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TMI Blog2002 (8) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance on technical know-how fees when as per the provisions of section 35AB technical know-fee is allowable as revenue expenditure in six yearly equal instalments? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) allowing the assessee's claim in respect of the provision for bad and doubtful debts and interest thereon, even though the same was not written off and no debit was made to the profit and loss account and no credit to the debtors account and the provisions of section 36(1)(vii) were not attracted?" For the sake of convenience the facts in Appeal No. 1303 of 2000 are mentioned hereinbelow. On May 30, 1988, a revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was to be used as an aid to production. On the facts, the first appellate authority found that in the present case the expenditure was capitalised. That, it was incurred much prior to the commencement of the manufacture. It was found on the facts by the first appellate authority that since the expenditure was incurred prior to the commencement of manufacture, it cannot be said that the expenditure was incurred for the purposes of business. On the facts, the first appellate authority found that the expenditure was incurred for setting up the plant. In the circumstances, the first appellate authority came to the conclusion that section 35AB was not applicable and, accordingly, the first appellate authority allowed the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 43(3) of the Income-tax Act. The Supreme Court answered that question in the affirmative and in favour of the assessee. The Supreme Court held that the purpose of giving such documentation service was to enable the assessee to undertake trading activity of manufacturing microscopes. It was found on the facts that with the aid and assistance of these documents the assessee was able to commence its manufacturing activity and the said documents formed the basis for manufacturing the microscopes. The Supreme Court observed that, by themselves the documents did not perform mechanical operations but that did not militate against the documents being treated as a plant since they were the basic tools of the trade of the assessee and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st this finding. Now coming to question No. 2, the Assessing Officer disallowed bad debts on the ground that the assessee had made only a provision which was not equivalent to a write-off. Being aggrieved, the assessee went in appeal to the Commissioner of Income-tax (Appeals) who took the view following the judgment of the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala v. CIT [1981] 130 ITR 95, that even a provision for bad debt could be treated as a write-off. This view of the first appellate authority was confirmed by the Tribunal. Being aggrieved, the Revenue has come in appeal under section 260A of the Income-tax Act, to this court. As stated above, in this appeal, we are concerned with the accounting year 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on behalf of the Department that there was no writing-off of an actual debt. That, the assessee had only provided for writing-off. In that matter, the assessee had debited the profit and loss account of the relevant years and had credited the same to bad debt reserve account. The Department argued that the assessee had forfeited its right to claim deduction under section 36(1)(vii) by not squaring off the accounts of the concerned parties in its books. This argument of the Department was rejected by the Gujarat High Court following the judgment of the Bombay High Court in the case of CIT v. Jwala Prasad Tiwari [1953] 24 ITR 537 in which it has been held that it was open to the assessee to debit the profit and loss account and credit the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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