1. This reference relates to the assessment years 1955-1956, 1956-1957 and 1957-1958 of which the relevant previous years are the calendar years 1954, 1955 and 1956. Two questions arise in this Reference. The first question is common to all thethree assessment years and relate to certain unclaimed wages and the second question relates onlyto the assessment years 1956-57 and 1957-1958 and is as regards certain deductions claimed by the assessee company in regard to expenses incurred in connection with tours abroad by two of the directors of the assessee company who were also tile partners in the managing agency firm and employees of the company.
2. The assessee company is a public limited company and carries on business of manufacturing textiles. It maintains accounts according to the mercantile system. The expenses for wages to the employees engaged for carrying on the business of the company were shown in the accounts as liabilities as and when they accrued. In other words, irrespective of the payment of the wages, the assessee company used to take into account the wages due to the employees and labourers and the entire sum so due was shown as a deduction in its accounts and also allowed as such in the income-tax assessments made on the company. It sometimes happened that all the workers did not turn up to collect their dues and consequently, a portion of the wages in each year remained unpaid and such unpaid wages used to be transferred to an account called 'Unpaid Wages Account'. As and when the workers turned up to take their unclaimed wages, such amounts used to be paid to them and debited to the Unpaid Wages Account. A separate account used to be maintained for each year in respect of such unclaimed wages. The unclaimed wages relating to the calendar years 1947 to 1949 were transferred to the general reserve fund and the amounts so transferred were brought to tax. The following were the unclaimed wages relating to the year 1950 and subsequent years.
Year Unclaimed Wages.1950... ... Rs. 2,8691951...... Rs. 10.9141052......Rs. 1.3051953... ...Rs. 2.543
These unclaimed wages were shown as liabilities and formed part of the liabilities shown in the balance-sheets of each year under the heading 'Other Finance'. These amounts included in the liabilities under the heading 'Other Finance' and shown in the balance-sheets were as follows:
as atLiabilities for
'Other Finance'Unclaimed wages
included therein,31-12-1950 1,87.28384,10431-12-19512,06,67893,59631-12-19522.35 8141,17.92131-12-19522.35 8141,17.92131-12-19534,97,39021,30331-12-19542,50,62625,79431-12-19552,37.55243,46531-12-19562,03,06732,948
Thus, for the assessment year 1955-1956, the sum involved came to Rs. 13,783 being the unclaimed wages for the years 1950 and 1951. For the assessment year 1956-57 the unclaimed wages came to Rs. 1,305/- being such for the year 1952 and for the assessment year 1957-58, the unclaimed wages came to Rs. 2,543/- in respect of the year 1953.
3. The Income-tax Officer brought to tax these amounts of unpaid wages relating, to the calendar years 1950 and 1951, namely Rs. 13,783/-, in the assessment year 1955-1956. Similarly, the amounts of unpaid wages relating to the calendar years 1952 and 1953 were also added to the profits in the assessments made for tie assessment years 1956-1957 and 1957-1958. The reason given by the Income-tax Officer for including these amounts in the profits during the assessment years was that as regards the balance of unclaimed and unpaid wages for the years 1950 and 1951 amounting to Es. 13,783/- there was no possibility of these amounts being paid to the floating labourers, and he applied the same reasoning to the amounts of unpaid wages for the subsequent years 1952 and 1953 and treated them as taxable income. When the case went before the Appellate Assistant Commissioner, it was contended on behalf of the asses-Bee company that the balances of unclaimed wages had been carried forward in the balance-sheets as liabilities from year to year and that they constituted therefore a debt due from the company to its employees, that the assessee company had neither obtained any remission in respect of these liabilities nor had these liabilities ceased in any manner and that therefore, there was no justification in treating these unpaid wages as income of the assessee company under Section 10(2A). This contention was negatived by the Assistant Commissioner on the ground that the liability of the assessee company in respect of these amounts had become time-barred as more than three years had already elapsed since these wages became due and he concluded that when the creditors' legal remedies for recovery have ceased, the legal liability also ceased and the provisions of