Law:

Section:

Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment years 1961-62 and 1962-63 - Whether where expenditure was incurred by assessee-company for acquiring technical knowledge of more efficient use of process and methods which assessee company already had, expenditure was incurred with a view to earn profits from same methods and processes as before and was allowable as revenue expenditure - Held, yes FACTS During the accounting year relevant to the assessment year 1961-62, the assessee, a manufacturing company, deputed three of its technicians to abroad to enable them to obtain practical training in the manufacture of heat-resisting glassware. In connection with this practical training, the assessee-company paid amount by way of fee to the training company. A further sum was spent by the assessee-company for the assessment year 1961-62 for travelling, lodging and other expenses of the employees. For the assessment years 1961-62 and 1962-63 the assessee claimed deduction of aforesaid payments as business expenditure. The ITO disallowed the assessee-company, which had been established since long, claim of and had been manufacturing various types of glassware including heat-resisting glassware. The scientific process of manufacturing heat-resisting glassware was not a secret process but, for practical application of the process, it would be necessary to have first-hand knowledge of the working of the process in a modern factory manufacturing superior variety of heat-resisting glassware. It was for this purpose, according to the affidavit and also according to the finding of the Tribunal, that the assessee-company had sent its three technicians abroad to obtain technical knowledge from a company which had a great name in this line in the international market. The Tribunal held that, though the matter was not free from difficulty, the expenditure, in spite of the comparatively large amount involved, was of revenue nature and was only an outlay for running the existing business in a more efficient manner which could not be termed a capital outgoing. Under…

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