ORDER
Dr. B.P. Saraf, J.
1. By this reference under s. 256(1) of the IT Act, 1961 made at the instance of the assessee, the Tribunal has referred the following questions of law to this Court for opinion :
“1. Whether, on the facts and in the circumstances of the case, the expenditure incurred by R.P. Kedia, C.D. Malpani, P.M. Jhaveri, R.P. Kothari to the tune of Rs. 17,222, Rs. 13,524, Rs. 30,156 and Rs. 30,507 respectively, for foreign travel for setting up new plants in foreign countries has been rightly disallowed as capital expenditure ?
2. Whether r. 19A of the IT Rules, 1962, which prescribes the mode of computing the capital employed in the undertaking for the purpose of s. 80J of the IT Act, 1961, to the extent to which it artificially narrows down the meaning of the ‘undertaking’ by excluding the money borrowed and debts owned by the assessee is inconsistent with s. 80J of the IT Act, and, therefore, invalid in law ?
3. Whether, on the facts and in the circumstances of the case, the 50 per cent of the profits of the year should be included in computation of capital employed during the year has been rightly rejected ?
4. Whether, on the facts and in the circumstances, the Tribunal is justified in not considering a portion of fixed deposit of the company in the balance sheet of various units as part of capital employed ?”
2. So far as questions 2, 3 and 4 are concerned, learned counsel for the parties fairly stated before us that the controversy in these questions is covered by the decision of the Supreme Court in Lohia Machines Ltd. vs. Union of India (1985) 152 ITR 308 (SC) : TC 25R.910 and hence all these questions may be answered in the negative and in favour of the Revenue. We answer these questions accordingly. So far as the first question is concerned, Mr. Mehta, learned counsel for the assessee, submitted that the expenditure incurred by the assessee on the foreign travel of its employees for setting up new plants in foreign country is an allowable revenue expenditure and the Tribunal was not justified in treating the same as a capital expenditure and disallowing deduction in respect of the same. Mr. Jetly, learned counsel for the Revenue, on the other hand, submitted that having regard to the ratio of the decisions of this Court in Ciba of India Ltd. vs. CIT (1993) 202 ITR 1 (Bom) : TC 17R.512, CIT vs. J.K. Chemicals Ltd. (1994) 207 ITR 985 (Bom) : TC 16R.1328 and Bralco Metal Industries Pvt. Ltd. vs. CIT (1994) 206 ITR 477 (Bom) : TC 18R.647, in the facts and circumstances of this case, the Tribunal was justified in holding that the expenditure in question was capital expenditure.
3. We have considered the above decisions. Following the ratio of the same, we are of the clear opinion that the expenditure incurred by the assessee in the instant case on the travel of its employees for setting up new plants in foreign countries was an expenditure of capital nature and the Tribunal was justified in disallowing deduction on account of the same in computation of the income of the assessee.
4. In that view of the matter, the first question is answered in the affirmative and in favour of the Revenue. We make no order as to costs.