Ajit K.Sengupta, J. - (1.) In this reference at the instance of the Revenue, the following questions have been referred by the Tribunal to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1976-77 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that medical expenses reimbursed should not be treated as perquisite for the purpose of disallowance under Section 40(c) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the disallowance of Rs. 1,32,484 being the travelling expenses incurred in connection with the exploration of possibilities of expansion of the assessee's business which did not take place ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting addition of Rs. 2,99,462 being the export subsidy and duty drawback accrued to the assessee but not accounted for in the accounts ?"
(2.) It is not in dispute that the first question is covered in favour of the assessee by the decision of this court in CIT v. Ashoka Marketing Ltd. [1990] 181 ITR 493. We, accordingly, answer the first question in the affirmative and in favour of the assessee.
(3.) As regards question No. 2, the facts admitted and/or found by the Tribunal are as under : The assessee-company is engaged in the business of manufacturing and selling plywood. The assessee-company was exploring the possibility of expanding its business operation and setting up a saw-cum-plywood factory in Kenya with a view to expanding its existing business activity. The endeavour to set up the factory at Kenya was controlled and administered by the existing management of the assessee-company and the exploration was carried out by its existing employees. Travelling expenses were incurred in connection with the proposed expansion of the existing business of the assessee-company. Both the Commissioner of Income-tax (Appeals) as well as the Tribunal, following the decision of the Gujarat High Court in CIT v. Alembic Glass Industries Ltd. upheld the claim of the assessee-company. The findings of fact as recorded by the Commissioner of Income-tax (Appeals) as well as by the Tribunal have not been challenged by the Revenue. Learned counsel, appearing for the Revenue, drew our attention to the decision of this court in Indian Oxygen Ltd. v. CIT [1987] 164 ITR 466. In this case, this court held that travelling expenses incurred in contemplation of a new project and new lines of manufacture to be undertaken in future were not deductible since the expenditure had no relation whatsoever with the existing business which was being carried on by the assessee. This court held that the expenses incurred for the purpose of launching a new project or initiating a new line of business, separate from the existing business, cannot be held to be a revenue expenditure incurred in connection with the existing business. This case is clearly distinguishable in view of the findings of fact recorded by the Commissioner of Income-tax (Appeals) as well as by the Tribunal in the case of the assessee-company. The assessee, in this case, is already engaged in the business of manufacturing and selling plywood. The travelling expenses were incurred in connection with the expansion scheme of the assessee-company to set up a new plywood factory at Kenya under the same management with common administration and control. This was not a case of a new business, separate and distinct from the existing business.;