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2018 (12) TMI 1399 - HC - Income TaxNature of expenditure - technical knowhow expenditure - revenue or capital expenditure - only objection of the Assessing Officer was that by virtue of the amendment in Section 32, this position would no longer be valid - Held that - AO did not seriously dispute that the expenditure was in the nature of revenue expenditure. We notice that by virtue of such amendment in subsection (1) of Section 32 sub clause (ii) of subsection (1) of Section 32 merely grants depreciation on the listed intangible assets, in absence of which, the assessee would not be entitled to such depreciation. This provision however, cannot be pressed in service to examine whether certain expenditure for acquisition of know-how or similar intangible asset is revenue or capital expenditure. It would depend on the nature of expenditure. If it is a capital expenditure, it will be eligible for depreciation in terms of Section 32(1) of the Act. If it is revenue expenditure and expended wholly or exclusively for the purpose of the business, in any case, the assessee would be entitled to deduction thereof. Income accrued in India - attempt to tax the income in the hands of the assessee in relation to the assessee's units situated at USA and UK - Held that - Nothing is available on record to indicate any challenge by the Revenue to the order of the Tribunal for Assessment Years 199697 and 1997-98 before any higher forum. It therefore follows that the orders of the Tribunal on the above issue for the Assessment Years 1996-97 and 1997-98, have been accepted by the Revenue. Therefore, the Revenue can have no grievance with the impugned order of the Tribunal as it merely follows its earlier orders which have been accepted. Further, no distinguishing features in the present Assessment Year from that existing in the Assessment Years 1996-97 and 1997-98 have been brought to our notice which would justify our taking a different view on this issue for the subject Assessment Year.
Issues:
1. Technical knowhow expenditure treated as revenue expenditure 2. Taxability of profit from US and UK branches 3. Restoration of taxability issue of sale tax exemption benefit 4. Entertaining additional ground without prior mention Analysis: 1. Technical Knowhow Expenditure: The issue revolved around whether technical knowhow expenditure should be considered as revenue or capital expenditure. The Tribunal remanded the matter back to the Assessing Officer for fresh consideration in light of a previous judgment. The Revenue objected, arguing that the issue was raised for the first time before the Tribunal. However, the Court held that as long as material exists on record, a new contention can be raised. The Court emphasized that the nature of the expenditure determines its treatment, irrespective of the amendment in Section 32. Ultimately, the Court did not entertain this question. 2. Taxability of Profit from US and UK Branches: The Assessing Officer attempted to tax the income from the assessee's units in the USA and UK. However, the CIT(A) and Tribunal ruled that this income was not taxable in India, citing Double Taxation Avoidance Agreements. The Revenue challenged this decision, but the Court noted that similar issues were previously decided in favor of the assessee. The Court held that without any new distinctions in facts, the Revenue could not challenge the issue further. The Court dismissed the tax appeal on this ground. 3. Restoration of Taxability Issue of Sale Tax Exemption Benefit: The Tribunal restored the issue of taxability of sale tax exemption benefit back to the Assessing Officer for fresh consideration. The Revenue objected, claiming that the issue was raised for the first time before the Tribunal. The Court noted that the Tribunal had the authority to remand the issue for fresh assessment. The Court highlighted that the Revenue had previously challenged similar orders but failed to provide any distinguishing features for the current assessment year. The Court dismissed the appeal, upholding the Tribunal's decision. 4. Entertaining Additional Ground Without Prior Mention: The Tribunal entertained an additional ground raised by the assessee, concerning the treatment of sales tax exemption benefit as revenue receipt. The Revenue objected, stating that the issue had attained finality and should not have been permitted. The Court held that if material exists on record, a new contention can be raised. The Court emphasized that it was for the assessee to present relevant clauses of the subsidy for assessment. The Court dismissed this question, emphasizing the need for a decision in accordance with the law. In conclusion, the High Court dismissed the Revenue's appeal on various grounds, including technical knowhow expenditure, taxability of profit from overseas branches, restoration of taxability issues, and entertaining additional grounds. The Court's decision was based on legal interpretations, previous judgments, and the need for proper assessment in line with the law.
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