1987 (7) TMI 31 - HC - Income Tax

Advertisement Expenditure, Appeal To Tribunal, Business Expenditure, Depreciation, Interest, Remand

Summary

Issues:
1. Remand of matter relating to depreciation allowance for assets used for scientific research.
2. Classification of expenditure under section 37(3) as capital or revenue.
3. Competence of the Tribunal to deal with waiver of interest under rules 117A and 40.
4. Admissibility of an additional ground of appeal about a higher rate of depreciation.

Analysis:

Issue 1:
The Tribunal remanded the matter to the Income-tax Officer for deciding the admissibility of depreciation allowance on assets used for scientific research in light of a Supreme Court decision challenging the vires of a retrospective amendment to section 35(2)(iv) of the Income-tax Act, 1961. The Tribunal's order left the issue open for reconsideration by the Income-tax Officer, making the first question academic.

Issue 2:
Regarding the classification of expenditure under section 37(3), the Tribunal's reference encompassed the aspect of whether the expenditure was capital in nature or not. The court found the referred question comprehensive as it involved determining if section 37(3) applies only to revenue expenditure or irrespective of the capital or revenue nature of the expenditure.

Issue 3:
The question of whether the Tribunal was competent to consider the waiver of interest under rules 117A and 40 was deemed a legal issue following a recent Supreme Court decision. The court directed the Tribunal to refer parts (b) and (c) of the question, excluding part (a) due to the Tribunal's finding that the assessee had applied for waiver of interest.

Issue 4:
The Tribunal's admission of an additional ground of appeal on a higher rate of depreciation was questioned. Citing relevant precedents, the court found the issue merited further consideration. Therefore, the Tribunal was directed to refer this question for the court's decision.

In conclusion, the application was rejected concerning questions 1, 2, and 3(a) but directed for questions 3(b), 3(c), and 4 to be referred for decision. No costs were awarded in the disposition of the application.