TMI Blog1985 (10) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... : Assessment year 1966-67: " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the interest and expenses in connection with the A.I.D. loan can be added to the actual cost of the machinery for the purposes of depreciation ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in bifurcating the compensation of Rs. 15 lakhs paid to foreign collaborators and allowing Rs. 1,91,500 thereof as revenue expenditure spread over a period of five years and treating the balance amount of Rs. 13,08,500 as part of the actual cost of the plant and directing allowance of depreciation thereon? (3) Whether, on the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doing so. As far as the spreading out of revenue expenditure of Rs. 1,91,500 over a period of five years is concerned, the Revenue has no quarrel about that. The only question requiring determination is whether the said amount of Rs. 1,91,500 was capital expenditure as contended by the Revenue or revenue expenditure as contended by the assessee. As far as question No. 3 is concerned, it is again common ground that in view of the decision of a Division Bench of this court in CIT v. Colour-Chem Ltd. [1977] 106 ITR 323, this question must also be answered in the affirmative and against the Revenue. In view of what we have stated above, it is only the facts which relate to the remaining question, namely, question No. 4 and the disputed portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction over a period of five years. The assessee company paid salary of Rs. 97,902 in the previous year relevant to the assessment year 1968-69 and of Rs. 94,304 in the previous year relevant to the assessment year 1969-70, to one A. P. Giusti, one of the foreign technicians working in the assessee company. The Income-tax Officer, in his orders of assessment, disallowed the perquisites given to this employee under section 40(c)(iii) of the Income-tax Act, 1961, in the assessment year 1968-69 and under section 40(a)(v) of the said Act in the assessment year 1969-70, and added the excess perquisites with reference to one-fifth of the salary of the employee to the extent of Rs. 34,541 in the assessment year 1968-69 and Rs. 7,460 in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, in essence, the agreements were for acquiring technical knowledge regarding methods of production and were not agreements under which the assessee had acquired any asset or advantage of an enduring nature for the benefit of its business, and, hence, the amounts paid for the acquisition of technical know-how must be regarded as revenue expenditure. Mr. Jetly frankly conceded that he was unable to distinguish the said decision in any way. In view of this and following the said decision, we take the view that the said amount of Rs. 1,91,500 paid for the acquisition of technical know-how must be regarded as a revenue expenditure and was allowable by way of deduction as revenue expenditure. We now come to question No. 4. Section 10 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., and, in short, it provided that such perquisites to the extent that they exceeded one-fifth of the salary payable to the employee or one thousand rupees per month, whichever is less, would not be allowed by way of deduction in computing the income of the employer. The second proviso laid down that nothing in the said sub-clause (v) of clause (a) would apply to expenditure which results in the provision of any benefit or amenity or perquisite to an employee, whose " income chargeable under the head 'Salaries' is seven thousand five hundred rupees or less ". It is not possible to accept the submission of Mr. Jetly for the reason set out hereafter. We find that in Bombay Burmah Trading Corporation Ltd. v. CIT [1984] 145 ITR 793, a Divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court took the view that the second proviso to section 40(c)(iii) would be attracted where there is no income chargeable under the head " Salaries " and the case before that court was one where there was no income of the employee chargeable under the head " Salaries ". In view of this decision of the Madras High Court which had been followed by the Division Bench of this court in the case of Bombay Burmah Trading Corporation Ltd. [1984] 145 ITR 793, and in the interest of uniformity, we are also inclined to follow the said decision of the Madras High Court. In view of this, we are of the view that the Tribunal was right in holding that the perquisites paid to A. P. Giusti are not to be considered under section 40(c)(iii) or section 40(a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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