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Issues: Assessment of payments made to foreign companies for drawings as revenue or capital expenditure.
Analysis: The High Court of Bombay addressed the issue of whether payments made by the assessee to foreign companies for drawings were revenue or capital expenditure for the assessment years 1963-64 and 1965-66. The Appellate Assistant Commissioner disallowed the claim, considering the drawings as assets for which a price had been paid. The assessee contended that the agreements were for obtaining technical know-how, and parting with the drawings was a way to acquire it. The Tribunal upheld the claim, ruling that it was a license and not a sale, as the rights of the foreign companies were not diminished by parting with the drawings. The Commissioner sought reference, and the High Court considered previous judgments on similar agreements. Referring to the decision in Kirloskar Pneumatic Co. Ltd. v. CIT, the High Court agreed with the Tribunal's approach and conclusion. It was unnecessary to analyze the agreements further, as the Tribunal's analysis was deemed sufficient. The High Court held that the payments made to the Swiss and American companies were revenue expenditure and not capital expenditure for the respective assessment years. In conclusion, the High Court ruled in favor of the assessee, determining that the payments to the foreign companies were revenue expenditure. The Commissioner was directed to pay the costs of the reference to the assessee.
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