2000-VIL-298-ITAT-AHM

Equivalent Citation: ITD 076, 257, TTJ 071, 349,

Income Tax Appellate Tribunal AHMEDABAD

Date: 15.02.2000

GUJARAT PETROSYNTHESE LTD.

Vs

DEPUTY COMMISSIONER OF INCOME-TAX

BENCH

Member(s)  : H. L. KARWA., T. N. CHOPRA.

JUDGMENT

Per Shri T.N. Chopra, Accountant Member--These six appeals are cross appeals filed by the assessee and the Revenue for assessment years 1988-89,1989-90 and 1990-91 against separate orders of the CIT(A). Since the issues involved are common, these appeals have been heard together and are being disposed of by a single order for the sake of convenience.

2. The main ground, which is common in all the appeals, relates to computation of carry forward of unabsorbed depreciation and unabsorbed investment allowance in the context of the provisions of section 115J of the Income-tax Act, 1961. For the three assessment years the provisions of section 115J(1) are applicable and tax has been charged by deemiming the 30% of the book profit as the total income of the assessee. The claim of the assessee before the Assessing Officer was that the brought forward unabsorbed depreciation and unabsorbed investment allowance should be carried forward unchanged since income has been computed on a notional basis by applying provisions of section 115J(1). The Assessing Officer on the other hand held that in view of the specific provisions of section 115J(2) of the Act, the determination of carry forward of unabsorbed depreciation and unabsorbed investment allowance would be governed by the normal provisions of computation of income irrespective of the deeming fiction contained under section 115J(1). The CIT(A) for the three assessment years involved held that the carry forward unabsorbed depreciation and unabsorbed investment allowance etc. should be restricted only to the extent of amount which has not been absorbed for bringing the total income to the level of 30 per cent of book profit. The Revenue as well as the assessee both are aggrieved against the view taken by the ld. CIT(A).

3. Before adjudicating upon the point in issue involved, the relevant facts may be briefly indicated. For assessment year 1988-89 the assessee filed a return of income on 30-6-1988 declaring total income at Rs. 40,21,458 by invoking the provisions of section 115J of the Act. Subsequently, the return has been revised on 7-1-1991 declaring the same total income at Rs. 40,21,458 by invoking provisions of section 115J of the Act appending a note as under:

"Total Income chargeable to tax" has been worked out under section 115J(1) and accordingly no part of unabsorbed depreciation of Rs. 1,72,01,396 for assessment year 1986-87 and Rs. 8,77,350 for assessment year 1987-88 (as assessed) has been allowed or absorbed and the whole of Rs. 1,80,78,746 is carried forward."

The Assessing Officer however rejected the contention and adopted the figures of carried forward depreciation under section 32(2), of the Income-tax Act, and carried forward the following amounts:

 (1) Unabsorbed depreciation for assessment year 1987-88     Rs. 1,07,18,511

 (2) Unabsorbed depreciation for assessment year 1988-89     Rs.    8,77,350

Similarly for assessment years 1989-90 and 1990-91 revised returns were filed by the assessee company on 7-1-1991 claiming carry forward of unabsorbed depreciation and investment allowance etc. unchanged without reducing any portion set off while computing the total income for the preceding assessment years. The Assessing Officer computed the total income for assessment year 1989-90 under the regular provisions of the Act at Rs. 4,29,17,324 and after setting off the earlier years losses, the total income computed at Rs. 79,81,330. Applying the provisions of section 115J, the total taxable income, equal to 30 per cent of the book profit was adopted at Rs. 1,37,24,490. Since the depreciation and investment allowance have already been set off in full against the income of this year, nothing remained to be carried forward, according to the Assessing Officer, for the succeeding assessment years. Similarly for assessment year 1990-91 the Assessing Officer computed the total income under the regular provisions at Rs. 2,66,95,820. Since the total income computed under the regular provisions of the Act is more than 30 per cent of the book profit, the Assessing Officer determined the total income at Rs. 2,66,95,820.

