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Issues involved:
The judgment addresses three main issues raised by the Tribunal at the instance of the Revenue: 1. Whether the transactions described as hundi are actually hundi transactions. 2. Whether section 69D can be applied when the identity is established and the loan is genuine. 3. Whether a proportionate deduction under section 35(1)(iv) read with section 35(2) can be granted for research-related equipment. Issue 1: Hundi Transactions The assessee, a company, had hundi transactions noted during assessments for 1981-82 and 1982-83. The Income-tax Officer and Commissioner held these as hundi transactions, invoking section 69D. However, the Tribunal, based on established tests, determined that the transactions were not hundis. The court upheld this decision, citing the absence of the essential characteristics of a hundi transaction. Issue 2: Application of Section 69D The Tribunal's decision in a related case was crucial in determining the application of section 69D. The court emphasized the need for specific characteristics to classify a transaction as a hundi, ultimately ruling in favor of the assessee and against the Revenue based on the established tests. Issue 3: Deduction for Research Equipment Regarding the deduction claimed for plant and machinery used in research and development, the Income-tax Officer initially rejected the claim. However, the Commissioner and Tribunal partially allowed the deduction, considering the continuous nature of research and development in the company's electronic business. The court upheld this decision, emphasizing that the expenditure need not be wholly and exclusively used for research and development as per the relevant provisions of section 35. In conclusion, the court ruled in favor of the assessee on all three issues, highlighting the importance of specific characteristics in determining hundi transactions and the eligibility for deductions related to scientific research under section 35 of the Income-tax Act.
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