TaxTMI 
TaxTMI 
1988 (2) TMI 143
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....CIT(A) by mistake held in his order that the Tribunal had allowed this expense as a revenue expense in earlier years. The Tribunal also for the asst. yr. 1977-78 took without verifying that the Tribunal had allowed the same in the earlier years and thus confirmed the order of the CIT(A). It was, thus, argued by the Standing Counsel that according to the earlier history and the orders of the Tribunal on the topic, licence fee was held to be a capital expense and, according to the said finding, the same should be disallowed and the order of the CIT(A) be reversed on this issue. 3. The authorised representative of assessee did not dispute the above facts pointed out by the Standing Counsel, but he argued that licence fee was a revenue expense. 4. We have considered the facts and the rival contentions. In asst. yrs. 1974-75, 1975-76 and 1976-77, licence fee was held to be a capital expense by the Tribunal. In 1977-78, it was allowed by the Tribunal, it appears, on a misunderstanding that the same was allowed by the Tribunal in earlier years though it was actually not so allowed. The order of the Tribunal for the asst. yr. 1977-78 thus, in our opinion is not a correct guide. Follo....
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....ribunal for the asst. yr. 1977-78 deleted the disallowance of licence fee on the ground that the Tribunal in asst. yrs. 1974-75, 1975-76 and 1976-77 had deleted such a disallowance. The correct fact is that there was no such disallowance under consideration of the Tribunal for the asst. yrs. 1974-75, 1975-76 and 1976-77. Thus, the Tribunal in the order for the asst. yr. 1977-78 deleted the disallowance under a misunderstanding. It was argued by the Standing Counsel that licence fee was not a revenue expenditure and the same should have been disallowed. The Standing Counsel in this connection, relied upon the following cases: 1.Fenner Woodroffe & Co. Ltd., vs. CIT (1976) 102 ITR 665 (Mad). 2. Jonas Woodhead & Sons (India) Ltd vs. CIT (1979) 10 CTR (Mad) 150 (FB) : (1979) 117 ITR 55 (Mad) (FB). 3. CIT vs. Jyoti Ltd (1979) 11 CTR (Guj) 87 : (1979) 118 ITR 499 (Guj) 4. Ram Kumar Pharmaceutical Works vs. CIT (1979) 8 CTR (All) 168 : (1979) 119 ITR 33 (All) 5. Addl. CIT vs. Southern Structurals Ltd. (1977) 110 ITR 890 (Mad). 11. The Authorised Representative of the assessee argued that licence fee was allowed by the Department itself in the earlier years and this issue ....
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....deduction under the head 'Preliminary Expenses' and in deleting the same. The assessee had actually claimed deduction of Rs. 6,436 and only that amount was disallowed by the IAC. Relief of Rs. 6,436 only should have been allowed by the learned CIT(A)." 14. We have considered the facts. It appears that there was a mistake in the order of the CIT(A). The CIT(A) is directed to rectify the mistake, if it has not been done already. 15. The next contention in both the years is that CIT(A) was not justified in accepting the assessee's claim that deduction under s. 80MM shall be calculated with reference to the cross receipts. 16. This contention is covered by the orders of in the Tribunal in the earlier years. According to the orders of the Tribunal in earlier years the contention of the Revenue is rejected 17. The next contention is that CIT(A) was not justified in holding that depreciation was admissible on Rs.30,06,196 representing the cost of documents. 18. This issue is covered by the orders of the Tribunal in earlier years. Following the same, this contention of the Department is rejected 19. The last contention is that the CIT(A) was not justified in relying on th....
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....7th Nov., 1969. These two agreements were executed to provide necessary know-how and design. These two agreements were subsequently assigned to the assessee company on 13th Sept., 1973. 2. It took over the assets of Rs. 5.1 crores which included the Consultancy Wing and United Wing as follows; . Rs. "1.Consultancy Wing . Expenditure on technical know-how documents, training of engineers Soviet-------------written off 79,08,640 United Wing . Expenditure on Licence fee, Engineer/documents etc. not written off 70,90,370 Total 1,49,99,010 The assessee-company, in addition thereto, incurred the total expenses of Rs.16,55,980 Rs. 17,40,520 and Rs. 19,99,282 on payment to collaborators, engineering and design fees, postage and training expenses during the asst. yrs. 1974-75 to 1976-77." 3. The assessee claimed the Revenue expenses of Rs. 1,36,48,796 and capital expenses of Rs. 30,06,193 on which it claimed depreciation for the asst. yr. 1974-75. In 1975-76 and 1976-77 the expenditure of Rs. 17,40,529 and Rs. 19,99,282 were claimed as revenue expenditure. It would be relevant to give the break up of the claim of the assessee for Rs. 1,36,48,7....
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....hich was allowed to be deducted as business expenditure. 7. But in treating the expenditure for technical know how as capital expenditure, the Tribunal has recorded a further finding in para 11. An extract of this is reproduced as below: "The lower authorities have considered the expenses of the assessee on know-how, drawings, patents, etc., on the footing that the assessee acquired the technical know-how and utilised the same for its business. But the facts are otherwise. The assessee, no doubt, has utilised the technical know-how, drawings, patents, etc., but it has not manufactured any article on the basis of those licences for itself nor the article manufactured on the basis of know-how are subject matter of sale of the assessee. What the assessee has done is that the assessee has taken know-how, drawings patents, etc., from others and have provided them to others by charging fees. All the decisions either cited before the authorities below or cited before the Bench during the hearing by both the parties are related to know-how which was acquired by the assessee for the manufacture of any of the items by it which was ultimately sold. Therefore, in all these cases the obje....
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....er years' appeal was on altogether different set of facts. The order of the Tribunal was based on a finding that the assessee was a dealer in know-how but the finding of the CIT(A) in this year does not suggest that but on the other hand highlights that the payment was made in connection with the equipment to be supplied to its constituents as pointed out in the extract from the finding of the CIT(A) reproduced above. As highlighted in the Tribunal's own finding reproduced above, such an expenditure was to be differentiated from the expenditure incurred to supply the technical know-how as a dealer and was to be treated as revenue expenditure. It was this feature which appears to have led the CIT(A) to hold that the Tribunal had already recorded a finding which he faithfully and truthfully followed. Besides, if the payments of royalty and Engineering fees both incurred for acquiring technical know-how are to be treated as revenue expenditure by the learned Accountant Member to which I have agreed, I fail to see any logic in disallowing licence fee as capital expenditure. Engineering fee also was a constituent of the expenditure of Rs. 1,66,54,990 as indicated above which was conside....
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....oration agreement is allowable as revenue expenditure or capital expenditure. The assessee is a Government undertaking. Under the agreement the assessee was required to pay 1,00,000 dollars on the execution of agreement and similar amount of 1,00,000 dollars every year for another five years. The IAC held that the expenditure incurred by the assessee is capital expenditure. On appeal, the CIT(A) allowed the assessee's claim as revenue expenditure. 3. The revenue preferred the appeals before the Tribunal. The appeals were heard by the learned J.M. Shri U.S. Dhusia and the learned A.M. Shri B. Nath of Patna Bench of the Tribunal. The learned A.M. held that the expenditure is capital expenditure. The learned Judicial Member differed with this view. He held that it is allowable as revenue expenditure. In view of the above difference of opinion, the matter has been referred to me. 4. The learned departmental representative strongly urged that the payment towards licence fee for the technical know-how is a capital expenditure. The CIT(A) was wrong in allowing the same as revenue expenditure. He also pointed out that the Tribunal in the assessee's case in the asst. yrs. 1974-75 to 1....