Section 10(2A) would then come into play. The Assistant Commissioner also observed that if the assessee's views were to be accepted, it would mean that an assessee would indefinitely postpone taxation on such amounts by simply not transferring to the profit and loss account such reserve funds and that such a position could- hardly be accepted. Upon this reasoning, the Assistant Commissioner dismissed the appeals of the assessee company. The assessee company then took the matter in appeal before the Tribunal where two contentions were put forward, (1) that inasmuch as the assessee company had acknowledged its indebtedness by carrying forward these unclaimed wages as outstanding liabilities in its annual balance-sheets as at the end of each year, the debts owed by the company to the labourers were not timebarred, and (2) that even if such debts could be said to have become time-barred, Section 10(2A) could not apply to such a case as the assessee company could not be said to have received, whether in cash or in any manner whatsoever, any amount in respect of such expenditure. It may be observed that the case before the Tribunal proceeded on the footing that these amounts were expenditure incurred and not on the footing of a trading liability having ceased to exist as a result of remission or cessation. The Tribunal did not accept either of these two contentions and dismissed the assessee's appeals. The Tribunal assumed all along that these amounts had become time-barred and therefore had ceased to be payable by the assessee company to the labourers and upon that assumption, held that the assessee company must be held to have received these amounts either in cash or in any other manner and that even if such amounts could not be said to have been received in cash, the words 'in any other manner' were wideenough to cover such a case where the creditor was unable to claim payment of a debt due to him byreason of the period of limitation having expired. The Tribunal also held that if an assessee company, in a subsequent year, were to acknowledge its indebtedness through a balance-sheet prepared, for instance, as on the 31st of December 1953, such an acknowledgment would come very late, i.e., later than the moment when such amount of unpaid wages became fictionally stamped with the character of 'profits and gains of business' for the purpose of Section 10(2A), and once such an amount became so impressed, it was immaterial whether by a subsequent and a separate transaction, the assessee company chose to pay that amount to the labourer by acknowledging ex gratia its indebtedness publicly through its balance-sheet. The Tribunal, upon this reasoning, dismissed the assessee's appeals in respect of all the three assessment years. At the instance of the assessee company, the Tribunal referred on this part of the case the following questions common to all the three assessment years:
(1) Whether on the facts and in the circumstances of the case, the sum of Rs. 13,73/-, Rs. 1305/- and Rs. 2,643/- are assessable under Section 10(2A) of the Income-tax Act in the assessments for 1955-56, 1956-57 and 1957-53 respectively?
(2) Whether on the facts and in the circumstances of the case, the decision of the Tribunal that the debts are time-barred is correct in law?
4. The question therefore is whether the liability in respect of the unpaid wages payable during the calendar years 1950 to 1953 had become time-barred during the assessment years and consequently extinguished, as assumed by all the three tax authorities. It is only if it was time-barred that the next question would arise, viz., whether under Section 10(2A) these amounts treated as expenditure incurred could be said to have been received by the assessee, company either in cash or in and other manner whatsoever,
5. Mr. Kaji's contentions were that it was an admitted fact that the assessee company used to acknowledge publicly its liability in respect of these unpaid wages in the balance-sheets at the end of each year, that is to say, 1950, 1951, 1952 and 1953, and that therefore as a result of such acknowledgment the debt of the assessee company in respect of these unclaimed and unpaid wages remained outstanding and the assessee company continued to be liable to pay those amounts. He also contended that even if these debts were said to be time-barred, Section 10(2A) would not in any case apply in the instant case as it cannot be said that the assessee company had received either in cash or in any other manner whatsoever, the aforesaid expenditure or any part thereof. In our view, there is considerable justification in the first contention of Mr. Kaji and that being so, it would not be necessary for us to go into the second contention raised by him.
