1985 (10) TMI 87 - HC - Income Tax

Tribunal's Favorable Decisions on Income-tax Act References

The Tribunal's decisions in three references under section 256(1) of the Income-tax Act for assessment years 1966-67, 1968-69, and 1969-70 favored the ... Actual Cost, Business Expenditure, Company, Depreciation Issues involved:The judgment involves three references under section 256(1) of the Income-tax Act, 1961, pertaining to assessment years 1966-67, 1968-69, and 1969-70. The issues include the treatment of interest and expenses on a loan, bifurcation of compensation paid to foreign collaborators, allowance of depreciation on roads and fencing, and the treatment of perquisites paid to an employee under sections 40(c)(iii) and 40(a)(v) of the Income-tax Act.Assessment year 1966-67:The Tribunal was justified in adding interest and expenses on a loan to the actual cost of machinery for depreciation. The balance amount of compensation paid to foreign collaborators was correctly treated as part of the actual cost of the plant for depreciation. The Tribunal was right in allowing depreciation on roads and fencing as part of the factory building.Assessment years 1968-69 and 1969-70:The Tribunal correctly held that perquisites paid to an employee were not to be considered under section 40(c)(iii) or section 40(a)(v) of the Income-tax Act, leading to the deletion of disallowance by the Income-tax Officer.The amount spent for purchasing technical know-how was considered revenue expenditure based on precedents and the nature of the expenditure. The salary paid to the employee was exempted from tax under section 10(6) of the Act, leading to the conclusion that perquisites were not to be included under section 40(c)(iii) or section 40(a)(v) of the Act.The decision was based on legal interpretations and precedents, including the treatment of technical know-how expenditure as revenue, and the exclusion of perquisites from taxable income under specific sections of the Income-tax Act. The Tribunal's rulings were upheld, and all questions were answered in favor of the assessee.