expression 'ships' and therefore, they are entitled to development rebate at the rate of 40%. We answer the question accordingly in favour of the assessee and against the Revenue.
13. That takes us to the consideration of question No. 3 which is at the instance of the assessee. We are again faced with the same vexed question which is, as observed by Bhagwati J., in Empire Jute Co. Ltd. v. CIT : 124ITR1(SC) present 'a difficult problem and continually baffled the courts, because it has not been possible, despite occasional judicial valour, to formulate a test for distinguishing between capital and revenue expenditure which will provide an infallible answer in all situations.' In spite of it being often said that the line of demarcation has been found to be very thin and each case depends on its own facts and circumstances, it is desirable in order to avoid common pitfalls to remind ourselves of what should be the approach in resolving this question. In Abdul Kayoom v. CIT : 44ITR689(SC) , Hidayatullah J., speaking for the majority court, observed as under (p.703) :
'...... none of the tests is either exhaustive or universal. Each case depends on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo in The Nature of the Judicial Process, p.20) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, its broad resemblance to another case is not at all decisive. What is decisive is the nature of the business, the nature of the expenditure, the nature of the right acquired, and their relation inter se, and this is the only key to resolve the issue in the light of the general principles, which are followed in such cases.'
14. Bearing in mind this warning, it would still be advisable to refer to the broad tests which have been enunciated by the Supreme Court as early as in 1955 in Assam Bengal Cement Co. Ltd. v. CIT, where the Supreme Court was concerned with the nature of payment of protection fees for protection of the mining rights in the land leased by the Govt. of Assam, in consideration of which the Govt. undertook not to grant to any person any lease, permit or prospecting licence for limestone in a group of quarries without a condition that the limestone should be used for the manufacture of cement. In that context, the Supreme court, on a conspectus of the entire relevant case law then existing, laid down three tests for determining as to whether the amount of expenses was revenue or capital in nature. These broad tests are as under :
1. Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment.
2. Expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade. The enduring benefit or the permanent character means acquisition of the asset or the right having enough durability to justify its being treated as a capital asset.
3. Whether the expenditure incurred was a part of fixed capital of the business or a part of its circulating capital.
15. The Supreme Court digested these principles from the Full Bench decision of the Lahore High Court in Benarsidas Jagannath, In re . After digesting these tests, the Supreme Court, speaking through Bhagwati J.(as he then was), elaborated as to how these tests are to be applied. This elaboration is in the following terms (p.45 of 27 ITR) :
'In cases where the expenditure is made for the initial outlay or for extension of a business or a substantial replacement of the equipment, there is no doubt that it is capital expenditure. A capital asset of the business is either acquired or extended or substantially replaced and that outlay whatever be its source whether it is drawn from the capital or the income of the concern is certainly in the nature of capital expenditure. The question however arises for consideration where expenditure is incurred while the business is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment. Such expenditure can be looked at either from the point of view of what is acquired or from the point of view of what is the source from which the expenditure is incurred. If the expenditure is made for acquirng or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If, on the other hand, it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce profits, it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence, it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it s a capital expenditure or a revenue expenditure. The source or the manner of the payment would then be of no consequence. It is only in those cases where this test is of no avail that one may go to the test of fixed or circulating capital and consider whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital. If it was part of the fixed capital of the business, it would be of the nature of capital expenditure and if it was part of its circulating capital, it would be of the nature of revenue expenditure. These tests are thus mutually exclusive and have to be applied to the facts of each particular case in the manner indicated above. It has been rightly observed that in the great diversity of human affairs and the complicated nature of business operations, it is difficult to lay down a test which would apply to all situations. One has therefore got to apply these criteria one after the other from the business point of view and come to the conclusion whether on a fair appreciation of the whole situation, the expenditure incurred in a particular case is of the nature of capital expenditure or revenue expenditure...'
16. It was pointed out by the Supreme Court in Empire Jute Co.'s case : 124ITR1(SC) , that each case must necessarily turn on its own facts and no infallible test can be laid down since the tests are useful as illustrations of some general principles. The principle is equally recognised that the test whether expenditure is incurred with a view to obtain an advantage of enduring benefit may break down in certain circumstances. Every advantage of enduring nature acquired by the assessee would not rule out the expenses incurred for gaining this advantage from the category of revenue expenses. What is material to consider in such cases is the nature of advantage in a commercial sense and whether the advantage is in the capital field; it would be only then that the expenditure would be disallowable on an application of the tests. On the other hand, if such advantage consists merely in facilitating the assessee's trading operations or enabling it to carry on the business operations efficiently or profitably, the expenditure would be entitled to be treated on revenue account (See Empire Jute Co.'s case : 124ITR1(SC) ].
