1983 (7) TMI 6 - HC - Income Tax

Summary

Issues:
1. Computation of relief under section 80J of the Income-tax Act for assessment years 1968-69 and 1969-70.
2. Entitlement to deduction under section 35A of the Income-tax Act for the assessment year 1969-70.

Analysis:

Issue 1: Computation of relief under section 80J:
The assessee raised a question regarding the computation of relief under section 80J of the Income-tax Act for the assessment years 1968-69 and 1969-70. The contention was based on whether the liabilities should be deducted while calculating the relief. The court referred to rule 19A of the Income-tax Rules, which provides for the exclusion of borrowed money and debts from the computation of capital. The court analyzed a previous decision where it was held that borrowed money could be considered as part of the capital employed. However, the court noted that not all liabilities can be automatically treated as part of the capital employed. The nature of the debt or liability must be assessed to determine if it has contributed to the augmentation of capital. As the authorities had not investigated the nature of the liabilities incurred by the assessee, the court concluded that further examination was needed. The Tribunal was directed to reevaluate the case and determine if the liabilities in question had indeed augmented the capital. Therefore, the question regarding the computation of relief under section 80J remained unanswered pending further investigation.

Issue 2: Entitlement to deduction under section 35A:
The assessee claimed a deduction under section 35A of the Income-tax Act for the assessment year 1969-70, relating to a payment made to a foreign company for technical know-how. The Income-tax Officer allowed a partial deduction, but the Appellate Assistant Commissioner and the Tribunal denied the deduction entirely. The court observed that for claiming the benefit under section 35A, the assessee needed to show that the payment was for acquiring patent rights or copyrights. The agreement between the assessee and the foreign company did not indicate the acquisition of patent rights or copyrights. As such, the court agreed with the lower authorities that the assessee was not entitled to the relief under section 35A as there was no evidence of acquiring patent rights or copyrights. Therefore, the court answered the question in the negative and against the assessee, denying the deduction under section 35A.

In conclusion, the judgment addressed the issues raised by the assessee regarding the computation of relief under section 80J and entitlement to deduction under section 35A. The court directed further investigation into the nature of liabilities for the computation of capital under section 80J, while denying the deduction under section 35A due to the lack of evidence of acquiring patent rights or copyrights.