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TMI Blog2012 (4) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue. Matter related to deletion of addition on valuation made by A.O, is restored back to Tribunal to decide afresh. Also, matter related to deduction of lease rent and depreciation on leased assets for computing eligible profits u/s 80HHC is restored back to A.O. - INCOME TAX APPEAL NO.1357 OF 2009 - - - Dated:- 21-3-2012 - DR.D.Y. CHANDRACHUD M.S.SANKLECHA, JJ. Mr.Vimal Gupta for appellant. Mr.Percy J. Pardiwala, Senior Advocate with Mr.Mohan Salian, Ms.Vaijayanta Shete and Mr.Jainuddin Khan i/b. Gagrats for respondents. ORAL JUDGMENT ( PER DR.D.Y. CHANDRACHUD, J.) 1. This appeal by the Revenue arises from a decision of the Income Tax Appellate Tribunal dated 22 March 2007; the Assessment Year to which appeal relates being AY 1994-95. The following substantial questions of law are raised by the Revenue: (A) Whether on the facts and in the circumstances of the case and in law, the ITAT is right in deleting the increase in disallowance under Rule 6D made by the A.O.; (B) Whether on the facts and in the circumstances of the case and in law, the ITAT is right in deleting disallowance of pre-operative expenses even though the said expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Assessment year 1991-92. For the aforesaid reasons upon which there is no dispute between the counsel appearing on behalf of the Revenue and the assessee, Questions (A), (B), (F) and (G) will not raise any substantial question of law. 3. As regards Questions (D) and (E), the judgment of the Tribunal would indicate that both the grounds arose in the appeal filed by the assessee against the order of the CIT(A). On Question (D), the Tribunal confirmed the order passed by the CIT(A) in paragraph 74 of its decision while on Question (E), the Tribunal confirmed the order passed by the CIT(A) in paragraph 81. In that view of the matter, since there was no appeal whatsoever by the Revenue on the findings of the CIT(A) on the aforesaid two questions where the Tribunal has confirmed the order passed by the CIT(A), no substantial question of law would arise from the decision of the Tribunal at the behest of the Revenue. 4. The appeal is admitted on Questions (C), (H) and (I). By consent the appeal is taken up for final hearing and disposal at this stage. 5. The ground which has been raised by the Revenue is whether the Tribunal was right in allowing a deduction under Section 37 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Section 35AB would stand attracted. However, the Assessing Officer gave to the assessee the benefit of a deduction under Section 35AB limited to one-sixth of the total amount of Rs.1.43 crores paid during the year which worked out to Rs.23.86 lakhs. 8. In appeal, the CIT(A) held that in so far as the first agreement dated 24 May 1993 was concerned, the amount which was paid was not for transfer of technical know-how but only in pursuance of an agreement for preliminary survey. Consequently, the Assessing Officer was of the view that the entire payment of US $ 2,00,000 which was made in the previous year relevant to the Assessment Year would not fall within the purview of Section 35AB and would be allowable under Section 37. As regards the payment made under the second agreement dated 1 October 1993, the CIT(A) held that the payment was on account of transfer of know-how and would, therefore, fall within the purview of Section 35AB. However, the CIT(A) granted to the assessee the benefit of a deduction of one-sixth of the total amount of US $ 9,00,000 in respect of which the assessee had incurred a liability towards its foreign partner. The CIT(A) held that though the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was payable upon the execution of the technical collaboration agreement on 25 June 1994. The question of law would consequently stand answered in the affirmative in favour of the assessee. 11. In so far as the second agreement dated 1 October 1993 is concerned, both the Assessing Officer as well as the CIT(A) came to the conclusion that the agreement involved a transfer of know-how and consequently fell within the purview of Section 35AB. The Assessing Officer, however, had allowed to the assessee the benefit of a deduction of one-sixth only in respect of the payments which were actually effected during the previous year relevant to the Assessment Year in question. The CIT(A) has adverted to the provisions of Section 35AB. Section 35AB, as noted earlier, refers to a situation where any lump sum consideration for acquiring any know-how for the use for the purpose of the business of the assessee has been paid in any previous year. The expression paid must be understood in the context of the provisions of Section 43(2) which defines it to mean `actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue submitted that the Tribunal has merely affirmed the correctness of the findings which were recorded by CIT(A) without any independent application of mind. We have carefully considered the submission in order to assess whether the submission should be accepted by restoring the issue before the Tribunal. Upon careful evaluation of the findings which have been recorded by the CIT(A) and as confirmed by the Tribunal, we do not find any reason or justification to do so. Moreover, the question which has been formulated on behalf of the Revenue and the ground in the memo of appeal would essentially raise an issue of whether the Tribunal was justified in allowing a deduction under Section 37 as opposed to the provisions of Section 35AB. This issue in substance would pertain only to the findings in regard to the first agreement where the claim of the deduction under Section 37 has been allowed. For the reasons which we have already indicated, the Tribunal was justified in coming to the conclusion that the provisions of Section 35AB were not attracted to the first agreement which did not relate to the transfer of know-how within the meaning of Section 35AB. We accordingly answ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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