Law: Income Tax Act, 1922

Section: 66(1)

- Section 66(1) - Indian Income-tax Act, 1922 CASES REFERRED TO Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax [1955] 27 ITR 34, 45; [1955] 1 SCR 972, CIT v. Ciba Pharma Private Ltd. [1965] 57 ITR 428, Parisutha Nadar v. Commissioner of Income-tax [1962] 46 ITR 1041 and Rolls-Royce Ltd. v.Jeffrey {Inspector of Taxes) [1965] 56 ITR 580, 585 (HL). JUDGMENT Hegde, J. - This is a reference under section 66(1) of the Indian Income-tax Act, 1922, to be hereinafter referred to as the "Act". The said reference was made by the Income-tax Appellate Tribunal, Bombay Bench, at the instance of the assessee. The question of law referred for the opinion of this court is : "Whether, on the facts and in the circumstances of the case, the sum of Rs. 26,713 was properly disallowed as a capital expenditure ? " 2 The assessee, the Mysore Kirloskar Limited, is a company manufacturing machine tools, workshop equipment, etc. 3. For manufacturing Capstan and Turret lathes of particular designs, the assessee entered into a collaboration agreement with M/s. Alfred Herbert Ltd., on August 1, 1958. The agreement was to last for a period of 15 years. Under clause 3 of the agreement, Herbert was to provide the assessee with manufacturing technique from time to time and also furnish two complete sets of detailed and general arrangements, drawings, material specifications and parts lists relating to the appropriate machines. Herberts had also to supply patterns, jigs, fixtures and special tools at certain agreed prices. One of the employees of Herbert was to superintend the assessee's factory and manufacture. The assessee could send its employees for training to the Herbert Company at England. Under clause 8 of the agreement, it is provided that the machines manufactured by the assessee should be sold under the trademark "Herbert Kirloskar". On the machines the assessee had also to make it clear that the machines were made for and to the designs of Alfred Herbert Limited. All information about improvements in the design, manufacture or using of the products, were to be the subject-matter of mutual communication between the assessee and Herbert. 4. Clause 12 of the agreement is the…

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