4. In the memorandum of appeals for the three assessment years the assessee has made the prayer that since the notional income of the company has been taxed by applying the deeming provisions contained in section 115J(1) of the Act, the entire unabsorbed depreciation and investment allowance and unabsorbed losses etc. should be allowed to be carried forward without any change. However, the ld. counsel for the assessee company during the course of arguments supported the order of the CIT(A) and did not press the ground raised in the appeals of the assessee. The ld. counsel pleaded that the taxable income adopted for the purpose of levy of tax under sub-section (1) of section 115J should be deemed as available for the purposes of setting off unabsorbed losses or unadjusted allowances in that assessment year and to that extent benefit of set off should be allowed to the assessee company. The ld. counsel further submitted that the stand taken by the Revenue would result in double taxation inasmuch as on the amount of income assessed under section 115J(1), the assessee would be denied the benefit of set off of the unabsorbed depreciation, losses etc. In support of his contentions the ld. counsel heavily relied upon the decision of Gauhati High Court in the case of Lallacherra Tea Co. (P.) Ltd. v. CIT [1999] 239 ITR 611. Further reliance is placed on the following decisions of the Tribunal:

(i) Shriram Investments Ltd. v. Asstt. CIT [1996] 59 ITD 570 (Mad.)

(ii) Singh Alloys & Steel Ltd. v. Dy. CIT [1995] 55 ITD 13 (Cal.)

(iii) Fab Export (P.) Ltd. v. Asstt. CIT [1996] 56 ITD 132 (Mad.)

(iv) Fag Precision Bearing Ltd. v. Dy. CIT [1993] 47 ITD 193 (Ahd.)

(v) Surana Steels (P.) Ltd. v. Dy. CIT [1999] 237 ITR 777 (SC).

The ld. counsel further referred to the opinion of Shri N. A. Palkhiwala, eminent jurist. Reference is also made to the opinion of Shri P.N. Bhagwati, Retired Chief Justice of Supreme Court of India.

5. The learned DR, on the other hand, supported the order of the Assessing Officer and argued that on the determination of the taxable income under the relevant provisions of the Act, whatever amounts remained to be carried forward as per regular computation, either by way of unabsorbed depreciation or unadjusted allowances etc. the same may be carried forward to the next year in view of the explicit provisions of section 115J(2). The ld. DR further argued that the provisions of sections 115J(1) and 115J(2) are couched in unambiguous language bringing out the legislative intention in clear terms that computation of unabsorbed depreciation and unabsorbed losses etc. made under the regular provisions of the Act would not be affected by substitution of a notional figure of income in place of income computed under the Act.

6. We have given our thoughtful consideration to the rival submissions and perused the judicial authorities cited before us. The core issue which falls for determination before us centers around the interpretation of the provisions of sub-section (1) and sub-section (2) of section 115J. Section 115J has been introduced by way of an independent Chapter XII-B in the Income-tax Act by the Finance Act, 1987 and it came into force from assessment year 1988-89. While introducing section 115J, the Legislature deleted section 80VVA which provided for levy of minimum tax on companies. The object of insertion of section 115J was to ensure levy of minimum tax on what are known as "prosperous zero tax companies". Such companies were showing huge profits in the profit and loss account and they are also declaring dividend to the shareholders but on account of various incentives and increase in depreciation rates, among other, were showing very little or nil total income. Under the scheme of above section which is a self contained provision, certain companies whose total income as computed under the provisions of the Income-tax Act, is less than 30 per cent of their book profits, the total income of such companies chargeable to income-tax for the relevant previous year is treated as an amount equal to 30 per cent of such book profits and is taxed accordingly. At this stage, it will be useful to reproduce sub-section (1) of section 115J which reads as under:

Section 115J(1): Not withstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of generation or distribution of electricity), the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 (but before the 1st day of April, 1991) (hereafter in this section referred to as the relevant previous year), is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit.

Explanation appended to the section provides for certain adjustments by way of adding amounts and granting deductions for computing the book profit for the purposes of section 115J(1). The sub-section, as reproduced above, starts with a non obstante clause reading as "notwithstanding anything contained in any other provisions of this Act". The sub-section thus creates a deeming provision whereunder 30 per cent of the book profit is deemed to be total income chargeable to tax. The non obstante clause ensures that the provisions of the Act will not be an impediment for the operation of the legal fiction created by sub-section (1).

6.1 Sub-section (2) of section 115J, which is also material for the purposes of our discussion, is extracted below:

Section 115J(2): Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J.

