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TMI Blog2011 (5) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1981-1982 and allowed the deduction - Tribunal should have decided on merits the admissibility of the expenditure in terms of the then prevailing provisions of the Act. - matter remanded back to tribunal. Expenditure on providing food and beverages to employees in a guest house - tribunal decision allowing the deduction not disturbed Capital Expenditure - payment made for acquiring technical know-how from a foreign collaborator to set up a new plant - Tribunal came to the conclusion that 50% of the expenditure incurred by the assessee was on in the nature of capital expenditure while the balance was on revenue account - The matter is remanded to the Tribunal to do the needful in this regard - The appeal is disposed of - ITR No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance of the agreement dated 21.01.1980, 50% was capital expenditure and 50% was revenue expenditure? Question no.(i) 2. In so far as the first question is concerned, the brief facts are as follows :- (i). The assessee had in his books of accounts credit balances favouring several parties. During the accounting year in issue, these credit balances which amounted to a sum of Rs.1,94,965/- were written off. The Assessing Officer brought these amounts to tax under section 41(1) of the Income Tax Act, 1961 (in short, IT Act). The Assessing Officer‟s order was sustained by the Commissioner of Income Tax (A) [in short, CIT (A)]. The matter was carried in appeal to the Income Tax Appellate Tribunal ( in short, the Tribunal). The Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the assessee‟s own case in assessment year 1981-82. The relevant facts are thus deducible from the Tribunal‟s order passed in the assessment year 1981-1982. It appears, the assessee had acquired capital assets used for scientific research vis- -vis a project carried on by the assessee, in its research division, in Kota. These assets were purchased from time to time and the assessee sought to claim deduction under section 35(4) of the IT Act in respect of the said assets only in the year in which the asset was put to use‟ for research. It appears this method was acceptable to the revenue till assessment year in issue i.e., A.Y. 1982-1983. The Assessing Officer for the first time held that a claim of Rs.1,86,49,403/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own order passed in assessment year 1981-1982 and allowed the deduction. 5. Mr. Sahni appearing for the revenue has contested this position. Mr. Sahni has submitted before us that the only issue which arose for consideration in Assessment Year 1981-1982 was whether the assessee was right in claiming the deductibility of the expenditure in A.Y. 1982-1983 as against that found by the Assessing Officer whereby he had veered to the position that the expenditure was claimable in the A.Y. 1981-1982. Mr. Sahni further contended that the Tribunal should have decided on merits the admissibility of the expenditure in terms of the then prevailing provisions of the Act. In this regard, Mr. Sahni referred to the provisions of section 35(2)(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t its attention to the impact of the said provision which were not noticed in the order of the Tribunal rendered in respect of A.Y. 1981-82. 6.1 In these circumstances both counsels agreed that the matter be remanded to the Tribunal. It is ordered accordingly. The Tribunal shall re-examine the issue. While re-examining the issue, it will examine its decision rendered in respect of A.Y. 1981-82 in the light of the provisions of section 35(2)(ia) of the IT Act. Question no.(iii) 7. In so far as question no.(iii) is concerned, the Tribunal has merely followed its decision in A.Y. 1981-82. The revenue has not been able to inform us as to whether the decision rendered by the Tribunal on the same issue in the A.Y. 1981-82 was challenged bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all these documents and informations would be utilized for the erection and operation of the plant. 68. On the above analysis, having found as a fact that a part of the payment related to the design for the erection of the plant we cannot accept the assessee‟s contention that the entire amount is revenue in nature. Neither can we accept the Department contention that the entire amount is capital in nature. A part of the know-how is definitely relatable to the process of manufacture and, therefore, it would be governed by the principle in Alembic Chemical Works‟ case. So, a suitable allocation must be made between the capital and revenue. On this point, unfortunately, neither the Department, or the assessee has addressed us. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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