17. A Division Bench of the Madras High Court in CIT v. Ashok Leyland Ltd. : 72ITR137(Mad) , summed up the various tests succinctly as under :
'The word 'capital' connotes permanency and capital expenditure is, therefore, closely akin to the concept of securing something tangible or intangible property, corporeal or incorporeal rights, so that they could be of a lasting or enduring benefit to the enterprise in issue. Revenue expenditure, on the other hand, is operational in its perspective and solely intended for the furtherance of the enterprise This distinction, though candid and well accepted, yet is susceptible to modification under peculiar and distinct circumstances. Thus, the facts of each case, the attendant circumstances revolving round the expenditure, the aim, object and purpose of the same, their impact on the assessee, particularly in matters relating to the future of the assessee's trade and business, whether it could be sustained on ordinary canons of commercial expediency simpliciter, whether it is a step-in-aid of future expansion or prolongation of life of an existing business, whether it is to secure an enduring benefit, whether the expenditure constitutes conceivable nucleus to form the foundation for posterior profit earning, whether the expenditure could be viewed as an integral part of the conduct of the business and to avoid inroads and incursions into its concrete present and potential future, are all some of the main incidents which have a bearing on the decision whether, in a given case, the expenditure is capital or chargeable to revenue. On the whole, an objective application of a judicial mind to the facts of each case is necessary.'
18. It should also be borne in mind that the expenditure would be attributable to capital if it is made with a view to bringing an asset or advantage into existence and, therefore, it is not necessary that the expenditure should have that result. It is the object that matters. [See Anglo-Persion Oil Co. Ltd. v. Dale  16 TC 253; CIT v. Maneklal Industries Ltd. : 107ITR133(Guj) and State Trading Corporation of India v. CIT : 94ITR496(Delhi) ]. It is in the background of this settled legal position that we have to consider as to whether the expenses incurred by the assessee-company for obtaining feasibility report for setting up the shipyard at Seeka was in the nature of revenue expenses as claimed by the assessee. Since the Appellate Assistant Commissioner has emphasised that these expenses were entailed with a view to increase the manoeuvrability of the fleet of ships that the assessee company had, it would be a permissible deduction on account of revenue expenses. The Tribunal, on the other hand, held that the impugned expenditure was directly linked with the construction of shipyard with a view to facilitating better manoeuvrability of country crafts and, therefore it was an expenditure incurred with a view to obtain an advantage of enduring nature. As we have to find out, inter alia, the object of the expenses, we requested the learned advocate for the assessee company to produce the feasibility report for setting up a shipyard at Seeka. The learned advocate called for this report which referred to the agreement between the company and the consultancy firm, M/s. Indopal Limited. He also produced the relevant agreement in this behalf. We have taken the agreement as well as the feasibility report on record with the consent of counsel for the Revenue as well as the learned advocate for the assessee company and collectively marked them as annexure 'F'. The agreement indicates that the consultants were engaged to prepare within the agreed period, a feasibility report for a ship building yard at Seeka in accordance with the scope indicated in enclosure No. 2 with a view to enable the assessee company to arrive at a decision regarding the development of a ship-building yard. Enclosure No. 2 gives broadly the scope of the feasibility report. The scope, inter alia, covers the topics as description of shipyard proposed to be developed, including the vessels to be constructed, stagewise programme of ship-building facilities proposed and the possibility of using these facilities to overhaul materials and equipments necessary for construction, schedule of project execution, description of machinery required to be installed, stagewise financial and economic aspects, cost of project including civil construction, mechanical equipment erection, cost of utilities, power, water, etc., recommendation of shipyard management, personnel and technical administration and evaluation of cost of ship production. In pursuance of this agreement, the consultancy firm, M/s. Indopal Limited, submitted a report where they have set out the main points in respect of which the firm was required to prepare the report. The said Points have been listed as under :
1. To find the investment requirement for constructing a shipyard workship for reparing ships of 20,000 DWT capacity when initially the shipyard is equipped with the minimum essential machinery.
2. To find the number of ships that can be repaired in the above shipyard.
3. To find if it is feasible to build ships in this shipyard.
4. If the shipyard is to be altered for shipbuilding purposes, then what would be the cost of investment and its profitability.