A plain reading of the above sub-section would indicate that the legal fiction created by enacting sub-section (1) has a limited scope and would not affect "determination of the amounts in relation to the relevant previous year--to be carried forward--under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A...." Sub-section (2) thus lays down in unambiguous and clear terms that the determination of the carry forward of unabsorbed depreciation, unabsorbed investment allowances or losses etc. under the regular provisions of the Income-tax Act, would not be affected by the deeming fiction contained in sub-section (1) which provides that 30 per cent of the book profit would be treated as total income chargeable to tax.

6.2 In its literal sense, the word "determination" derivative from the verb to determine means "to settle or decide which in its literal sense in the context of law means to give a judicial decision." That is the meaning given to the word "determination" or "to determine" under the Shorter Oxford English Dictionary.

Black's law Dictionary while referring to the word "determination" states, "the decision of a court or administrative agency. It implies an ending or finality of a controversy or suit." It further says, "A. 'determination' is a 'final judgment' for purposes of appeal when the trial court has completed its adjudication of the rights of the parties in the action."

It also says as respecting assessment the term implies judgment and decision after weighing the facts. A somewhat similar view has been expressed by their Lordships of the Supreme Court while considering the meaning of word 'determination' in the context of the expression used in article 136 of the Constitution in case of Jaswant Sugar Mills Ltd. v. Lakshmi Chand AIR 1963 SC 677.

In the context, it was held that the expression "determination" signifies an effective expression of opinion which ends a controversy or a dispute by some authority to whom it is submitted under a valid law for disposal.

The Hon'ble Gujarat High Court in Mohit Shantilal Shah v. CIT [2000] 241 ITR 28, while construing the word "determination" occurring in section 87(m) of the Kar Vivad Samadhan Scheme, 1998 referred to the above mentioned judgment of the Supreme Court in the case of Jaswant Sugar Mills Ltd. and held that the word "determination" has the necessary ingredients of conscious decision making by the Competent authority after weighing the facts. In view of the aforesaid decisions of the Hon'ble Gujarat High Court as well as Hon'ble Supreme Court, we have no hesitation in holding that the expression "determination of the amounts in relation to the previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32" used in section 115J(2) clearly envisages the determination of carried forward unabsorbed depreciation worked out by the Assessing Officer in relation to the assessment years under consideration and carrying forward of the same amounts to the subsequent year or years uninfluenced and unaffected by the operation of deeming fiction of sub-section (1).

6.3 When the words of a Statute are clear, plain or unambiguous, i.e., they are reasonably susceptible to only one meaning, the Courts are bound to give effect to that meaning irrespective of consequences. It has been observed by Justice Gajendra Gadkar in the case of Kanai Lal Sur v. Paramnidhi Sadhukhan AIR 1957 SC 907 that, "if the words used are capable of one construction only, then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act". Since the deeming fiction created under sub-section (1) does not extend to determination of the carried forward unabsorbed depreciation, losses etc., as explicitly and unequivocally provided under sub-section (2), we see no ambiguity in the provisions. The ld. counsel has argued that the interpretation adopted by the Assessing Officer in carrying forward the unabsorbed depreciation etc. as determined under the regular provisions, without considering the fact that the assessee has been levied tax on notional income leads to inequitable results. We are not persuaded to accept this contention. It does not lie within the province of this Tribunal to modify or amend the explicit enactments in the Statutes merely on the ground of inequitable results. It has been observed in the classical treatise on statutory interpretation "Craies on Statute Law' (7th Edition at page 89) "The argument from inconvenience and hardship is a dangerous one and is only admissible in construction where the meaning of the statute is obscure and there are alternative methods of construction". A similar view has been taken in "Maxwell on the Interpretation of Statutes" (Twelfth Edition) at page 205 as under:

"But convenience is not always a safe guide to construction. However difficult it may be to believe that Parliament ever intended the consequences of a literal interpretation, we can only take the intention of Parliament from the words which they have used in the Act and therefore the question is whether these words are capable of a more limited construction. If not, then we must apply them as they stand, however unreasonable or unjust the consequences and however strongly we may suspect that this was not the real intention of Parliament.'

