1991 (2) TMI 91

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.... is a reference by the Department. The assessee is a company and the proceedings relate to its assessment for the years 1970-71 and 1971-72. By an order under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred to this court the following three questions of law: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the c....

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....be treated as capital employed in the industrial undertaking for the assessment year 1971-72 ?" Briefly stated, the facts relevant for question No. 1 are that the assessee purchased technical know-how from its foreign collaborators for sum of Rs. 14,34,000. An asset was created in the balance-sheet representing the said amount in the name of technical know-how. However, when the question came u....

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.... the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal held that the amount was includible in the capital computation. Reference in this regard was made to rule 19A(2)(ii) of the Income-tax Rules. After hearing Dr. Balasubramanian for the Revenue and Shri Dalvi for the assessee, we find that there is no dispute between the parties that the entire sum of Rs, 14,34,000 appear....

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....d by the assessee to the extent of Rs. 7,07,390 represented the assessee's money required for its business. Since, however, the monies were not required immediately, the assessee made short-term deposits of these monies and earned interest thereon. The question that arose for the purpose of granting relief under section 80-I was whether such an income was a business income so as to earn benefit un....