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Issues involved:
The judgment involves issues related to income tax assessments for multiple years, including the classification of expenditure as entertainment expenditure, the treatment of profits from the sale of dry fruits, and the payments made to foreign collaborators. Income-tax Reference No. 350 of 1975: 1. The Tribunal's decision on the classification of certain expenditures as entertainment expenditure under section 37(2) of the Income-tax Act, 1961 was challenged. 2. The treatment of technical fees paid to foreign collaborators as revenue or capital expenditure was in question. 3. The eligibility of profits earned from the sale of imported dry fruits for relief under section 80E/80-I of the Income-tax Act, 1961 was disputed. Income-tax Reference No. 39 of 1975: 1. The Tribunal's ruling on whether profits from the sale of dry fruits were 'attributable to' the priority industry of manufacturing and selling oil engines under section 80-I of the Income-tax Act, 1961 was contested. 2. The classification of technical fees paid to foreign collaborators as revenue or capital expenditure was under scrutiny. Judgment Details: The High Court analyzed the connection between profits from the sale of dry fruits and the priority industry, emphasizing the need for a close link to qualify for relief under section 80-I. The court disagreed with the Tribunal's broad interpretation of the term "attributable to" and ruled that the profits were not directly linked to the priority industry. Regarding payments to foreign collaborators, the court referred to previous judgments and held that fees paid for technical information and know-how constituted revenue expenditure. Thus, the fees paid by the assessee to its foreign collaborators were deemed allowable revenue expenditure. In the case of disputed entertainment expenditure, the court found that the seminar and related expenses were incurred in connection with the assessee's business activities, not as entertainment expenditure. Consequently, the court ruled in favor of the assessee on all issues except for the eligibility of profits from the sale of imported dry fruits for relief under the Income-tax Act, where the ruling favored the Revenue. The court provided detailed reasoning for each issue, citing relevant legal provisions and precedents to support its conclusions.
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