At this stage it would be relevant to mention that the special provisions relating to zero tax companies as enacted under section 115J were in operation for three assessment years viz. Assessment years 1988-89 to 1990-91 and with effect from 1-4-1997 new provisions were enacted by inserting section 115JA by the Finance (No. 2) Act, 1996 w.e.f. 1-4-1997. The scheme for levy of minimum tax on zero tax companies as enacted in section 115JA contains some modifications over the earlier scheme enacted in section 115J. However, the broad parameters of the new scheme viz. treating 30 per cent of the book profit as deemed total income for levy of tax remain the same. Thus sub-section (1) of section 115JA is in pari materia with the provisions contained in sub-section (1) of section 115JA. Similarly, sub-section (3) of section 115J is a reproduction of sub-section (2) of section 115JA in the earlier scheme. However, a new provision section 115JAA has been inserted in the new scheme which provides tax credit in respect of tax paid on deemed income while computing tax for the subsequent assessment years. It appears, that under the new scheme introduced by the Finance Act, 1997, the concept of tax credit has been brought in on grounds of equity by the Legislature. Since section 115JA(3) in the new scheme is virtually the reproduction of sub-section (2) of section 115J of the earlier scheme, the content and meaning of both the sub-sections would obviously be the same. Now if the interpretation sought to be placed by the ld. counsel on section 115J(2) is applied to section 115JA(3) in the new scheme, this would lead to unintended results involving double benefit inasmuch as the assessee would get the adjustment of deemed income against the brought forward depreciation and losses etc., and also get the benefit of tax credit in the subsequent years. Thus, the total tax paid by the assessee over the years would be much less than the tax payable under the normal provisions of the Act. This would not only be contrary to the express statutory provisions enacted under Chapter XII-B but also frustrate the objective; purpose and intention of the Legislature to levy minimum tax on prosperous zero tax companies. We are therefore not inclined to accept the interpretation canvassed by the learned counsel before us which would not only do violence to the express language of the enactment but would also bring about manifestly absurd results.

6.4 In support of the view taken by us, reliance is placed on the decision of Andhra Pradesh High Court in the case of Suryalatha Spg. Mills Ltd. v. Union of India [1997] 223 ITR 713 which is a direct authority on the issue arising before us. Their Lordships of the Andhra Pradesh High Court have placed reliance on the decisions of the Hon'ble Supreme Court in ITO v. N. Takin Roy Rymbai [1976] 103 ITR 82, R.K. Garg v. Union of India [1982] 133 ITR 239 and Kerala Hotel & Restaurant Association v. State of Kerala [1990] 2 SCC 502 and held that no inequity is involved in the provisions contained in section 115J relating to levy of tax on zero tax companies. Repelling the contention of double taxation, their Lordships have observed that what is being taxed is income determined on the basis prescribed under the said impugned provision and there is no provision to re-tax the same income as such. It is further pointed out that in view of the judgment of the Supreme Court in Jain Bros. v. Union of India [1970] 77 ITR 107 double taxation per se would not render an otherwise valid provision, as invalid.

6.5 The contrary decision of Gauhati High Court in the case of Lallacherra Tea Co. (P.) Ltd. relied by the ld. counsel does not refer to the earlier decision of Andhra Pradesh High Court in the case of Suryalatha Spg. Mills Ltd. The Andhra Pradesh High Court decision contains a detailed analysis of the statutory provisions contained in section 115J and has cited the various judgments of the Apex Court in support of the view taken. We would therefore with great respect to the Hon'ble Judges of Gauhati High Court, prefer the view taken by the Hon'ble Andhra Pradesh High Court.

6.6 We have also considered the opinion of the eminent jurists namely Shri N.A. Palkhiwala and Shri P.N. Bhagwati, relied upon by the learned counsel, Shri P.N. Bhagwati is of the opinion that since sub-section (1) of section 115J provides for treating the notional income as the total income, the entire brought forward depreciation and allowances etc. would be liable to be carried forward unchanged. However, the learned jurist has ignored the words "the determination of the amounts--to be carried forward" used in sub-section (2). Sub-section (2) clearly lays down that determination of such amounts of carried forward allowances would not be affected. The view of Shri P.N. Bhagwati is therefore contrary to the express provisions of section 115J(2). In fact Shri N.A. Palkhiwala, eminent jurist in his opinion has also criticised Shri Bhagwati's view and observed that this interpretation would tender sub-section (2) otiose.

