TMI Blog1996 (9) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and the imported new system being an exclusive property of the assessee and factually and scientifically the plant being new and of an enduring nature, the expenditure for the same is revenue in character ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding,--- (i) the expenditure incurred by the assessee in acquiring designs and drawings is not in the capital field ? (ii) the expenditure is of revenue nature ? " On reading the questions and after hearing learned senior standing counsel for taxes as well as learned counsel for the assessee, we find that question No. 2 is an unnecessary facet of question No. 3 and learned counsel a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellate Tribunal. In view of the above reasons, the Appellate Tribunal under resort to rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, would be justified to consider the contention raised by the assessee in regard to which the first appellate authority had decided against him. Question No. 1 thus gets answered in the affirmative, against the Revenue and in favour of the assessee. The assessee is a manufacturer of electronic equipment. The assessment year is 1979-80 and in regard to which the assessee claimed deduction. The deduction was of the amount of Rs. 5 lakhs paid to RFL International Inc., USA, towards the acquisition of designs and drawings for the manufacture of power line carrying communication equipment. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basic factual peculiarity was not even disputed by him. The said peculiarity as found from the above observations relate to electronics as a rapidly developing industry and as compared to other mechanical industries, in regard thereto obsolescence is faster in electronics than in other industries. In spite of this position, the contention of the assessee was rejected. The first appellate authority --- the Commissioner of Income-tax (Appeals), Calicut, has also endorsed these factual peculiarities and aspect relating to the field of electronics. To be precise the observations of the first appellate authority are to the following effect : " I do agree that electronics is a field where rapid changes are taking place. That does not, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt's case, it can still be allowed as an expenditure coming under section 35 of the Income-tax Act. With the import of the 6 modules of the new system, the appellant can be considered to have purchased time for its own scientific research or incurred a capital expenditure for that purpose. That the imported asset could not be used as such and had to be considerably modified and adapted to suit the Indian conditions by adding 35 modules developed at the appellant's own factory or research wing would show that it was a capital expenditure incurred for the purpose of research and development. In my view, such an expenditure though capital in nature can be allowed as a straight deduction under section 35. I would, therefore, allow the claim for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " Having regard to the fact that the assessee is engaged in the field of manufacturing certain equipment in the sphere of electronics and is found to have changed its technology very frequently we have no hesitation in holding that the expenditure incurred by the assessee on acquiring designs and drawings from RFL Inc, USA, is undoubtedly for improving its efficiency or its profit earning apparatus, the advantage, if any, is not of a permanent degree but shortlived in view of further vast developments in technology and at any rate, the advantage is not in the capital field. " In reaching the above fact-finding, right from paragraph 8 of the impugned order the Tribunal has referred in great and minute detail to the factual peculiarities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the test of 'enduring benefit' might break down. " The above paragraph would show that the question gets clinged to the factual peculiarities and all kinds of decisions and approaches go to help to determine the consequence of the factual peculiarities. We have already pointed out the above factual peculiarities floating on the surface of the decisions of the above authorities. We would like to add that left to ourselves we would not have also been able to reach any conclusion other than the one reached by the Tribunal, that the assessee acquired designs and drawings for improving its efficiency or its profit earning apparatus and the consequent advantages are not of a permanent degree but short-lived in view of further vast and rapid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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