6. It is obvious that the reasoning adopted by the Tribunal overlooks the fact that the liability in respect of those unpaid wages was acknowledged by the assessee company at the end of each yean in its balance-sheets and, therefore, the illustrationgiven by the Tribunal in its order and upon which it seems to have acted was erroneous in para 4 of the Statement of the Case, the Tribunal itself acknowledges that these unclaimed wages were shown by the assesses company as liabilities in the balance-sheets under the heading 'Other Finance' and in that very paragraph, the Tribunal also shows various amounts of unpaid wages shown in the balance-sheets for the calendar years ending 31st of December 1950 to the 31st of December 1950. The liability of the assessee company, in these circumstances, therefore to pay the unpaid and unclaimed wages cannot be said to be barred by limitation on account of the yearly acknowledgment thereof in the balance-sheets and obviously, therefore, those amounts could not be said to have been fictionally stamped with the character of profits and gains as all along they retained the character of liabilities owing to the annual acknowledgments made by the assessee company. The conclusion of the Tribunal that these debts became time-barred was incorrect as it obviously overlooked the acknowledgments in the balance-sheets far the years 1951 and 1952 in respect of wages due in those years and the subsequent years. These acknowledgments were not in respect of time-barred debts and would not, therefore, require a fresh, promise to pay under Section 25(3) of the Contract Act. It is well settled that a debt shown in a balance sheet is an acknowledgement within the meaning of Section 19 of the Limitation Act, and in order to be so, a balance-sheet in which such acknowledgment is made need not be addressed to the creditor. The learned Advocate General conceded that in these circumstances the debt could not be said to have been time-barred and therefore, the unclaimed wages could not be added back under Section 10(2A). In view of that concession, it does not become necessary for us to go into the second contention raised by Mr. Kaji, namely that even if these debts were time-barred Section 10(2A) was not applicable. In view of the concession made by the learned Advocate-General, we would first answer question No. (2) on this aspect of the case, and our answer to that question would be in the negative and in view of that answer, our answer to question No, (1) also must be in the negative.
7. As regards the claim for deduction of expenses incurred by the assessee company for sending the two directors and the Superintendent of its mills to foreign countries, as valid deductions under Section 10(a)(xv), the question referred by the Tribunal to us is in the following terms:
'Whether on the facts and in the circumstances of this case the sums of Rs. 22,247/- and Rs. 14,494/- being the foreign tour expenses were allowable as revenue expenditure under Section 10(2)(xv) in the assessment years 1956-57 and 1957-58 respectively?'
Rs. 22,247/- were said to have been spent for tour expenses of one of the directors of the company and one S.R. Subbaram, the Superintendent of the company's mills, who accompanied him. This expenditure was incurred during the accounting year relating to the assessment year 1956-1957. Rs. 14,494/- is the expenditure spent as expenses for tour in some of the European countries by another director during the accounting year relating to the assessment year 1957-1958. The ques- tion therefore is whether these expenses were revenue expenditure allowable under Section 10(a)(xv).
8. On May 11, 1955, the Board of Directors of the assessee company passed a resolution to the effect that it was desirable that one of the directors of the company and the said Subbaram should be deputed to the United Kingdom and certain western European countries to gain personal knowledge and experience of the latest developments in manufacturing, designing and processing of cloth in these countries. The resolution recorded that after some discussion, it was resolved that those two persons be deputed to the United Kingdom and the countries of western Europe 'at tee company's expense for on the spot study of the latest developments and new methods of manufacturing, designing and processing of textiles employed in those countries and on their return they do make report to the Board on the work done by them.' The aforesaid two persons started for the tour on the same day, namely, nth of May 1955 and after touring several countries, made on their return a report to the assessed company dated September 3, 1955. The report records as to what they saw at various places in afferent European countries including the United Kingdom, and then describes several new trends in the textile industry in those countries and new machinery manufactured there as also the latest and upto date processes. The Income-tax Officer, the Assistant Commissioner as also the Tribunal were of the view that this expenditure as also the expenditure incurred in the next year by another director, could not be said to be revenue expenditure and was, therefore, not allowable under section 10 (2) (xv).
