JUDGMENT JUDGMENT judgment of court was delivered by G. G. SOHANI J.--By this reference under section 256(1) of Income-tax Act, 1961 (hereinafter referred to as " Act"), Incometax Appellate Tribunal, Indore Bench, has referred following question of law to this court for its opinion: " Whether, on facts and in circumstances of case, Income- tax Appellate Tribunal was justified in holding that expenditure incurred by managing director and business executive of assessee-company on their tour to Mauritius amounting to Rs. 20,270 was intimately connected with business of assessee-company and hence was allowable as business expenditure in respect of assessment year 1979-80? " material facts giving rise to this reference, briefly, are as follows: assessee is limited company carrying on business of manufacturing flour mill products, foodstuff, oil products, etc. For assessment year 1979-80, assessee claimed sum of Rs. 20,270, being amount of travelling expenses for Mauritius trip of managing director and chief executive, as business expenditure. It was contended before Inspecting Assistant-Commissioner that trip to Mauritius was undertaken for purpose of helping Mauritius Government in setting up flour mill in that country. Inspecting Assistant Commissioner held that work done by managing director was in nature of consultancy service and that there was no clause in memorandum of association authorising assessee to undertake job of consultancy. Inspecting Assistant Commissioner also noted that no report was submitted to Reserve Bank of India. Inspecting Assistant Commissioner accordingly disallowed claim of assessee in that behalf. On appeal, Commissioner of Income-tax (Appeals) upheld disallowance. Commissioner held as follows: "The next objection of appellant for assessment year l979-80 is against disallowance of Rs. 20,270 out of travelling expenses incurred by managing director and chief executive on their tour to Mauritius. It was explained before Inspecting Assistant Commissioner (Asst.) that both managing director and chief executive of company were authorised by board resolution to undertake tour to Mauritius to explore possibility of setting up flour mill in Mauritius with appellant's collaboration. trip of managing director and chief executive was of 8 days' duration and cost company sum of Rs. 20,270. I find that managing director and chief executive who went to Mauritius on definite mission did not submit their report to board of directors regarding work which had actually been done by these persons to justify payment of travelling expenses. Inspecting Assistant Commissioner (Asst.) has rightly observed that trip was undertaken for helping Mauritius Government in erecting or setting up flour mill in that country which was in nature of consultancy job. Since consultancy service was no part of appellant's business, it was clearly not admissible. Since expenditure was incurred for exploring possibility of export of technical know-how which did not pertain to sphere of business activities of company, expenditure was clearly not allowable, being either of capital nature or not connected with business of company. disallowance by Inspecting Assistant Commissioner (Asst.) was just and proper which is accordingly confirmed." On further appeal before Tribunal, Tribunal referred to clauses IA and ID of memorandum of association of assessee and held that imparting technical know-how was business of company. Tribunal, therefore, took view that expenditure incurred by assessee on trip undertaken by managing director and chief executive to Mauritius was intimately connected with business of assessee-company and was, therefore, allowable as business expenditure. Tribunal, therefore, allowed appeal preferred by assessee in that behalf. Aggrieved by that order, Revenue sought reference and it is at instance of Revenue that aforesaid question of law has been referred to this court for its opinion. For holding that expenditure in question was intimately connected with business of assessee, Tribunal referred to provisions of clauses IA and ID of objects clause of memorandum of association of assessee. These clauses are as follows: " 1A. To carry on at any place or places in India or elsewhere in world by itself or in collaboration with any other body corporate or otherwise of any other country, business of manufacture, and to assemble, repair, buy, sell, re-sell, exchange, import, export, distribute or deal in all kinds of plant and machineries, relating to objects of company and tools, implements and any other materials of whatsoever kind used in or conducive to manufacture or use of such machinery. ID. To acquire, develop and impart technical and managerial now-how in machineries, engineering, chemicals, food, animal feed, milling and other connected industries either by itself or in collaboration with others in India or elsewhere in world." It was, however, conceded before us by learned counsel for assessee that aforesaid clauses were inserted in memorandum of association on April 27, 1981, and were not in existence during assessment year in question. In these circumstances, on basis of aforesaid clauses in memorandum of association, Tribunal was not right in holding that expenditure in question was intimately connected with business of assessee. fact that consultancy was not business of assessee at relevant time was not disputed before us. Learned counsel for assessee, however, referred to following resolution of assesseecompany authorising managing director and chief executive to incur expenditure in connection with Mauritius trip: "Resolved unanimously that (1) Shri Jasbirsingh G. Bhandari, managing director, and (2) Shri Jambookumar G. Bhandari, chief executive of company, be deputed to Mauritius to take part in negotiations for setting up flour milling industry on turnkey basis for and on behalf of company with Mauritius Government and/or any other party connected therewith and, if possible, finalise negotiations in interests of company, as they deem fit. It is further resolved that all expenditure on this travel by both these persons be and is hereby approved to be borne by company." From aforesaid resolution, it is clear that Mauritius trip was undertaken for initiation of new business and not for expansion of business carried on by assessee. It would, therefore, be in nature of capital expenditure as rightly held by Commissioner of Income-tax (Appeals). In this view of matter also, Tribunal was not right in holding that amount of Rs. 20,270 was allowable as business expenditure in respect of assessment year 1979-80. For all these reasons, our answer to question referred to this court is in negative and in favour of Revenue. In circumstances of case, parties shall bear their own costs of this reference. *** COMMISSIONER OF INCOME TAX v. FLOUR & FOOD LTD.