COMMISSIONER OF INCOME TAX Vs. CARBORUNDUM UNIVERSAL LIMITED

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Madras Bench, under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as " the Act ", has stated a case and referred the following question of law for the opinion of this court:

(2.) THE assessee is a company and it carried on the business of manufacture and sale of abrasives. It entered into technical assistance and collaboration agreement with the foreign company by name Corborundum Company under which it received technical information and know-how with respect to the manufacture of bonded abrasive products and coated abrasive products. One of the terms of the agreement, namely, Clause (6), provided for the foreign company furnishing necessary technical personnel for the operation of the plant of the assessee-company. Clause (7) of the agreement provided for payment of remuneration to the said foreign personnel and stated :

(3.) AS we have pointed out already, the Tribunal has taken the view that the expenditure involved in the present case is of a nature described in Section 36(1)(iv) and, therefore, the residuary provision contained in Section 37 will not be attracted. However, the Tribunal allowed the deduction under Section 28 itself holding that any expenditure incurred for the purpose of carrying on business can be deducted for arriving at the true profits and gains of the business. The question for consideration is whether this conclusion of the Tribunal is correct or not.