6.7 Regarding the opinion of Shri N.A. Palkhiwala relied upon by the learned counsel before us, we find that the learned jurist has argued that the carry forward of unabsorbed depreciation and allowances as computed under the regular provisions of the Act in disregard of the fact that tax has been levied on deemed income would render section 115J as unconstitutional. Shri Palkhiwala has therefore opined that sub-sections (1) and (2) should be harmonized and set off of unabsorbed depreciation and other allowances should be worked out till the total income is brought down to the level of 30 per cent of the book profits. We find that this interpretation is an artificial interpretation which does not conform to the express and unambiguous language of sub-section (2). We may mention here that Shri P.N. Bhagwati in his opinion has observed that this interpretation adopted on equitable grounds, even if it sounds just and fair, would be contrary to the express language of sub-section (2) of section 115J and would not be acceptable to Courts.

6.8 Thus we find that both the jurists, undoubtedly highly eminent in the legal field, have considered each other's interpretation as contrary to the unambiguous language of sub-section (2) of section 115J. It appears to us that Shri Palkhiwala, apprehending that sub-section (2) as it stands may offend article 14 of the Constitution proceeds to modify the clear meaning of the sub-section so as to make it sound equitable and constitutional even though in this interpretative process violence is caused to the clear language of the sub-section. In any case the Constitutional vires of section 115J has already been upheld by Delhi High Court in National Thermal Power Corpn. Ltd. v. Union of India [1991] 192 ITR 187 and Andhra Pradesh High Court in Suryalatha Spg. Mills Ltd. In the various judicial pronouncements of the Apex Court, cited earlier, it has been held that fiscal legislation should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. There may be crudities and inequities in complicated experimental economical legislation but on that account alone it cannot be struck down as invalid. R.K. Garg's case.

6.9 Having regard to the aforesaid discussion we hold that only such amounts of unabsorbed depreciation, investment allowances etc. can be carried forward to the subsequent year or years as would have been determined under the regular provisions of the I.T. Act. We would therefore uphold the view taken by the Assessing Officer for the three assessment years involved here and allow the appeals of the Revenue on this issue. The common ground relating to carry forward of unabsorbed depreciation, unabsorbed investment allowance etc. is thus decided in favour of the Revenue.

7. In assessee's appeal for assessment year 1990-91 there is one more ground relating to disallowance of payments to Club. The assessee has made payments to Cricket Club of India and Royal Bombay Yatch Club. The assessee has made payments of Rs. 6,598 and Rs. 2,287 to Cricket Club of India and Royal Bombay Yatch Club. The expenditure has been incurred for the membership and other expenses of the Managing Director. The Assessing Officer disallowed the entire expenditure of Rs. 9,485 treating the same as non-business expenditure. The disallowance has been confirmed. In view of the decision of Gujarat High Court in Gujarat State Export Corpn. Ltd. v. CIT [1994] 209 ITR 649 we feel that the expenses on account of membership of the club and other expenses are of the nature of business expenditure and liable to be allowed. The disallowance of Rs. 9,485 is therefore deleted. This ground is allowed.

8. In the assessee's appeal for assessment year 1990-91 there is one more ground regarding computation of deduction under section 80-I. The assessee company credited to its P&L Account interest on short term deposits amounting to Rs. 16,06,875 and service charges amounting to Rs. 88,677. The Assessing Officer held that interest income earned by making deposits with Bank as well as service charges on account of sale of raw material to HICO cannot be construed as derived from the manufacturing activity and therefore do not qualify for deduction under section 80-I. No arguments have been addressed before us by either side on the issue. The expression "derived from" used in section 80-I has been given narrow and restricted meaning by the various High Courts as well as Supreme Court. The word "derived" connotes a direct and close nexus with the source of income. Unless the nexus is direct, the receipts would not be construed as derived from the Industrial Undertaking. The latest decisions of the Supreme Court in CIT v. Sterling Foods [1999] 237 ITR 579 and Orissa State Warehousing Corpn. v. CIT [1999] 237 ITR 589 have interpreted the expression "derived from" giving it a very narrow and limited meaning observing that there must be for the application of the words "derived from" a direct nexus between the profits and gains and the industrial undertaking. In the instant case interest as well as profit on sale of raw material, the nexus is not direct but only incidental. Respectfully following the aforesaid decisions of the Supreme Court we therefore uphold the view of the learned CIT(A) and dismiss this ground of appeal.

