Interest on Delayed Tax Not Deductible as Business Expenditure; Technical Know-How Payment Eligible for Depreciation

The court held that interest paid under section 139(8) of the Income-tax Act for delay in filing the return is not deductible as "business expenditure" under section 37 of the Act. Therefore, the interest paid is not allowed as a deduction under sections 80V and 37(1) of the Act. Additionally, the court clarified that payment made towards technical know-how qualifies as "plant" eligible for depreciation under section 32(1)(iii) based on the definition of "plant" under section 43(3) of the Act. The court emphasized that depreciation cannot be granted if not claimed, and rejected retroactive application of subsequent amendments affecting depreciation deductions.

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Issues Involved:
1. Deductibility of interest paid u/s 139(8) of the Income-tax Act, 1961 under sections 80V and 37(1) of the Act.
2. Allowability of deduction u/s 32(1)(iii) for payment made towards technical know-how.

Issue 1:
The court held that interest paid u/s 139(8) for delay in filing the return is not deductible as "business expenditure" under section 37 of the Income-tax Act, based on the decision in Bharat Commerce and Industries Ltd. v. CIT [1998] 230 ITR 733. Therefore, the interest paid is not allowed as a deduction under sections 80V and 37(1) of the Act.

Issue 2:
Regarding the deduction claimed under section 32(1)(iii) for payment made towards technical know-how, the court analyzed the definition of "plant" under section 43(3) of the Act, which includes drawings, designs, and other literature. The court referred to the case of Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86, which clarified that such documents constitute "plant" eligible for depreciation u/s 32(1)(iii).

The court emphasized that when assets are discarded without any amount payable, the written down value becomes the actual cost of the asset. As the assessee had not claimed any depreciation for the asset, the cost of acquisition itself was considered as the written down value. The court cited the case of CIT v. Mahendra Mills [2000] 243 ITR 56, which highlighted that depreciation cannot be granted if not claimed, reinforcing the position that the cost of acquisition can be the written down value in such cases.

The court rejected the argument to consider a subsequent amendment, stating that a law coming into effect in the future cannot be applied retroactively. The court highlighted that the amendment, which aimed to remove doubts about depreciation deductions, should be considered only after it takes effect. The court reiterated that depreciation cannot be granted if not claimed, emphasizing that a privilege of claiming depreciation cannot be turned into an obligation.

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