Revenue expenditure treatment upheld for know-how fees, sales-tax set-off timing, and factory road resurfacing costs.

Technical know-how fees were treated as revenue expenditure because the same agreement had already been accepted in earlier years and no contrary basis justified departure. Sales-tax set-off and related statutory dues were held outside section 43B where the amount was not claimed in the profit and loss account and was recognised only on final adjudication under the sales-tax regime. Expenditure on asphalting and concreting factory roads was also treated as revenue, on the footing that repairs or resurfacing creating no new asset are not capital in nature.

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Issues: (i) whether technical know-how fees were deductible as revenue expenditure; (ii) whether disallowance under section 43B could be sustained in respect of sales-tax set-off and related statutory dues; (iii) whether expenditure on asphalting and concreting of roads was revenue in nature.

Issue (i): whether technical know-how fees were deductible as revenue expenditure.

Analysis: The claim had already been decided in the assessee's favour in earlier years on the same agreement, and the earlier view had been consistently followed. No contrary basis was shown to depart from that conclusion.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Issue (ii): whether disallowance under section 43B could be sustained in respect of sales-tax set-off and related statutory dues.

Analysis: The assessee followed a consistent method of accounting by recognizing the sales-tax set-off only when the sales-tax assessment was completed. The amount did not represent a claimed deduction in the profit and loss account, and the set-off was treated as becoming final only on adjudication by the sales-tax authorities. The majority view held that section 43B was not attracted to such set-off claims on the facts of the case.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Issue (iii): whether expenditure on asphalting and concreting of roads was revenue in nature.

Analysis: The expenditure was held to be covered by the jurisdictional High Court's view that repairs and resurfacing of roads within factory constituted revenue expenditure and did not amount to creation of a new capital asset.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Final Conclusion: All the substantive grounds raised by the Revenue failed, and the assessment additions in dispute were not sustained.

Ratio Decidendi: Where a liability or set-off item is not claimed as an expenditure in the profit and loss account and is accounted for only on final determination under the governing sales-tax regime, section 43B does not apply; further, expenditure on repairs or resurfacing of roads within factory may be revenue expenditure where no new asset is brought into existence.

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