COMMISSIONER OF INCOME TAX Vs. ELECON ENGINEERING COMPANY LIMITED

JUDGEMENT

(1.) IN this case, at the instance of the revenue, the following two questions have been referred to us for our opinion :

(2.) WE are concerned in this case with the assessment year 1967 -68, the previous year being the calendar year 1966. The assessee before us is a limited company. It was manufacturing engineering equipments of various kinds. In the year of account, relevant for this reference, one of its directors, Mr. S. I. Patel, was sent abroad by the company for selection of some foreign engineers with a view to start manufacture of aerial ropeways. The aerial ropeways were for transporting of machines as well as human beings. The assessee had not manufactured aerial ropeways earlier. The ITO noted that in the director's report it was clarified that the company had decided to start designing and manufacture of aerial ropeways for passenger traffic and handling materials on a turnkey basis to overcome the effects of competition and with a view to diversify its activities. The ITO, however, held that this was entirely a new line of activity and disallowed the expenditure claimed for the foreign tour expenses of the director as capital pH expenditure, the foreign tour expenses being in the same of Rs. 16,948.

(3.) THE case in CIT v. Elecon Engineering Co. Ltd. [1964] 104 ITR 510 was the case of the very same assessee as is before us. That case was in respect of assessment year 1964 -65. In that cases, it was held (headnote) :