Law:

Section:

Section 32, read with section 33 of the Income-tax Act, 1961 – Depreciation – Allowance of - Assessment year 1958-59 – Pursuant to two separate agreements with two different foreign collaborators, royalty amounts were paid to them – Assessee claimed depreciation on royalty amount treating them as part of cost of machinery – Tribunal allowed 50 per cent of royalty payment as outright revenue expenditure and divided balance of 50 per cent into two equal parts, allowing 25 per cent as capital expenditure on which depreciation and development rebate, were admissible on which depreciation and development rebate, were admissible, and holding that balance of 25 per cent was capital expenditure on which neither depreciation nor development rebate was admissible – Whether, fifty percent of total sum being payment of royalty charges was rightly allowed deduction as revenue expenditure – Held, yes – Whether, so far as remaining fifty percent amount was concerned, since there was no material before Tribunal to hold that any part out of this fifty percent was not pertaining to errection of plant or to design and know-how for running thereof, there was no warrant for treating any part of said fifty per cent as one on which depreciation and development rebate were not admissible – Held, yes – Whether, therefore, twenty five percent sum disallowed by Tribunal, could be included in cost of machinery and plant for purpose of deprecation and development rebate – Held, yes FACTS The assessee-company was established to produce gasoline from crude oil and market the product. For this purpose, two different processes were to be utilised, for which two collaboration agreements were entered into with two different foreign collaborators on similar terms, though the first was to run till January 63 whereas the second was for 10 years. For the relevant assessment year the assessee-company claimed depreciation on the royalty amounts paid to the two foreign collaborators, treating them as part of the cost of machinery. The ITO disallowed the same holding that the payments were for use of processes and could not be added to the cost of machinery. On appeal, the AAC confirmed the decision…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492