1997 (11) TMI 77 - HC - Income Tax

Summary

Issues involved:
The judgment addresses various questions of law for assessment years 1971-72 and 1972-73, including the nature of certain expenditures, entitlement to depreciation, development rebate, and treatment of payments as revenue or capital expenditure.

Assessment year 1971-72:
- The court ruled that the claim for development rebate was disallowed due to the failure to create a statutory reserve as required by law.
- Expenditure on project reports and survey reports for new products was deemed capital in nature as it aimed to bring an asset or advantage into existence for enduring benefit, even though the projects did not materialize.

Assessment year 1972-73:
- Legal and professional charges related to the merger of the company were considered capital expenditure based on precedents, unless the amalgamation was necessary for the smooth and efficient conduct of the business.

Summary:
For the assessment year 1971-72, the court disallowed the development rebate claim due to the failure to create a statutory reserve and upheld the capital nature of expenditures on project and survey reports for new products. In the assessment year 1972-73, legal charges for merger were considered capital unless essential for business efficiency. The judgment clarified the distinction between revenue and capital expenditures based on enduring benefits and specific business needs, providing detailed reasoning for each decision.