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TMI Blog1982 (3) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... sum claimed as 'research and engineering expenses' was an expenditure laid out or expended wholly and exclusively for the purposes of the assessee's business and was accordingly allowable in computing the profits of the said business?" The assessee is a non-resident company and carries on the business of rendering technical services to oil industries engaged in prospecting and searching oil wells. The assessment years are 1964-65 to 1969-70 and the relevant accounting years are the 12 months period ending on 31st March, 1963, and 30th April, 1964, respectively, for the first two assessment years and the calendar years 1964 to 1968, respectively, for the other assessment years. The assessee is one of the subsidiaries of Schlumberger Seaco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid five subsidiaries as well as SL entered into an agreement dated 15th December, 1958, under which SURENCO, OVER. SEAS and SOC agreed to bear development and engineering expenses incurred by SWSC and SPE on pro rata basis. As the total operating revenue of these companies were derived from such services, it had been provided in the agreement that development and engineering expenses should be born by the respective companies on the basis of their operating revenue bearing to the total revenue of all the Schlumberger group, of companies including their subsidiaries and branches. Each of the aforesaid subsidiaries, namely, SURENCO, OVERSEAS and SOC in turn entered into supplementary agreement with their own subsidiaries and branches wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses were charged against Indian income. There was an appeal before the AAC. The AAC dealt with the points in great detail but relying on the decision of the Supreme Court in the case of CIT v. Ciba of India Ltd. [1968] 69 ITR 692 (SC), he held that the assessee would be entitled to claim deduction under s. 37(1) of the Act. Accordingly, he deleted the aforesaid amounts from the total income of the respective years under reference. Before we deal with the order of the Tribunal it may be necessary to refer to the agreement dated the 15th December, 1958, where, after reciting that the Schlumberger companies were wholly owned by SL and offered uniform oil field services to the oil industry throughout the world, the agreement went on to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the benefits thereof and is willing to contribute its pro rata share of engineering expenses in the same manner as SOSA, and SEACO, therefore, hereby undertakes to pay this share on a monthly basis. II. The agreement dated January 1, 1959, provides that a supplemental agreement may be entered into by the parties to effectuate its purposes, and consequently this agreement is hereby made. SEACO accepts and agrees to all the terms and conditions of the earlier agreement which are made an integral part thereof, I including the date of expiration of this agreement which shall be December 31, 1974. " Being aggrieved by the order of the AAC, the Revenue went up in appeal before the Tribunal and after considering the rival contentions of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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