SATISH CHANDRA, C.J. - (1.) THE assessee is a registered company engaged in aluminium industry. Assessment year with which we are concerned is 1963-64, the relevant accounting year ending on December 31, 1962.
(2.) THE assessee-company erected a factory for manufacturing aluminium in 1960-61. Actual production of aluminium was commenced at the factory on May 14, 1962. With a view to run the factory efficiently, the assessee sent 28 of its employees to U.S.A. for practical training and experience in running an aluminium factory. For this purpose the company entered into an agreement with Kaiser of U.S.A., the company which had given to the assessee the know-how, etc., for the factory. It also entered into an agreement with each of the 28 employees who were being sent for practical training to U.S.A. The agreement with the employees, inter alia, provided that after coming back from the United States, they shall work with the company at least for a period of 5 years at the settled remuneration of Rs. 570 per month. In order to effect this practical training, the assessee incurred an expenditure of Rs. 7,16,916 during the accounting period ending December 31, 1962. The assessee spread this expense over period of 5 years and claimed 1/5th of the amount, i.e., Rs. 1,43,383, as business expenditure for the asst. yr. 1963-64. The assessee-company also claimed deduction of a sum of Rs. 2,15,314 incurred by it for prospecting and searching for bauxite mines in order to enable it to obtain bauxite which was the necessary raw material for the production of aluminium at the factory. Under this head, it claimed deduction of Rs. 2,15,314 as revenue expenditure.
(3.) THE ITO disallowed both the claims on the ground that they were in the nature of capital expenditure. On appeal, the AAC confirmed the view of the ITO that the expenses were of capital nature. THE assessee took the matter in appeal to the Tribunal. THE Tribunal also rejected the submissions made on behalf of the assessee. At the instance of the assessee, the Tribunal has referred the following questions for our opinion : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the expense of Rs. 2,15,314 incurred on prospecting and investigating bauxite mines were in the nature of capital expenditure and therefore, not allowable as a deduction under s. 37 of the IT Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the expense of Rs. 7,16,916 incurred by the assessee-company for training its employees was in the nature of capital expense and, therefore, not allowable as a deduction under s. 37 of the IT Act, 1961 ?" ;