1993 (1) TMI 42 - HC - Income Tax

Summary

Issues:
1. Whether technical fees and drawing charges are revenue or capital expenditure for the assessment years 1970-71, 1971-72, and 1973-74.
2. Allowability of depreciation on capital assets used for scientific research for the assessment year 1973-74.

Analysis:

Issue 1 - Technical Fees and Drawing Charges:
The case involved determining whether technical fees and drawing charges paid by the assessee were revenue or capital expenditure for the assessment years 1970-71, 1971-72, and 1973-74. The Tribunal allowed the deductions, considering them as revenue expenditure, while the Revenue argued they were capital expenditure due to enduring benefits derived. The assessee relied on previous court decisions in its favor, emphasizing that the payments did not result in acquiring enduring assets. The court agreed with the assessee, citing consistency with previous decisions and the Supreme Court's guidance on determining revenue vs. capital expenditure. The court held that the payments were revenue expenditure, affirming the Tribunal's decision.

Issue 2 - Depreciation on Capital Assets for Scientific Research:
Regarding the claim for depreciation on capital assets used for scientific research in the assessment year 1973-74, the Income-tax Officer initially rejected the claim, but the Tribunal allowed it. However, following a recent Supreme Court decision in the case of Escorts Ltd. v. Union of India, the court ruled in favor of the Revenue, stating that the claim for depreciation on assets used for scientific research was not allowable. The court, based on the latest Supreme Court decision, answered this question against the assessee and in favor of the Revenue.

In conclusion, the court held that the technical fees and drawing charges were revenue expenditure, supporting the assessee's position. However, the claim for depreciation on capital assets used for scientific research was disallowed based on the recent Supreme Court decision. No costs were awarded in this case.