9911796707
TMI Blog1982 (5) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... confined to the process of manufacturing the end product only and not for structural aspect of the plant and mechinery. During the course of the assessment proceedings, the ITO had disallowed the assessee's claim for depreciation on technical khow-how in respect of Styrene Monomer Plant and Polystyrene Plant. The claim for depreciation in respect of the first plant was for ₹ 1,30,432 and the second plant was ₹ 31,886 for the assessment year 1973-74. For the assessment year 1976-77, the assessee's claim was for ₹ 95,086 and ₹ 27,621. The ITO has not indicated in his assessment orders why he has refused to allow depreciation on these plants. This issue had come up for the earlier years before the Tribunal for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act when the formula and process thereof was developed by Shri Ram Institute and the assessee had incurred the expenditure on the pilot plant to find out the technical and financial viability of producing the final product viz. ABS Resin on commercial basis. The assessee's claim for the three years amounted to ₹ 1,17,973 for the assessment year 1974- 75, ₹ 6,02,932 for the assessment year 1975-76, and ₹ 35,368 for the assessment year 1976-77. The assessee had purchased khow-how from Shri Ram Institute because the company intended to manufacture 2000 M.Tonnes of A.B.S.Resins and had set-up a pilot project for research and development section in this respect. Such a pilot project was necessary to test the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under section 35 of the Income-tax Act. The research was carried on by Shri Ram Institute. All that the assessee did was trying out the scientific formula received by the assessee from Shri Ram Institute. On behalf of the assessee, Shri Mehta has submitted that all that assessee received from Shri Ram Institute was the scientific formula for ABS Resins. It was required to be tried out whether the resins could be produced in a factory on a commercial basis. For this purpose, the pilot project had to be set up and a trial production had to be tried out. This expenditure was ordinarily covered by section 35 of the Income-tax Act and the Commissioner (Appeals) was justified in allowing the assessee's claim. 6. We have carefully con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and it did not secure for the assessee any new, or permanent advantage of an enduing nature. The ITO rejected assessee's claim. The Commissioner (Appeals) on considering the facts and the nature and the extent of the assessee's business, directed that the expenditure should be treated as the revenue nature and he allowed the assessee's claim in this respect. 8. The revenue is in appeal. It was stated that a new bund was constructed and a new pipe was laid for preventing pollution of the river. This was a capital work. On behalf of the assessee, it was submitted that considering the extent of the assessee's business and income and the value of the total assets of the assessee and also considering the fact that in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1974-75 is concerning the order of the Commissioner (Appeals) directing that deduction under section 80 MM was to be allowed in relation to the gross receipt from technical khow-how and not on the net income there from, as held by the ITO. We find that the Commissioner (Appeals)'s order in this respect follows the Supreme Court decision in the case of Cloth Traders Pvt. Ltd. v. Commissioner (1979) 118 ITR 243 (SC). During the course of the hearing of the appeal, it was not brought out on behalf of the revenue that how the case was not covered by the aforesaid Supreme Court decision. We, therefore, decline to interfere with the order of the Commissioner (Appeals) in this respect. 11. The next ground of appeal for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he process of polystrene considerable amount of heat was generated and for removing heat cooling water was used which had the effect of condensing hydrocarbon vapours by indirect contract in various heat exchange Rs. Thus water was used for cooling molten polymer strands by direct contain as they emerged from the polymerization train. It was urged on behalf of the assessee before the Commissioner (Appeals) that in the view of these facts the water storage ponds were in effect water reservoirs which were part of the plant necessary for the manufacturing process of the assessee. The Commissioner (Appeals) accepted this argument and directed that depreciation at the rate of 15 per cent should be allowed on the value of the pond. Since the main ..... X X X X Extracts X X X X X X X X Extracts X X X X
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