9. The contention of Mr. Kaji was that this conclusion was not correct because the tour undertaken in 1955 by one of the directors and the superintendent of the company's mills was essentially a study tour and did not bring into existence any capital asset, nor could it be said that the expenditure was incurred with a view to bring in any capital asset. The study tour was merely for investigation as to how the methods of processing of the assessee company's mills could be improved upon and how thereby, the profits of the assessee company could be maintained of increased. He argued that as a result of this tour the company's director might recommend introduction of new processes or even purchase of new machinery, but it could not, therefore, be said that he was sent to Europe for purchasing new machinery. He relied upon the report dated September 3, 1955, and argued that the report pointed out new trends so that the assessee company might decide whether it should go in for them and purchase new machinery for that purpose, but that again would not mean that the director had gone on tour to purchase new machinery and that the report in fact did not afford any such evidence. He further argued that the mere fact that machinery was purchased subsequently in the years 1956 and 1957 did not mean that the director and the superintendent had gone on tour for the sake of purchasing machinery and not merely to investigate and study new processes, In support of his argument Mr. Kaji cited before us an unreported decision of the High Court of Bombay in Commercial, Industrial and Pharmacential Laboratories Ltd. Bombay v. Commissioner of Income-tax, Ref. No. 14 of 1951, D/- 31-8-1951 (Bom) and reported in the Unreported Income-tax Judgments of the Bombay High Court, Book I, 1959. That was a case where the managing director of the assesses company led a delegation of Indian chemical manufacturers to England and the United States of America at the invitation of the Government of India, the object of the visit being to study the developments made in chemical industries in those countries. The Income-tax Department contended that the expenses for the trip were a capital expenditure. The High Court repelled that contention, observing that an abstract view should not be taken of the questions of commercial expediency and the principles of ordinary commercial trading and the main question that had got to weigh with the Court was whether the expenditure was a part of the process of profit making. It was not disputed that as a result of that visit an improvement in the manufacturing processes, in the research activities and the development of manufacturing activities had taken place and the prestige of the company was enhanced in the United States of America and the United Kingdom and publicity was received in those countries. The High Court, however, was of the view that on that account alone the expenses did not become capital expenses in the sense that permanent benefit was derived by the company and new assets had come into existence. The test laid down in that case by the High Court was whether the expenditure incurred brought into existence any new asset or whether the expenditure was merely calculated to increase the profits of the company. If it was the former, the allowance could not be claimed under Section 10 (2) (xv). Mr. Kaji also relied upon the cases reported in Dr. P. Vadamalayan v. Commissioner of Income-tax Madras 1960 40 ITR 501 : AIR 1961 Mad 485, Commissioner of Income-tax, West Bengal v. Royal Calcutta Turf Club : 41ITR414(SC) and Seshasayee Brothers Ltd. v. Commissioner of Income Tax, Madras : 42ITR568(Mad) which are practically decided on the same lines as the case in Ref. No. 14 of 1951 D/- 31-8-1951 (Bom) and therefore, it does not become necessary for us to consider them in any details. From these decisions, it was argued by Mr. Kaji that the expenditure incurred for the improvement in the standards of business would not amount to bringing into existence a capital asset. He pointed out that during this tour the director did not go alone to Europe but was accompanied by the superintendent of the mills, and that that fact indicated that the two of them had proceeded a study tour which ultimately might result in the purchase of new machinery by the assessee company, but that would not justify the conclusion that the tour was undertaken for the purpose of purchasing new machinery, that is to say for bringing into existence a new capital asset. The primary object, according to him, of the tour was to investigate whether the new processes should be introduced in the textile mills belonging to the assessee company, irrespective of thefact that such processes might mean purchase of new machinery, and that the same would still be revenue expenditure. But Mr. Kaji's principal