1993 (2) TMI 85 - HC - Income Tax

Business Expenditure Depreciation Disallowance Export Market Development Allowance Roads Scientific Research Weighted Deduction

Summary

Issues:
1. Whether cash payments made by the assessee to its employees for medical expenses should be considered for computing disallowable expenditure under section 40A(5) for the assessment years 1972-73 and 1973-74.
2. Whether weighted deduction under section 35B was allowable for the assessment years 1972-73 and 1973-74 in respect of commission amounts.
3. Whether roadways in the factory premises should be treated as 'plant' for granting depreciation and development rebate for the assessment years 1972-73 and 1973-74.
4. Whether the assessee's claim for depreciation in respect of assets used for scientific research, on which relief under section 35 was already allowed in earlier years, is justified.

Analysis:
1. The judgment addressed cross-references with questions referred by the Tribunal under section 256(1) of the Income-tax Act, 1961. The first issue involved whether cash payments made by the assessee to its employees for medical expenses should be considered for computing disallowable expenditure under section 40A(5) for the assessment years 1972-73 and 1973-74. The court ruled in favor of the assessee based on a previous decision in CIT v. Indokem P. Ltd. [1981] 132 ITR 125, answering the question in the negative, against the Revenue.
2. The second issue concerned whether weighted deduction under section 35B was allowable for the assessment years 1972-73 and 1973-74 in respect of commission amounts. The court referred to the decision in CIT v. Gwalior Rayon Silk Mfg. Co. Ltd. [1992] 196 ITR 149 and held that the commission paid to the German company was not eligible for weighted deduction under section 35B, ruling in favor of the Revenue.
3. The third issue involved whether roadways in the factory premises should be treated as 'plant' for granting depreciation and development rebate for the assessment years 1972-73 and 1973-74. The court decided that roadways within the factory premises should be treated as "buildings" for depreciation purposes, following the decision in Escorts Ltd. v. Union of India [1993] 199 ITR 43, thereby disallowing development rebate on such assets.
4. The final issue addressed the assessee's claim for depreciation in respect of assets used for scientific research, on which relief under section 35 was already allowed in earlier years. The court concluded that the commission paid to the German company did not qualify for weighted deduction under section 35B as it was considered compensation, not commission for services related to export to the U. S. S. R. The court ruled in favor of the Revenue, denying the weighted deduction claimed by the assessee.