COMMR.OF INCOME TAX-II,CHANDIGARH vs M/S SWARAJ ENGINES LTD.

The Supreme Court addressed the applicability of Section 35AB of the Income Tax Act, 1961, regarding the classification of royalty expenditure as either revenue or capital in nature. The Court emphasized that the determination of the nature of expenditure is crucial for the application of Section 35AB, which pertains to amortization of capital expenditure. The Court set aside the High Court's judgment and remitted the matter for fresh consideration, allowing the appeal with no order as to costs.