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TMI Blog2002 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... l was right in law in confirming the order of the Commissioner of Income-tax (Appeals) allowing the assessee's claim in respect of the provision for bad and doubtful debts and interest thereon, even though the same was not written off and no debit was made to the profit and loss account and no credit to the debtors account and the provisions of section 36(1)(vii) were not attracted?" X X X X Extracts X X X X X X X X Extracts X X X X ..... ore. It was contended that this expenditure was for setting up a plant and, therefore, the assessee claimed depreciation and investment allowance. However, the Assessing Officer rejected the claim of the assessee. The Assessing Officer held that the payment of know-how fees was not for setting up a plant. The Assessing Officer, however, applied the provisions of section 35AB and granted deduction of 1/6th of the technical know-how fees. Being aggrieved, the assessee carried the matter before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) came to the conclusion that in view of the Explanation to section 35AB, the words 'know-how" would mean technological or industrial information which was likely to assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e light of the factual findings given by the first appellate authority and the Tribunal. In the case of Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86, the Supreme Court has laid down that where a capital asset of technical know-how was acquired by the assessee then such capital asset became a, tool of the assessee's trade with which he carried on his business. In that case, the assessee entered into collaboration agreement with a foreign company for manufacture of microscopes. Under that agreement, the foreign collaborator agreed to supply to the assessee all technical know-how required for the manufacture of microscopes. The question which arose before the Supreme Court was whether the documentation supplied by the foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of Scientific Engineering House P. Ltd. [1986] 157 ITR 86 is squarely applicable to the facts of the case. In the circumstances question No. 1 referred to above is answered in the affirmative, i.e., in favour of the assessee and against the Department. Therefore, the assessee has been rightly given the benefit of depreciation and investment allowance. However, before concluding it may be mentioned that the assessee had also asked for deduction of 1/6th over a period of six years under section 35AB of the Income-tax Act but the same has been disallowed on the ground of non-applicability of section 35AB which was pressed into service by the Assessing Officer in his assessment order. It was held by the Tribunal that sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the assessee could be treated as a write off. In the case of Vithaldas H. Dhanjibhai Bardanwala [1981] 130 ITR 95, one of the questions which arose for determination before the Gujarat High Court was whether the Tribunal was right in holding that the bad debts of Rs. 54,145 and Rs. 10,807 for the assessment years 1967-68 and 1969-70 were not written off as per section 36 of the Income-tax Act. It was argued on behalf of the Department that there was a difference between the writing-off of an actual debt and making a provision for the same. It was argued on behalf of the Department that in that case the assessee had only made a provision and had not actually written-off the debt. In that case, the assessee had debited the amount to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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