Commissioner of Income Tax vs Toshniwal Electrodes Manufacturing Co. Ltd.

T.D. Sugla J.

The only question of law referred to this court in this departmental reference relating to the assessee''s assessment for the assessment year 1969-70 is :

"Whether, on the facts and in the circumstances of the case, the sum of Rs. 47,207 paid by the assessee-company to Moellar under agreement dated July 1, 1966, was a permissible deduction ?"

Ordinarily, in view of the Supreme Court''s decision in the case of Commissioner of Income Tax, Bombay Vs. Ciba of India Ltd., , which was followed by our court in the case of Gannon Norton Metal Diamond Dies Ltd. Vs. Commissioner of Income Tax., , we would have straightaway answered the question in the affirmative and in favour of the assessee; more so, as the Supreme Court itself has taken a similar view in its later decision in Alembic Chemical Works Co. Ltd. V. CIT : [1989]177ITR377(SC) . We, however, find that, in the reference relating to another assessment year of this very assessee, two questions of law were referred to this court, one each at the instance of the assessee and the Revenue. The second question was that, in case the answer to the first (similar) question was in the negative, whether the assessee would be entitled to depreciation on the cost of the know-how, treating it as a plant within the meaning of sections 43(3) and 32 of the Income Tax Act, 1961.

Following another decision of the Supreme Court in the case of Scientific Engineering House (P) Ltd. Vs. Commissioner of Income Tax, Andhra Pradesh, , the order was passed with the consent of the parties that the second question in that case be answered in the affirmative in favour of the assessee and, in view thereof, there would be no necessity of answering the first question. In other words, the first question was not pressed.

Accordingly, we are of the view that, in matters like this, uniformity is a must to avoid confusion. We would, therefore, answer the question referred to us in this refernce in the negative, in favour of the Revenue and against the assessee. However, we direct that while giving effect to our judgment the Tribunal shall allow the assessee depreciation on the amount of Rs. 47,207, treating it as a part of the cost of the plant within the meaning of sections 43(3) and 32 of the Income Tax Act, 1961.

With the consent of the parties and for the sake of uniformity and convenience (sic); there is another reference relating to the assessee''s assessment for assessment year 1970-71, being Income Tax Reference No. 466 of 1977, in which, like the earlier reference in Commissioner of Income Tax Vs. Toshniwal Electrodes Mfg. Co., , two questions of law have been referred to this court. We have taken it on board. Following our judgment in the assessee''s own case in Commissioner of Income Tax Vs. Toshniwal Electrodes Mfg. Co., , we answer the second question in this reference in the affirmative and in favour of the assessee. In view thereof, the first question is again not pressed by counsel for the assessee. There will be no order as to costs.