Tribunal affirms revenue treatment for technical know-how expenditure

The Tribunal upheld the CIT(A)'s decision regarding the treatment of expenditure on acquiring technical know-how as revenue expenditure for A.Ys 2010-11 and 2011-12. Citing a previous decision for A.Y. 2009-10, the Tribunal found that the technical know-how was utilized for the assessee's existing business activities, leading to the dismissal of the Revenue's appeals. The Tribunal concluded that the expenditure was in line with the agreement between the parties for sales and production activities, affirming the CIT(A)'s findings.

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Issues:
Appeals by Revenue against CIT(A) orders for A.Ys 2010-11 and 2011-12 regarding expenditure on acquiring intangible asset - technical know-how treated as capital or revenue expenditure.

Analysis:
The Tribunal heard two appeals by the Revenue against CIT(A) orders concerning the treatment of expenditure on acquiring technical know-how as either capital or revenue expenditure for A.Ys 2010-11 and 2011-12. The common grievance of the Revenue was the deletion of the addition made by the Assessing Officer. The Assessing Officer treated the expenditure as capital, while the CIT(A) considered it as revenue expenditure. The counsel for the assessee argued that the issue was in favor of the assessee based on a previous Tribunal order for A.Y. 2009-10, which was acknowledged by the ld. DR representing the Revenue.

Upon careful consideration of the authorities' orders, the Tribunal found merit in the assessee's argument. The Tribunal referred to a previous decision for A.Y. 2009-10 where technical know-how fees were treated as revenue expenditure. The Tribunal noted the contentions of both parties regarding the nature of the expenditure and the purpose for which the technical know-how was acquired. The Tribunal highlighted that the technical know-how was related to the assessee's existing business activities and not a new line of business. The Tribunal upheld the CIT(A)'s decision based on the agreement between the parties, which indicated that the technical know-how was to be utilized for the assessee's sales and production activities. Consequently, the Tribunal dismissed the Revenue's appeals, following the precedent set by the co-ordinate bench in a similar case for A.Y. 2009-10.

In conclusion, the Tribunal declined to interfere with the CIT(A)'s finding and dismissed the Revenue's appeals for A.Ys 2010-11 and 2011-12. The orders were pronounced on 07.06.2018, and the appeals of the Revenue were consequently dismissed.

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