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16. The learned Departmental Representative has duly supported the conclusion of the ITO and stressed the ground taken by the Revenue. He filed a statement showing break up details of the consultation fees of Rs. 50,000 paid to M/s. Multiproducts. According to the statement, (i) for software development of gas agency working and selection of computer and training of personnel fees is Rs. 20,000 (ii) for management consultancy, selecting of personnel, steam lining of office work of gas agency, etc., by devising of cash flow, work chart and customer satisfaction survey and suggestions arising of responsibility, etc., for official working Rs. 25,000 and (iii) proposals for diversification new project facility on Pharmaceutical formulation Rs. 5,000. According to him, the expenditure relating to item No. (ii) amounting to Rs. 25,000 alone is attributable to the gas agency business, while the expenditure relating to item Nos. (1) & (iii) relate to new line of business and, therefore, the nature of expenditure is capital and not revenue. Therefore, he supported the order of the ITO with respect to expenditure in items Nos. (i) & (iii).

18. He also referred to the decision of the Karnataka High Court in the case of CIT vs. Karnataka State Industrial & Investment Development Corpn. (1987) 163 ITR 657 (Kar) wherein the expenditure incurred on project report and feasibility studies was held to be revenue expenditure. Reference was also made to the judgment of Supreme Court in the case of Alembic Chemical Works Co. Ltd. vs. CIT (1989) 177 ITR 377 (SC).

19. We have duly considered the submissions of the parties. At the outset, we have to make a pointed reference to the letter dt. 4th Feb., 1984 conveying agreement of M/s. Multiproducts Ltd. for rendering services to the assessee. In this letter, besides market survey, consultation and advise for the gas agency, reference is also made for future expansion project. It is for this reason that the learned Departmental Representative has furnished break up details of the fees paid to M/s. Multiproducts and argued that the expenditure relating to software development and proposal for diversification to new project facility on pharmaceutical formulation relating to different project was capital in nature. Page 34 of the paper compilation filed by the assessee contains Chapter VIII relating to future project and expansion in which it has been mentioned that there was hardly any future prospects for gas agency business because as per the prevailing rules now the ceiling limit is kept at 6,000 refill sale per month and a distributor would not be getting new connection thereafter. Therefore, no additional income other than the commission on Cylinder delivery with prevailing commission of Rs. 3.62 per cylinder delivery maximum income will not exceed Rs. 19,720 per month. Therefore, it was suggested that the ideal time for gas distributor 10 diversity is on the later part of the second year of operation. Therefore, it was suggested the project of Intravenous Transfusion solution would be economically viable and for this purpose, they enclosed the study report procured from M/s. Core Consultants. Therefore, a perusal of the entire consultancy report including suggestion for future diversification shows that the entire fees paid to M/s. Multiproducts pertained to the gas agency business carried on by the assessee only and the bifurcation of the fees into three parts made by the learned Departmental Representative is not warranted. Keeping in view the legal principles laid down in the case of M/s. Praga Tools Ltd. (supra), Karnataka State Industrial & Investment Development Corpn. (supra) and Alembic Chemical Works Co. Ltd. (supra), the expenditure incurred by the assessee is revenue in nature because the assessee is already in business and being new to the line of business, he obtained the project report for running the business more profitably and the expenditure fell in the revenue field and not in the capital field though the benefit is enduring in nature. The decision of the Supreme Court in the case of Empire Jute Co. Ltd. vs. CIT (1980) 124 ITR 1 (SC) is relied on. Accordingly, we uphold the order of the CIT(A) on this point.