COMMISSIONER OF INCOME TAX III vs. M/S SHRIRAM PISTONS & RINGS LT

ITA - 27 / 2004HC Delhi19 January 20041 pages

For Petitioner: SANJEEV SABHARWAL

AI SummaryRemanded

What did the High Court hold?

The High Court of Delhi admitted the appeal, framing two specific questions of law for determination. The ITAT, in its impugned order, had held that the entire royalty payments made to foreign entities and the entire expenditure on foreign technicians under collaboration agreements were revenue expenditures. The revenue's contention that a portion of these expenditures should be treated as capital expenditure was not accepted by the ITAT. The High Court has not yet rendered a decision on the merits of these questions; it has only admitted the appeal and framed the issues. The operative direction is to list the appeal with other connected matters, including ITA 58/2002 and ITA 249/2003, and for the appellant to file a paper book within three months.

What were the facts?

The assessee is challenging an order of the Income-Tax Appellate Tribunal (ITAT) for the assessment year(s) not explicitly stated but implied to be for earlier years concerning the same assessee. The revenue is the respondent. The High Court of Delhi admitted the appeal. The ITAT had disposed of the appeal by following its earlier orders for previous assessment years. The revenue's counsel pointed out that while three questions were framed for ITA 58/2002, only two arise in the present matter. The appeal concerns the classification of royalty payments and expenditure on foreign technicians as revenue or capital expenditure.

What were the issues?

1. Whether the ITAT was correct in holding that the entire royalty payment made by the assessee to M/s Riken Corporation, Japan and M/s Kilbenschimdt of West Germany constitutes revenue expenditure, with no portion being capital expenditure. The assessee contends that the ITAT's decision is correct. The revenue argues that a portion of this expenditure should be treated as capital expenditure. 2. Whether the ITAT was correct in law in holding that the entire expenditure incurred by the assessee on visits by foreign technicians under collaboration agreements is revenue expenditure, with no portion being capital expenditure. The assessee argues in favor of the ITAT's finding. The revenue contends that 25% of this expenditure cannot be regarded as capital expenditure.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF DELHI AT NEW DELHI . 19.01.2004 . Present: Mr Sanjeev Sabharwal with Mr S.C. Sharma for the Appellant. . + ITA 27/2004 * Admit. The Income-Tax Appellate Tribunal, following its earlier orders for earlier assessment years for the same assessee, has disposed of the appeal. It is brought to our notice by the learned counsel for the revenue that for earlier years, appeals have been admitted. He submitted that though in ITA 58/2002 three questions were framed, in the instant case, question no.3 raised in ITA 58/2002 does not arise in this matter. Accordingly, in this matter only the following questions are framed:- i) Whether the ITAT was right in holding that the entire royalty payment made by the assessee to M/s Riken Corporation, Japan and M/s Kilbenschimdt of West Germany is revenue expenditure and 25%/ no part of it can be regarded as capital expenditure. . ii)Whether the ITAT was right in law in holding that the entire expenditure incurred by the assessee on visits by foreign technicians under collaboration agreements is revenue expenditure and no part of it/25% of the said expenditure cannot be regarded a s capital expenditure. . 2. The appellant shall file the Paper Book within three months. The appeal be listed with ITA 58/2002 and other connected matters. In that appeal, the registry may indicate that ITA No. 58/2002 and ITA No. 249/2003 are to be heard alongwith ITA 27/2004. . CHIEF JUSTICE . . . BADAR DURREZ AHMED, J January 19, 2004 sd

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