Technical know-how payment treated as revenue expenditure, as it improved business production without creating a capital asset.

Payment to a foreign collaborator for technical know-how was treated as revenue expenditure because it was made for carrying on the business and improving production. No capital asset was acquired, and the payment did not create an advantage of enduring capital nature. The expenditure was therefore allowable as a business deduction, and the reference was answered in favour of the assessee and against the Revenue.

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Issues: Whether the payment made to the foreign collaborator for technical know-how was revenue expenditure allowable as business deduction or capital expenditure.

Analysis: The amount was paid for carrying on the business and for improving production. No capital asset was acquired by making the payment, and the expenditure did not bring into existence an asset or advantage of enduring capital nature.

Conclusion: The payment was revenue expenditure and was allowable as a deduction. The question referred was answered in the affirmative and against the Revenue.

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