5. Up to what extent ship-building and repairs capacity can be expanded and its economics.
6. The maximum size of ships that can be built in future.
19. The report consists of three parts. Part I relates to site condition, Part lI pertains to repair yard and Part III to expansion possibilities. It is not necessary to go into details of these parts. Suffice it for our purposes to bear in mind that the assessee company has called for this detailed report so as to enable it to arrive at a decision regarding the development of ship-building yard at Seeka. The aim and object of the expenses which is in the nature of consulting fees for preparing this feasibility report cannot be said to be clearly for initiation of a business, for extension of a business or for substantial replacement of equipment. In other words, it would not fall within the first test laid down in Assam-Bengal Cement Co.'s case : 27ITR34(SC) . The expenses have been incurred while the business of manufacturing cement is going on. It is an admitted position that it is not incurred either for the expansion of business of manufacturing cement or for the substantial replacement of its equipments The question, therefore, shall have to be examined from the angle of the second test which has been laid down in Assam-Bengal Cement Co's case : 27ITR34(SC) . Such expenditure can be looked at from the pot of view of what is acquired or from the point of view of what is the Source from which the expenditure is incurred. If the expenses are not entailed in running the business or working it with a view to produce profits, but have been entailed with the purpose of bringing into existence an asset or advantage of enduring benefit, the question of the Source of the expenditure would be of no consequence. It is only when the second test fails that we may have to examine as to whether the expenditure incurred was part of the fixed capital or part of the circulating capital. The bone of contention between the parties is that nothing tangible has been achieved or intended to be achieved by calling for the feasibility report. As contended by the assessee, it was only with a view to enable the assessee company to decide whether it should go for setting up of the shipyard that this report has been called for. On the other hand, the Revenue has emphasised that it is of no consequence whether the decision has been taken or, for that matter, the shipyard was, in fact, established. Even if the expenses are entailed with a view to bring into existence an asset or advantage of enduring nature, they are not qualified to be treated as revenue expenses. The learned advocate for the assessee tried to impress upon us that this test of bringing into existence an asset of enduring benefit breaks down under certain circumstances and that test cannot in all situations clinch the issue. The court has to examine this question from the view-point of the commercial expediency, and if the assessee company with an immediate object of increasing the manoeuvrability of the fleet of its crafts called for this feasibility report, with no ultimate view of setting up a shipyard, it cannot be held as was done by the Tribunal, that these expenses were entailed with a view to bring into existence some asset or advantage of enduring nature. The learned counsel for the Revenue, in this connection, invited our attention to the provision contained in section 35D of the Income-tax Act, 1961, which has been inserted by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971. It provides for amortisation of certain preliminary expenses which, inter alia, includes expenses for preparation of feasibility report. The learned counsel for the Revenue, therefore, urged that since in some cases, this expenditure which is in the nature of capital may not be permissible and would be treated for all purposes as personal expenses, the Legislature has provided for writing off capital expenditure of such a nature over a period of years. Having regard to the scope of agreement between the assessee company and the consultancy firm which was assigned the work of preparing the feasibility report for setting up the shipyard at Seeka, we are of the opinion that the assessee company intended to bring into existence an asset which is of a permanent or at least an enduring nature. It cannot be gainsaid that the expenses incurred for preparation of feasibility report is with a view to bring this asset into existence. The only short question which is to be answered is, does the test of bringing the asset or advantage of enduring nature break down in the circumstances As pointed out by Bhagwati J., in Empire Jute Co.'s case : 124ITR1(SC) , what is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account. The factual context before the Supreme court in Empire Jute Co.'s case : 124ITR1(SC) , was that the assessee company had purchased loom hours from four different jute manufacturing concerns for a sum of Rs. 2,03,255 during the previous year relevant to the assessment year 1960-61, and claimed to deduct the said amount as revenue expenses. The Tribunal held that the expenses were revenue in nature and hence qualified for permissible deduction. The High Court held that the amount paid by the assessee company was in the nature of capital expenditure and, therefore, not a permissible deduction. In that background, the Supreme Court ruled that by the purchase of the loom hours no new asset was created and there was no addition to or expansion of the profit-making apparatus of the appellant and the acquisition of additional loom hours did not add to the fixed capital of the appellant; the permanent structure of which the income was the product or fruit remained the same; it was not enlarged nor did the appellant acquire a source of profit or income when it purchased the loom hours. The expenditure incurred for the purpose of operating