9. In the three Departmental appeals there is a common ground regarding disallowance made under rule 6B in respect of presentation articles. The disallowances have been deleted by the CIT(A) on the ground that the presentation articles were not meant for advertisement and are not covered under rule 6B. Respectfully following the decision of Madras High Court in S.K.S. Rajamani Nadar v. CIT [1995] 216 ITR 696 as well as Ahmedabad Bench of the Tribunal in Asstt. CIT v. Bell Ceramics Ltd. [1999] 69 ITD 156 we uphold the finding of the CIT(A) and dismiss the common ground in the Revenue's appeals. ITA No. 95O/Ahd/94 Departmental appeal for assessment year 1990-91.

10. In this appeal ground No. 3 taken by the Revenue is directed against the adjustment of Rs. 3,87,438 being depreciation at higher rate deducted for the purposes of computing the book profits as per Explanation to section 115J. The Assessing Officer has discussed the issue vide para 2 of the assessment order. In the notes to the accounts the auditors have pointed out that the depreciation on fixed assets was calculated on straight line method at the rates prescribed in Schedule XIV of the Companies Act except for vehicles for which the company has revised the rate of depreciation during the year to 30 per cent. The profit for the year is therefore reduced by Rs. 3,87,438. The Assessing Officer made an addition of Rs. 3,87,438 on the ground that profit and loss account has not been prepared in accordance with Parts II and III of Schedule VI to the Companies Act as provided for under section 115J(1 A). The CIT(A) deleted the adjustment vide para-3 of the order without pointing out any reasons therefor. We find that the issue is covered by the two decisions of Ahmedabad Bench of the Tribunal in the case of Bell Ceramics Ltd.'s case. Following the earlier decisions of the Tribunal and in the light of identical facts of the case we uphold the deletion of the amount of Rs. 3,87,438 made by the CIT(A). This ground of the Revenue is therefore dismissed.

11. Ground No. 4 is against the deletion of disallowance of Rs. 16,674 out of travelling expenses. The CIT(A) has deleted the disallowance following the decision of the Bombay Bench of the Tribunal in S.V. Ghatalia v. Second ITO [1983] 4 ITD 583, wherein it has been laid down that for the purposes of computing disallowance under rule 6D of I.T. Rules total expenditure should be considered. We find that the decision of the Bombay High Court in 239 ITR 325 has approved the aforementioned decision of the Tribunal and held that total expenditure on travelling should be considered for applying rule 6D. Therefore the disallowance of Rs. 16,674 has been rightly deleted by the CIT(A). This ground is therefore dismissed.

12. Ground No. 5 is against the deletion of addition of Rs. 6,75,952 by the CIT(A) treating the expenses as covered under section 37 as against 35AB applied by the Assessing Officer. The expenses of Rs. 8,11,142 have been debited to the P&L Account as Technical Assistance Fees. The Assessing Officer has invoked the provisions of section 35AB and allowed deduction in respect of 1/6th of these expenses on the ground that the expenses are on account of technical know-how and no objection certificate for payment of the amount in foreign currency has been obtained treating the amount as technical know-how fees paid to certain persons. The disallowance has been deleted by the ld. CIT(A). It appears that the Assessing Officer has proceeded on an erroneous basis invoking the provisions of section 35AB without ascertaining as to whether the expenses in question are in the nature of acquisition of technical know-how as envisaged under section 35AB. From the order of the CIT(A) it appears that the expenses are in respect of professional fees, ticket charges, hotel charges, cess duties etc. We feel that the disallowance has been rightly deleted by the CIT(A) since the provisions of section 37 are clearly applicable to the facts of the case. This ground is therefore dismissed.

13. In the result, the appeals of the assessee for assessment years 1988-89 and 1989-90 are dismissed and for assessment year 1990-91 partly allowed. The appeals of the Revenue for the three years are partly allowed as above.

 

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