TMI Blog1982 (9) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ory. These fees were to be calculated as a particular fraction or percentage of the gross sale value of the tyres and other products produced by the factory. The assessee claimed that the fees paid by it to Mansfield constitute current revenue expenditure and must be allowed as such in the computation of its income. The ITO, however, disallowed 25% of the fees paid to Mansfield on the score that it represented capital expenditure. The disallowance by the officer on this account was based on the theory that the technical know-how gained by the assessee was of an enduring benefit to the assessee and any business expenditure which produces enduring advantage to the business must be held to be capital expenditure. The Tribunal differed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely, the computation of the relief under s. 80-I claimed by this assessee. The controversy between the parties is brought out in the frame of the question, which is as under: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the relief under section 80-I should be granted on the profits before set off of unabsorbed depreciation and development rebate carry forward ? " The assessee's tyre manufacturing unit, run under foreign collaboration, is a priority industry within the meaning of the I.T. Act. There is no dispute about this fact. There is also no dispute about the assessee's eligibility for relief under s. 80-I. The controversy appertains only to the mode of arriving at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward depreciation and the carry forward development rebate of past years must also be deducted. According to the assessee, on the other hand, these items should not be deducted, and only the current year's depreciation and development rebate must be deducted. In the computation of the assessee's total income, which includes the profits from the tyre factory, the assessee had claimed deduction for the carry forward of past years' unabsorbed depreciation and development rebate, and this claim was allowed, and rightly so. For obtaining the eight per cent. relief under 80-1, however, the assessee wants to add back the unabsorbed depreciation and development rebate granted as deduction in the assessment of the business income. This is quite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e standards must apply both for the computation of the special relief under s. 80-I and for the computation for the general purposes of assessing the business income. There cannot, in other words, be one law for assessment of tax on business income and another law for assessment of tax relief on business income. The question at issue in the present case about unabsorbed depreciation and unabsorbed development rebate is, therefore, to be decided by following the Supreme Court's ruling on the proper line of approach for the computation of profits attributable to the priority industry. If the matter were one of first impression, which it is not, there might be something to be said for the assessee's standpoint that carry forward development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment rebate is not so much deduction for arriving at net profits, but a measure of tax relief, pure and simple. This theoretical argument may be rested on the circumstance that development rebate bears on the same machinery whose entire cost, sooner or later, would be charged against profits, as depreciation allowance year after year, and as balancing allowance in the year in which it is ultimately discarded. The matter, however, is not res integra, susceptible to argument on first principles. In the case which we have earlier mentioned more than once, the Cambay Electrical's case [1978] 113 ITR 84, the Supreme Court have eschewed all these niceties. They held that " items like unabsorbed depreciation and unabsorbed development rebat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, when it brought all tax relief provisions under one single roof, as it were, and when it hitched the quantum of relief to income, by way of straight deductions. It was the boast of those who sponsored this law reform that the system, as altered, was more sensible and was much easier to work than the 1922 provisions. Subsequent experience, however, has belied the earlier hopes and expectations. Whatever Chap. VI has brought about, it has not brought relief to courts and others engaged in the incessant task of statutory interpretation. It has only led to more and more litigation between the taxpayers and the Revenue, with the ever present risk that first principles of fiscal accounting might get lost or distorted in the process. We fear th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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