the looms for longer working hours was primarily and essentially related to the operation or working of the looms which constituted the profit-making apparatus of the appellant and was expenditure laid out as part of the process of profit-earning. It is no doubt true that the Supreme Court in Empire Jute Co.'s case : 124ITR1(SC) , did say that the test of enduring benefit is not an immutable and a certain test since it may break down under certain circumstances. We have not been able to appreciate how this ruling can be pressed into Service on behalf of the assessee company for purposes of establishing that he test has, in fact, broken down under the facts and circumstances of the case. It is no doubt, as stated above, not a certain and conclusive test, but none the less it is one of the tests which has to be applied and what the court has to bear in mind is that in the ultimate analysis what is the aim and object of the expenses. The learned advocate for the assessee company was at great pains to persuade us that no capital asset has come into existence, nor was it intended to bring a capital asset into existence. The feasibility report is nothing else but an exploratory exercise for purposes of taking a decision whether a shipyard should be established or not and, therefore, on the facts of the case, the test of bringing an asset or advantage of enduring benefit into existence would not apply. That, in our opinion, is a separate argument by itself. That would not be tantamount to saying that the test has broken down. We have, therefore, to find out as to what was the precise purpose of calling for the feasibility report. On a mere reading of clause 1.2 of the agreement, we are of the opinion that it was for the purpose of enabling the assessee company to decide regarding the development of ship-building yard. The relevant clauses of the said agreement are clauses 1.1. and 1.2, which read as under :
'1.1. The consultant shall within a period of 6(six) months from the date hereof work out a feasibility report for a ship-building yard at Seeka, in accordance with the scope indicated in the Enclosure No. 2 annexed hereto.
1.2. The consultants shall within the said period submit the feasibility report to the clients to enable the clients to arrive at a decision regarding development of the ship-building yard.'
20. It is no donubt true that a decision for development of the ship-building yard was to be taken on the basis of the feasibility or otherwise in the report that was to be submitted by the consultancy firm. None the less, the sole purpose which prompted the assessee company to call for such a report is with a view to decide as to whether they should or should not establish and develop a shipbuilding yard. In other words, the expenses have been entailed with a view to decide as to whether the advantage or asset of an almost permanent nature or of an enduring benefit should be brought into existence or not. If that is the aim and purpose of the expenses which cannot be disputed, the fact that the feasibility report did not indicate favourably the establishment of ship-building yard or the fact that there was infrastructure facility for developing the site into a ship building yard, or that yard was established and developed in fact, cannot be of much assistance to the assessee. As Bowen L.J. remarked in City of London Contract Corporation Ltd. v. Styles  2 TC 239 (CA), 'You do not use for the purposes of your concern which means for the purposes of Carriage on your concern, but you use it to acquire another concern' or with a view to bring into existence an asset or advantage of permanent or enduring nature. In Anglo-Persian Oil Co. Ltd. v. Dale  16 TC 253 CA), Viscount Cave emphasised that the expenditure would be attributable to capital if it is made with a view to bringing an asset or advantage into existence, and it is not at all necessary that the expenditure should have that result. It is the object alone that counts. It cannot be successfully contended that the shipbuilding yard was to facilitate the assessee's trading operation or was to enable the assessee to conduct and manage their business more efficiently or to earn more profits without touching their capital asset. The possibility of a shipping yard resulting, if at all, for greater manoeuvrability of the fleet of crafts of the company is so remote that it is travesty of language to say that it is an integral part of the business or profit-earning apparatus. We are, therefore, of the Opinion that on the matter of principle as well as authority, it would be difficult for us to agree with the learned advocate for the assessee that these expenses qualify themselves to be revenue expenses and therefore, permissible deduction. There is an additional reason in support of the view which we are inclined to take and that is the insertion of a new provision in section 35D in the Income-tax Act, 1961, which of course permits the amortisation of capital expenditure, inter alia, for preparation of feasibility report under specified conditions. In other words, the Legislative development indicates that under the specified conditions, the Legislature has thought it fit to permit the set-off of capital expenses against revenue receipts over a number of years. It is not intended to supersede any other provision in the income-tax law under which the expenditure is allowable as deduction against profits. We are emphasising it for a limited purpose to indicate as to how the Legislature has tried to intervene and see that such nature of expenses may not be treated as virtually personal expenses, if certain conditions are specified. In that view of the matter, therefore, we have to answer question No. 3 in the affirmative, i.e., in favour of the Revenue and against the assessee. Having regard to the facts and circumstances of this case, there would be no order as to costs.