difficulty lies in the fact that this is not the conclusion arrived at by the Tribunal in respect of the tour undertaken by the director and the superintendent in the year 1955. The Tribunal has in clearest terms come to the conclusion that 'the object of this tour was to replace the old and out-of-date or obsolete machinery used in the textile mills of the assesses company by the more modern ones. It is on record that after this visit, the assessee company did import this new improved and modern machinery in the years 1956 and 1957 for the purpose of being used in running its textile mills. In our opinion, the expenditure incurred in these circumstances relates to the fixed framework of the profit making apparatus of the assesses company and not to its carrying on of the business.' The finding of the Tribunal as to the purpose and object of this tour is obviously a finding of fact which would be binding upon us as it is the Tribunal which is the fact finding body. But Mr. Kaji tried to assail this finding upon the ground that there was no evidence before the Tribunal to support that finding and that, therefore, though it was a finding of fact it had no sanctity and we are entitled to go behind that finding and coma to our own finding from the record of the case. Mr. Kaji contended that although a separate question has not been referred to us, namely whether there was any evidence to justify this finding of fact arrived at by the Tribunal or whether the finding of fact arrived at by the Tribunal was perverse and unreasonable, it being a finding on an intermediate fact, it was competent for us to disturb or interfere with such a finding without the necessity of a separate question being referred to us if we were to come to the conclusion that the finding of fact given by the Tribunal was not founded upon any evidence or that it was otherwise perverse or unreasonable. Mr. Kaji relied upon two decisions, one of the High Court of Calcutta and the other of the Supreme Court reported in Bhikamchand Bagri v. Commissioner of Income-tax (Central) Calcutta : 44ITR746(Cal) and Liquidators of Fursa Ltd. v. Commissioner of Income-tax Bihar : 25ITR265(SC) , and pointed out to us from these decisions that even without the question having been referred to in these cases, the Court had interfered with the finding of fact on the ground that the finding of fact given by the Tribunal had lost its sanctity for the reasons stated in those decisions.
10. Assuming that we have jurisdiction, and we wish to make it clear that we are not deciding in this Reference the question as to whether we have or we have not the jurisdiction to disturb such a finding, the question would still remain whether it is possible to say that the finding given by the Tribunal as to the purpose and object of the tour undertaken in 1955, is perverse or unreasonable or a mere conjecture without any foundation in evidence. In other words, can it be said that the finding given by the Tribunal is not even a possible view to take on the facts and circumstances of this case, namely that the tour was undertaken for a preliminary investiga-tion of methods of new processing adopted in textile industry in Europe and new machinery manufactured and used for such processing in these countries with a view to adopt in the assessee company's mills the said processing and install, for that purpose new machinery? If the tour is undertaken with the object of investigating whether new processing should be adopted and for that purpose, new and suitable machinery should be purchased, it is clear that even if the purchase were not to take place then but later, in other words, even if the tour were to be for investigating which new machinery should be suitably and properly purchased to bring the mills of the company on modern and upto date lines, thereby bringing in existence new asset, the expenditure for such a tour must be regarded as capital expenditure. It is not possible to say, even if we were not to agree with the finding of fact of the Tribunal, that the Tribunal acted without evidence or that the finding was a mere conjecture on its part. The Tribunal had before it three items' of undisputed evidence, (1) the resolution dated the nth of May 1955, (2) the report made by the director dated September 3,1955 and (3) the fact of new machinery having been purchased in the very next two years, namely1956 and 1957. The order of the Tribunal shows that this evidence was not only before the Tribunal but that the Tribunal applied its mind to it and then arrived at its finding as to the object of the tour. A mere disagreement by the High Court with the finding of fact arrived at by the Tribunal is no justification for either disturbing or interfering with the finding of fact, for as we have said it is the Tribunal which has to give the finding of fact.
