- (1.) THE Income Tax Appellate Tribunal Delhi Bench "D" (hereinafter referred to as, the Tribunal) had forwarded the following question of law for an answer: "Whether the ITAT was correct in law in the facts the circumstances of the case in holding that deduction under section 35AB could not be allowed in respect of payments made prior to 1.4.1986 and thereby denying deduction of Rs.1,26,944/ - being 1/6th of Rs.7,61,666/ - -
(2.) COUNSEL for the assessee submits that the assessee made payment for know -how in the previous years 1982 -83, 1983 -84 relevant to assessment years 1983 -84 and 1984 -85. In view of amendment of Section 35AB(1) of the Income Tax Act, 1961(for short, the Act), the applicant is entitled to deduction of 1/6th of the amount so paid, while computing profits and gains of business, from previous year i.e. 1982 -83 and 1983 -84 and thereafter, deductions in equal installments for each of the five immediately succeeding previous years, namely, 1984 -85, 1985 -86, 1986 -87, 1987 -88 and 1988 -89 or previous year 1990 -91. It is further submitted that the applicant does not claim deduction, as provided by Section 35AB(1) of the Act with respect to previous years before 1.4.1986, the date of coming into force of Section 35AB(1) of the Act but the use of words "any previous year", "that previous year" and "for each of the five immediately succeeding previous years" clearly indicates that Section 35AB(1) of the Act applies to previous years even where payment was made before 1.4.1986.
(3.) COUNSEL for the assessee places reliance upon a judgment of the Hon'ble Gujarat High Court in titled CIT v. Shri Vallabh Glass Works Ltd., 1994 207 ITR 963 in support of his argument that even though Section 35AB(1) of the Act may not be retrospective but applies to payments made in the previous years prior to assessment year 1986 -87 provided the six years provided for distribution of deductions fall after 1.4.1986. Counsel for the revenue submits that if the argument advanced by counsel for the assessee is accepted, it would amount to retrospective operation of Section 35AB(1) which applies prospectively from the date of enactment i.e. 1,4,1986. The Tribunal has, therefore, rightly rejected this contention.;