Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1971-72 - Whether having regard to provisions of section 37, onus is upon assessee to establish that particular item of expenditure, in respect of which deduction is claimed, is not of capital nature - Held, yes - In order to explore feasibility of reducing cost of production, assessee incurred certain expenditure in carrying out a survey - Deduction in respect of said expenditure was claimed under section 37(1) - Income-tax Officer required assessee to place before him certain material in support of its claim - As assessee failed to produce said material, Income-tax Officer rejected assessee's claim - AAC as well as Tribunal, however, allowed assessee's claim - Whether, since, in assessment proceedings, assessee had failed to discharge its burden that expenditure claimed was not of capital nature, deduction in respect of said expenditure could not be allowed - Held, yes FACTS The assessees, that before the Income-tax Officer was that it was utilising hardwood as a substitute for bamboo, for the manufacture of paper, that the cost of hardwood as raw material had been found to be comparatively higher than the cost of bamboo, that it was thought desirable to carry out the survey, in order to explore the feasibility of reducing the cost of production and that the relevant expenditure having been incurred for providing economic use of the raw material for production of paper, it should be allowed as the revenue expenditure. The Income-tax Officer required the assessee to place before him the following information and material: (a)Assessee's letter to Industrial Aid International by virtue of which the said survey was carried out ; (b)Whether the survey was asked for relating to any specific wood of any specific jungle ; and (c)The report of the Industrial Aid International. The assessee failed to produce the said material. The Income-tax Officer did not doubt the genuineness of the expenditure but was of the opinion that the result of the survey had created an advantage of enduring nature and lasting benefit to the assessee, which would be available to it for all…

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