2012 (9) TMI 481 - SC - Income Tax

Claim of revenue expenditure u/s 37 - assessee had actually imported the knowhow - claim of the assessee for deduction of earlier years expenditure pertaining to AY 1991-1992 cannot be allowed in AY 1992-1993 - Held that - No view on the applicability of Section 35AB or Section 37 is required as during the pendency of this civil appeal, the assessee has got deduction u/s 37 as claimed, thus at this point of time, it would not be fair to ask the assessee, who has already got deduction under Section 37 to re-work and claim the benefit under Section 35AB on the basis of amortization of capital expenditure - against revenue.

Issues:
1. Claim of deduction for revenue expenditure under Section 37 of the Income Tax Act, 1961 for Assessment Year 1992-1993.
2. Dispute regarding the timing of liability for payment to a Japanese company.
3. Interpretation of the decision by the Income Tax Appellate Tribunal (ITAT).
4. Applicability of Section 35AB and Section 37 of the Income Tax Act.
5. Validity of the ITAT decision and its impact on the civil appeal.

Analysis:
1. The case revolved around the assessee's claim for deduction of Rs.65,44,703 as revenue expenditure under Section 37 of the Income Tax Act for Assessment Year 1992-1993. The Assessing Officer contended that the liability for payment to a Japanese company occurred in the previous year, disallowing the deduction for the current year. However, the ITAT disagreed and allowed the deduction with a condition to withdraw a portion of it in subsequent years to prevent double deduction.

2. The dispute primarily focused on the timing of the liability for payment to the Japanese company. The Assessing Officer argued that the liability arose in the previous assessment year, while the ITAT concluded that the deduction should be allowed in the current year under consideration, i.e., Assessment Year 1992-1993, based on a comprehensive analysis of facts and legal principles.

3. The ITAT's decision, as outlined in Paragraph 9.21 of its order, emphasized the need to prevent double deduction and specified the conditions under which the deduction for the expenditure should be allowed in the current year while adjusting it in subsequent years. This decision was crucial in resolving the dispute between the assessee and the tax authorities regarding the treatment of the expenditure.

4. The Supreme Court refrained from expressing a view on the applicability of Section 35AB or Section 37 of the Act in this case, given that the assessee had already obtained deduction under Section 37 during the appeal process. The court acknowledged doubts about the validity of the ITAT decision but decided not to compel the assessee to rework the claim under a different section at that stage.

5. Ultimately, the civil appeal filed by the Department was dismissed by the Supreme Court, with no order as to costs. The court opted to keep the question of law open, considering the specific circumstances of the case and the fact that the assessee had already availed the deduction under Section 37 of the Income Tax Act for the relevant assessment year.

← Previous Next →