COMMISSIONER OF INCOME TAX Vs. INDIA CARBON LTD

JUDGEMENT

(1.) IN this reference under Section 256(1) of the INcome-tax Act, 1961, the following two questions have been referred for opinion of this court ;

(2.) THE assessee is a company carrying on a business of manufacturing of petroleum coke. But for some reasons, the assessee-company found that the said calcination plant at Budge Budge was not going well since 1979, and the assessee-company explored the possibility of manufacturing of cement. For that purpose, the assessee-company entrusted the two companies, namely, J. C. B. Pvt. Ltd., and J. R. C. I. Ltd., to submit a feasibility report for converting the existing coke kiln to a cement plant without making any disturbances of the existing plant and for that purpose for obtaining the feasibility report the assessee-company defrayed expenses of Rs. 38,000 and Rs. 1,00,000 in total Rs. 1,38,000. As per the feasibility report the project was not found viable and feasible by the company to convert the existing coke plant to a cement plant, therefore, the desire to convert the existing plant, i.e., the coke plant to a cement plant was abandoned.

(3.) IN our opinion, in this case also the very idea of the assessee was to find out the feasibility for converting the existing plant to the cement plant without much disturbing the existing plant. Therefore, in our considered view, this expenditure incurred in obtaining the feasibility report will be a revenue expenditure and not a capital expenditure.