TaxTMI 
TaxTMI 
2010 (1) TMI 85
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....of law: "Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the expenses incurred to get technical know-how is fully allowable under section 37 of the Income-tax Act, 1961?" 3. The assessee is a company engaged in the manufacture of textile machinery accessories like transmission belts, cots and aprons, loom components, etc. The relevant assessment year is 1995-96 and the corresponding accounting year ended on March 31, 1995. The assessee filed its return of income on November 29 1995, declaring income of Rs. 21,39,740. The Assessing Officer sent intimation under section 143(1) (a) of the Income-tax Act, 1961, on March 11,1996. Subsequently, notice under section 143(2) of the....
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....d disallowed the balance portion and in support of his contention he relied on the decision of this court in the case of CIT v. Tamil Nadu Chemical Products Ltd. reported in [2003] 259 ITR 582 and CIT v. Drilcos (India) P. Ltd. reported in [2004] 266 ITR 12. Therefore, the order passed by the Tribunal is not in accordance with law and the same has to be set aside. 5. The learned counsel appearing for the assessee submitted that once the expenditure incurred is revenue expenditure, it has to be allowed under section 37 of the Act and the Tribunal is correct in allowing the said deduction and has also relied on the decision of the apex court in the case of CIT v. Swaraj Engines Ltd. reported in [2009] 309 IIR 443 in support of his contention....
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....ll raised. In this regard, the order of the Assessing Officer is not clear principally because it has focused only on one point, viz., whether such expenditure is revenue or capital in nature. At the same time, it is important to note that even for the applicability of section 35AB, the nature of expenditure is required to be decided at the threshold because if the expenditure is found to be revenue in nature, then section 35AB may not apply. However, if it is found to be capital in nature, then the question of amortization and spread over, as contemplated by section 35AB, would certainly come into play. Therefore, in our view, it would not be correct to say that in this case, interpretation of section 35AB was not in issue. Our above reaso....
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....igh Court for fresh consideration in accordance with law. On the second question, we do not wish to express any opinion. It is for the High Court to decide, after construing the agreement between the parties, whether the expenditure is revenue or capital in nature and, depending on the answer to that question, the High Court will have to decide the applicability of section 35AB of the Income-tax Act. On this aspect we keep all contentions on both sides expressly open." 8. From a reading of the aforesaid decision, it is clear that the Supreme Court directed the High Court first to decide the matter whether the expenditure incurred is revenue or capital expenditure. After construing the agreement entered into between the parties and dependi....