1998 (11) TMI 60 - HC - Income Tax

Summary

Issues:
1. Depreciation on technical know-how capitalized.
2. Disallowance under section 40A(5) of the Income-tax Act.
3. Excess expenditure incurred on employee traveling under rule 6D(2) of the Income-tax Rules.

Issue 1: Depreciation on technical know-how capitalized
The Income-tax Appellate Tribunal referred questions of law regarding depreciation on technical know-how capitalized to the High Court. The Court found that the questions were covered by a previous decision in favor of the assessee. Therefore, the Court answered in favor of the assessee and against the Revenue.

Issue 2: Disallowance under section 40A(5) of the Income-tax Act
The Court noted the disagreement between the assessee and the Revenue regarding the interpretation of rule 6D(2) of the Income-tax Rules. The assessee contended that all trips of an employee during the relevant accounting year should be clubbed together for deductions under rule 6D(2). However, the Revenue argued that each trip of an employee should be considered individually. The Court analyzed the provisions of rule 6D(2) and its clauses, emphasizing that the rule refers to an individual employee and their specific circumstances. The Court concluded that the expenditure for rule 6D(2) should be considered based on each trip of an individual employee outside the headquarters. Therefore, the Court answered this issue in favor of the Revenue and against the assessee.

Issue 3: Excess expenditure incurred on employee traveling under rule 6D(2) of the Income-tax Rules
The Court delved into the details of the case where the assessee claimed deductions for employee traveling expenses under rule 6D(2) of the Income-tax Rules. The Court highlighted the specific provisions and provisos of rule 6D(2), emphasizing that the rule pertains to individual employees and their respective travels. The Court rejected the assessee's argument to club all trips of an employee together for deductions, stating that the rule requires consideration based on each trip of an employee. Consequently, the Court answered this issue in favor of the Revenue and against the assessee, aligning with the specific language and provisions of rule 6D(2).

This detailed analysis of the judgment showcases the High Court's interpretation of the legal issues surrounding depreciation, disallowance under the Income-tax Act, and excess expenditure on employee traveling under the Income-tax Rules.