1983 (12) TMI 120 - AT - Income Tax

Summary

Issues:
- Allowance of development rebate on technical know-how fees
- Capitalised amount on account of exchange rate fluctuations
- Jurisdiction of the Income Tax Officer (ITO) to entertain claims for development rebate
- Admissibility of development rebate on technical know-how fees
- Entitlement for development rebate on exchange fluctuations

Analysis:

The appeal involves Hindustan Polymers Ltd. objecting to the order of the Commissioner (Appeals) regarding the allowance of development rebate on technical know-how fees and capitalised amount on account of exchange rate fluctuations for the assessment year 1974-75. The ITO initially disallowed the development rebate due to lack of necessary vouchers, but the first appellate authority sent the matter back to the ITO for further consideration. The ITO, on the second occasion, denied the rebate, leading to the appeal. The jurisdiction issue arose as the department argued that the ITO's scope was limited to specific items, while the assessee claimed the entire development rebate issue was restored to the ITO. The ITAT held that the assessee could claim a higher or lesser rebate on any items it deemed eligible, as the entire issue was sent back to the ITO. The ITAT further stated that the jurisdiction question was academic due to a loss for the year, and the development rebate could be claimed in a later year when profits allowed for a reserve creation.

Regarding the admissibility of development rebate on technical know-how fees, the ITAT agreed with the first appellate authority's decision that such rebate is permissible. However, as the ITO did not delve into this aspect in detail, the ITAT remitted the question back to the ITO for further assessment. On the issue of entitlement for development rebate on exchange fluctuations, the ITAT referred to a recent decision of the Andhra Pradesh High Court that supported the assessee's entitlement to the rebate even outside the provisions of the Income-tax Act. Consequently, the ITAT remitted this claim to the ITO for processing based on the principles claimed by the assessee. The appeal was treated as allowed for statistical purposes, concluding the judgment.