LexM/S. MANGALORE GANESH BEEDI WORKS versus COMMISSIONER OF INCOME TAX, MYSORE &ANR.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
[2015] 13 S.C.R. 1080
A
M/S. MANGALORE GANESH BEEDI WORKS
B
c
v.
COMMISSIONER OF INCOME TAX, MYSORE &ANR.
(Civil Appeal NoS.10547-10548 of 2011)
OCTOBER 15, 2015
[MADAN B. LOKUR AND S. A. BOBDE, JJ.)
Income-Tax Act, 1961:
s. 37 - Business Expenditure - Deduction - Certain
amount claimed as revenue expenditure by the Association
of persons constituted by partners of the erstwhile firm -
Deduction u/s. 37, as being laid out or expended wholly and
D exclusively for the purpose of b_usiness of the Association of
Persons - Permissibility of - Held: Amount claimed as
revenue expenditure by Association of persons can be allowed
as permissible deduction by them u/s. 37 of the Act -
Concern was ·a going concern and thus, the legal expenses
E incurred were for defending the business of the going concern
and for protecting its interests- Expenses were not personal
in nature, nor the expenses were unreasonable or not bona fide.
s. 32 r/w s. 43(3)- Depreciation- Benefit of s. 32 rlw s.
F 43(3) - Entitlement to - Held: For the purposes of a large
business, control over intellectual property rights-brand
name, trademark is absolutely necessary - Acquisition of
such rights and know-how is acquisition of a capital nature -
Intellectual property .such as trademarks, copyrights and
G know-how come within the definition of 'plant' - Thus, the
trademarks, copyrights and know-how acquired by assessee
would come within the definition of 'plant' - s. 32 as it stood at
the relevant time did not make any distinction between
tangible and intangible assets for the purposes of
H depreciation - Assessee is entitled to the benefit of
1080
M/S. MANGALORE GANESH BEEDI WORKS v. CIT,
1081
MYSORE
depreciation on plant-trademarks, copyrights and know-how,
A
in terms of s. 32 -
On facts, the tribunal was justified in
directing the Assessing Officer to capitalize the value of
trademarks, copyright and technical know-how by treating the
same as plant and machinery. and grant depreciation.
B
Disposing of the appeals, the Court
HELD: 1.1 The tribunal held that the concern was
in fact a going concern and therefore, the legal expenses
incurred were for defending the business of the going C
concern and for protecting its interests. It could not be
said that the expenses were personal in nature, nor
could it be said that the expenses were unreasonable or
not bona fide. There is a clear finding of fact by the
tribunal that the legal expenses incurred by the Assessee D
were for protecting its business and that the expenses
were incurred after 18th November, 1994, after the
business was taken over by AOP-3. There is no reason
to reverse this finding of fact particularly since nothing
has been shown to conclude that the finding of fact was E
perverse in any manner whatsoever. That apart, if the
finding of fact arrived at by the tribunal were to be set
aside, a specific question regarding a perverse finding
of fact ought to have been framed by the High Court.
The Revenue did not seek the framing of any such F
question. [Paras 16, 19] [1089-B-C; 1090-F·H]
1.2 The High Court was not justified in upsetting a
finding of fact arrived at by the Tribunal, particularly in
the absence of a substantial question of law being G
framed in this regard. Thus, the view of the tribunal that
the amount claimed as revenue expenditure by the
Association of persons which was constituted by the
three partners of the erstwhile firm, MGBW, can be
allowed as permissible deduction in the hands of the H
1082
SUPREME COURT REPORTS
[2015] 13 S.C.R.
A said Association of Persons under Section 37 of the
Income-Tax Act, 1961, as being laid out or expended
wholly and exclusively for the purpose of business of
the said Association of Persons, is restored and that of
the High Court is set aside. [Paras 2, 20] (1085-B-C;
B 1091-E·F]
2.1 It is accepted and acknowledged that intellectual
property rights have a value. As regards the issue
whether the assessee was entitled to claim any
C deduction on the alleged expenditure for acquisition of
patent (trademarks] rights, copyrights and know-how,
in terms of s. 35A and 35AB of the Act, the question of
the applicability of s. 35A and s. 35AB of the Act is left
open for an appropriate case because the counsel
D submitted that if the assessee is given the benefit of
Section 32 read with Section 43(3) of the Act
{depreciation on plant) as has been done by the tribunal,
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