TMI Blog1978 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking and, therefore, the sum of Rs. 1,01,000 was not entitled to be included in the capital of the undertaking when computing the relief under section 80J ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 80,445 paid to Messrs. Oerlikon Ltd., Switzerland, was capital expenditure and not revenue expenditure ? " The assessee is a private limited company engaged in the manufacture of machine tools. The year of assessment is 1969-70. The assessment resulted in a business loss which was allowed to be carried forward. The reference is at the instance of the assessee. However, the assessee has not been represented by any counsel. When the case came up for hearing we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer disallowed the claim on the ground that it was capital expenditure following the principle enunciated by this court in Mysore. Kirloskar Ltd. v. Commissioner of Income-tax [1968] 67 ITR 23 (Mys). The assessee preferred an appeal to the Appellate Assistant Commissioner, but with no success. A further appeal to the Tribunal also failed. Feeling aggrieved by the decision of the Tribunal, the assessee sought reference to this court and, accordingly, the above questions have been referred to this court. Before the Tribunal, the assessee relied upon rule 19A of the Income-tax Rules, 1962, which made provision for the capital employed in an industrial undertaking for the purpose of section 80J, and in particular to sub-rule (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80J. This is the view that was taken by the High Court of Calcutta in Commissioner of Income-tax v. Indian Oxygen Ltd. [1978] 113 ITR 109 and also [1959] 35 ITR 651 of the High Court of Madras (Jayaram Mills Ltd. v. Commissioner of Excess Profits Tax). In Indian Oxygen's case [1978] 113 ITR 109, after referring to the observations of the House of Lords in the case of Birmingham Small Arms Co. Ltd. [1951] 2 All ER 296, it was held--See [1978] 113 ITR 109, 120 (Cal). "........ it appears to us that the moment capital is utilised for the purposes of acquiring any asset for a business, such capital becomes employed in the business. Whether the asset itself is actually used in the business or not, so far as the capital is concerned, it continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment in I.T.R.C. Nos. 82 to 85 of 1974 decided on 17-4-1978 in the case of Mysore Kirloskar, Ltd., in which identical question for the subsequent years was involved, held on the construction of the agreement therein that the payments were revenue in nature. This court also overruled the decision in Mysore Kirloskar, Ltd. v. Commissioner of Income-tax [1968] 67 ITR 23 (Mys) following the decision of the Supreme Court in Commissioner of Income-tax v. Ciba of India Ltd. [1968] 69 ITR 692. Clauses in regard to the payment as well as the other clauses which indicate the purpose and nature of the payment in the instant case are similar to those discussed in I.T.R.C. Nos. 82 to 85 of 1974 (Mysore Kirloskar Ltd. v. Commissioner of Income-tax). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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