11. The resolution dated May 11, 1953, in the first place, authorises the tour by the directorand the superintendent of the company's mills. That resolution indicates that the tour was to be undertaken for two purposes, (1) in order to make an on-the-spot study of the latest developments in the manufacture, designing and processing of cloth in the United Kingdom and other countries, and (2) to make a report on their return on the work done by them. Such a report obviously would be (1) as to the latest developments in the manufacturing, designing and processing of textiles seen by the representatives, and (2) their recommendations as to whether the latest developments should be adopted and for that purpose, to purchase new machinery which would bring an enduring benefit to the assessee company and which also would bring about a change in the methods of manufacturing, designing and processing. This can be seen from the report dated September 3, 1915, which describes the various factories visited by these representatives of the assessee company. The factories they visited were of two kinds, (1) where new machinery was manufactured, and (2) where such new machinery was actually used and new processing with the aid of such machinery was adopted. One of the places they visited was Zurich where they visited Ricter's Factory and had discussions with the technical staff regarding a machine, called Auto Mixer in the Blow Room Line. They also visited a spinning mill to see the working of thisAuto Mixer and their conclusion was that the Auto Mixer 'is found to be quite effective.' During their stay in the United Kingdom, they visited, amongst other places, the Card Clothing Factory of Morsefall and Bickam and saw different processes of manufacturing Card Clothing 'which was quite interesting'. They also visited another factory where they saw a processing plant which they found 'to be quite good'. As the report shows, the conclusions arrived at by these representatives was 'The trend seems to be for short processing, higher speeds and introduction of modern appliances of saving power, steam, water, etc., is quite prominent. Continuous wet processing seems to be the trend of future development, introduction of different methods of control and appliances whereby the frequent attention by man is being eliminated is adopted more and more'. The report ends by the statement that in Europe also renovation of machinery was going on in full swing. These were then the new trends they saw in Europe and though they did not in so many words say so, the report appears to suggest that the company should go in for this new processing and new machinery. If that was not so, there was no object in stating that in Europe also renovation of machinery was going on in full swing. The suggestion is clear that the assessee company should follow suit. The fact that new modern machinery was purchased by the assessee company in the next two years, i.e. 1956 and 1957, as found by the Tribunal, is not disputed. In view of that fact, coupled with the contents of the report, it is not possible to say that the finding of the Tribunal that the object of the tour was to replace the old for the new and modern machinery, was not even a possible conclusion. We are, therefore, unable to agree with the contention that this finding was either perverse or unreasonable or it otherwise lost its sanctity so as to entitle us to disturb it or interfere with it.
12. As regards the tour undertaken in 1955, the position is still clearer and that was conceded even by Mr. Kaji. The resolution dated March 29, 1956, shows that the Board of Directors considered the question of installation of a Waste Spinning Plant at Mill No. 1 of the assessee company and, therefore, considered the advisability of sending a representative to visit the works of reputed, manufacturers of Waste Spinning. Plant machinery in Western European countries. The directors, therefore, resolved to depute one of them at the company's expense to visit the factories of manufacturers in the United Kingdom, West Germany, Belgium and other countries to have a complete study of the plant and to select the most suitable machinery and to submit his report to the Board on his arrival. The report of the director dated August 31, 1956, shows the various factories he visited and his conclusion that the plants which he saw were more modern and capable of producing better and finer yarn than so far manufactured in our country and that the Waste Plants inspected were modern equipment in line with the latest developments incorporated and capable of producing better and finer yarn. His conclusion was that out of this yarn a much better type of fabrics could be produced than whatwas produced so far in our country. It is clear from this report that after having inspected the machinery for a Waste Plant and having actually seen it in work, the director recommended that the company should go in for it. It is clear from the resolution as also the report that the object of the tour was for selection of machinery for an additional plant. Even Mr. Kaji could not attack the finding of the Tribunal in respect of this mission, either on the ground that it was unreasonable or that it was not founded upon evidence. That being so, we would not be justified to disturb the finding as to the object of the tours, arrived at by the Tribunal.
