- (1.) The only issue in this appeal is whether the disallowance of Rs. 1,70,000 is proper or not.
(2.) The assessee is a public limited company carrying on the business of manufacture and sale of billets and rolled products at its Adityapur (Jamshedpur) and Agra factories respectively. In the return the assessee claimed deduction, inter alia, in respect of fees for the preparation of feasibility report prepared by Development Consultants Pvt. Ltd. with regard to the installation of captive power station at its Jamshedpur factory. The claim was disallowed on the ground that it represented capital expenditure.
(3.) On appeal, it was contended on behalf of the assessee that due to erratic power supply, the production in Jamshedpur was being adversely affected with the result that the company had to pay the labour wages and overheads even for idle hours when there was no production. The company thought that if it had a captive power station in the factory, such a situation could be avoided. Since the feasibility of installing the captive power station had to be examined first, the company engaged M/s. Development Consultants Pvt. Ltd. and obtained from them a report thereon. After securing the report it was found that the amount required to be invested will not be economical for the company and, therefore, the proposal was dropped. It was contended that under the aforesaid facts, the fees paid for the feasibility report should be allowed as expenditure incidental to the business. It was claimed that no asset of enduring advantage was brought into existence, the proposal having been dropped. It was, therefore, contended that the expenditure cannot be treated as capital expenditure. Various authorities were cited in support of the contention.;