Law:

Section:

Section 37(1) of the income-tax act, 1961-Business expenditure-Assessee, a non-resident company engaged in rendering technical services to oil prospecting industry, was subsidiary of another company SSO engaged in the same business along with several other companies comprising group SL-Under agreement among sister companies of SL, to avoid duplication of efforts, SSO paid part of research and development expenses of two such companies on pro rata basis-under similar agreement with SSO, assessee paid part of such expenses incurred by SSO-Whether said expenditure by assessee admissible as a revenue deduction-Held, on facts, yes Facts The assessee was a non-resident company carrying on the business of rendering technical services to oil industry engaged in prospecting and searching for oil wells. It was one of the subsidiaries of another company SSO, which, in turn, was one of the five subsidiaries of a group of companies SL, the other four being SWSC, SPE, SUR and SOC. All these companies were engaged in developing and producing equipment connected with their business of oil prospecting, etc. In order to avoid duplication of research and development activities, SL and its five subsidiaries (including SSO, the principal of the assessee), entered into an agreement on 15-12-1958 under which SSO, SUR and SOC agreed to share development and engineering expenses incurred by SWSC and SPE on pro rata basis in the ratio which their operating income from services and renting/sale of equipment to customer outside the SL group bore to the total revenue of the SL group including its subsidiaries. Further, each of three subsidiaries SOC, SCR and SSO entered into a supplementary agreement with their own subsidiaries and branches whereby the subsidiaries and branches agreed to share the development and engineering expenses on a similar pro rata basis. The assessee also executed such a supplementary agreement with its principal SSO, and in its return for the assessment years 1964-65 to 1969-70, claimed deduction of certain amounts as research and engineering expenses which it had paid in terms of the said agreement. The ITO disallowed the claim, inter alia, on the grounds: (i)…

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