13. But Mr. Kaji's contention was that expenditure incurred by an assessee for replacement of new machinery for the old would be revenue expenditure and that if such expenditure were to be revenue expenditure, a preliminary expenditure for investigating whether that machinery should be replaced by new one, must be held to be revenue expenditure. In support of this proposition, Mr. Kaji first relied upon the decision of the High Court of Madras in Commissioner of Income-tax, Madras v. Sri Ram Sugar Mills Ltd. : 21ITR191(Mad) . The assesee company there was ...carrying on business ofmanufacturing sugar and had in its factory three boilers. During the crushing season the factoryhad to work for all the twenty-four hours and during such period, two of the boilers had to be constantly in use while 'the third boiler had to be used when any one of the two boilers was either to be given rest or to be cleaned at intervals. One of the three boilers deteriorated in its efficiency in the relevant accounting period and the assessee replaced it by a new but an exactly similar boiler. The Appellate Tribunal held, that the expenditure incurred in the purchase, creation and fitting of the new boiler for replacing the old one was a business expenditure within the meaning of Section 10 (2) (xv) and thereupon a Reference was made to the High Court at the instance of the Commissioner. There was a difference of opinion between the two learned Judges who heard the Reference, but Mr. Kaji relied upon some of the observations made by Ratyanarayan Rao, J. who held that the expenditure in purchasing the new boiler was a revenue expenditure, deductible under Section 10 (2) (xv). The learned Judge was of the view that if the purchase of the boiler amounted merely to a replacement or a repair or putting in the original state the machinery,' by the use of which the process of manufacture was carried on, no additional advantage was thereby derived. He also held that it could not be suggested that by using a new boiler for an old one, the productive capacity of the sugar manufacturing unit was in any manner increased. On the other hand, the view held by Raghava Rao J. was that the new boiler had come in substitution for the old boiler which was part of the fixed capital of the company and therefore partook of the character of such capital. It might or might not be of superior quality or calibre than that of the old boiler, but it certainly had resulted in a substantial extension of the period of the serviceableness of the machinery and in the creation of an asset of lasting advantage or enduring benefit to the company in the nature of a fresh fixed capital asset, and therefore.the expenditure was of a capital nature. Apart from the difference of opinion between the two learned Judges, it is clear that what appears to have impressed considerably Satyanarayana Rao J. was the fact that the case before him was one of the replacement Of an old and obsolete boiler by a new one which, however, was of the same type. It was relying upon this fact that he appears to have come to the conclusion that by the replacement of the new boiler no new capital asset was being added nor the strength of the productivity of the factory was being increased. But even Satyanarayana Rao J. appears to have relied upon the test laid down by Viscount Cave in British Insulated and Relsby Cables Ltd. v. Atherton, 1926 A C 205 where the learned Lord Chancellor laid down, that when an expenditure 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, I think that there is very good reason for treating such an expenditure as properly attributable not to revenue but to capital'. The same test was applied by the Privy Council in Rhodesia Railways Ltd. v. Income Tax Collector, Bechuanaland, (1933) A. C. 368, where it was held that if the expenditure was incurred with a view to bring into existence an asset or an advantage for the enduring benefit of a trade, such expenditure would be capital expenditure. In view of the difference of opinion between the two learned Judges and the approval of the dictum of Viscount Cave by Satyanarayana Rao J., we do not think that Mr; Kaji can bring to his aid the decision in that case. The next case relied upon by Mr. Kaji was New Shorrock Spinning and . v. Commissioner of Income Tax, Bombay North : 30ITR338(Bom) . This was however a case of current repairs under Section 10 (a) (v), and it was also a case, not of new machinery having been installed for the old one, as was the case in the Madras decision, but a case where some parts in the existing machinery were changed and that too, in 646 out of 864 looms in the assessee company's mills. This decision, therefore, does not have any application to the case before us, but while considering the meaning of 'current repairs', Chagla C. J. and Tendolkar J. observed that the test that has to be applied was that as a result of the expenditure which was claimed as an expenditure for repairs, what was really being done was to preserve and maintain an already existing asset. The object o| such expenditure was not to bring a new asset into existence nor was its object the obtaining of new or fresh advantage. But if the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure. Lastly, Mr. Kaji relied upon the decision in In re Hindustan Commercial Bank Ltd. Kanpur : 21ITR353(All) , decided by the High Court of Allahabad where the assessee company had incurred during the relevant accounting years certain expenditure in opening forty-six new branches, sub-branches and pay-offices. A sum of Rs. 24000/- and oddrepresented the charges for advertisement, entertainment, etc., and a further sum of Rs. 89000/-aod odd represented salary, dearness and other allowances, postage, etc., and included certain travelling expenses and the question was whether the assessed was entitled to deduct these two sums under Section 100 (2) (xv) of the Act. The High Court held that both the amounts, being expenditure incurred wholly and exclusively for the purpose of the business, were in the nature of revenue expenditure and were admissible deductions under Section 100 (2) (xv). Mr. Kaji contended, relying upon, this that that though opening of new branches of bank constituted expansion of the business of the bank, even then, the expenditure incurred in doing so was not considered to be capital expenditure, though there could be no doubt that some benefit of an enduring nature must have been derived by the bank. It is no doubt true that the High Court held that this expenditure was revenue expenditure and not capital expenditure, but it must be remembered that they did so on the footing that opening of new branches merely gave further facilities to the customers of the bank but that did not bring in an advantage of an enduring benefit of trade-to the bank and furthermore, that by the opening of such branches) no new asset was being brought in existence as it was the same business which, was being expanded. This is clear from the observations at page 363 of the report (ITR) : (at pp. 930-931 of AIR) that
'The mere fact that for the purpose of carrying on the same type of business and to attract more business they opened other branches at different places and incurred expenses which did not produce any new asset, that does not to our minds seem to change the nature of the expenditure. It is not a case where an assessee had started a new line of business or acquired new premises or purchased other assets which could be included as an asset in the profit and loss account. It is merely a case where for the purpose of extending the business new branches had been opened and certain expenses had been incurred by way of advertisement etc. We think that it cannot be said that an expenditure of this kind brings in an advantage for the enduring benefit of trade and is, therefore, capital expenditure.'
The basis of this decision, therefore, is the one laid down by Lord Chancellor Cave in the decision which we have already cited and which test was reiterated by Chagla C. J. in the Bombay decision. In our view, the three decisions cited by Mr. Kaji do not assist the assessee company, first, because one of them was a caseof replacement of a new but similar boiler for the old, which, according to Satyanarayana Rao J. did not bring about a larger activity or any benefit of an enduring nature to the trade, and the second was a case of current repairs where machinery was not even replaced but only parts ofsome of them were changed. The decision of the Allahabad High Court did not lay down any principle different from the one indicated by Lord Chancellor Cave and Chagla C. J. in their respective decisions. None of these cases, therefore, can be regarded as an authority for the proposition that installation of machinery for introducing new processing would not be an expenditure for bringing in a new capital asset. That being so, the very foundation of the contention of Mr. Kaji is lacking.
14. The finding of fact by the Tribunal, though of an intermediate fact, as to the object of the two tours, cannot, as we have already held, be said to be either perverse or not based on evidence or lacking in sanctity and therefore, we would not be justified in interfering with it. That being the position, it is not possible for us to say that the two tours were undertaken as study tours merely to get acquaitance with new methods of production and new machinery or only for adding to the knowledge of the assessee company's representatives, and therefore the expenses incurred were revenue expenditure. A tour undertaken for the purpose of a preliminary survey of new methods of manufacturing, designing or processing and of new machinery with a view to purchase them, even if not immediately but at a later stage, would be one for the purpose of bringing into existence a capital asset and such expenditure would, therefore, be capital expenditure. It is true that the line of distinction between the two kinds of expenditures, particularly where it happens to be an expenditure of a preliminary type, is a thin one, but nonetheless, it is a perceptible one. No hard and fast rule can be laid down for universal application and each case must depend upon its own facts and circumstances. It would therefore be the duty of the Court to find out from a scrutiny of facts and circumstances the true and proper nature of such expenditure. In our view, the Tribunal was right in the conclusion that it arrived at, namely, that the expenditure incurred by the assessee company in respect of these two tours undertaken in the years 1955 and 1956 was not revenue expenditure but was capital expenditure.
15. In the result, our answer to the question referred to us on this aspect of the case by the Tribunal is in the negative. In the view of the fact that both the parties have partially succeeded, it is agreed by them that the proper order of costs would be that each party should bear his own costs of this reference.