2014 (7) TMI 1120

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....y the assessee for acquiring technical know-how for a period of six years was a capital expenditure. On that basis the views to the contrary expressed by the Commissioner of Income-tax (Appeals) were set aside and the appeal preferred by the Revenue was allowed. Aggrieved by the aforesaid judgment and order, the present appeal has been preferred by the assessee. With the joint efforts of Tata Iron and Steel Co. Ltd. and Timken Co., an existing company under the laws of the State of Ohio, United States of America, a new company by the name of Tata Timken Ltd. was incorporated under the Companies Act, 1956. Tata Timken Ltd. (TTL for brevity) in order to expand its business agreed to take technological assistance from Timken Co. on the t....

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....ice invoiced and realised for products exported, or sold for export, from or in, as the case may be, the Republic of India during the six (6) years period commencing with the start of commercial production." A question arose as to whether the amount of USD 3,00,000 paid by TTL to Timken during the assessment year was to be treated as a revenue expenditure? The assessee naturally was interested in contending that it is a revenue expenditure whereas the Department was of the opinion that it is a capital expenditure. The Commissioner of Income-tax (Appeals) upheld the contention of the assessee which was challenged before the learned Tribunal which restored the views expressed by the Assessing Officer that the expenditure was capital in nat....

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....he assessee to Aturia is only a licence fee and not the price for acquisition of any capital asset". Mr. Majumdar submitted that considering the fact that the payment made by the assessee is on account of a licence fee and considering that the Supreme Court was considering an identical question in the case of I. A. E. C. (Pumps) Ltd. the question should be answered in favour of the assessee. Ms. Gutgutia, learned advocate appearing for the Revenue, drew our attention to a judgment of the apex court in the case of Jonas Woodhead and Sons (India) Ltd. v. CIT reported in [1997] 224 ITR 342 (SC). She submitted that the moot question for consideration has been indicated in the aforesaid judgment as follows (page 352) :   &nbsp....

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.... refrain from interfering with the order under challenge. We have considered the rival submissions of the learned advocates for the parties. The submissions advanced by Ms. Gutgutia are no doubt meritorious and certainly represent one way of looking at the things. Sight cannot, however, be lost of the fact that the payment made by the assessee is on account of licence fee. By making such payment, the assessee has got a permission to use the technology. The money paid is irrecoverable. In case, the business of the assessee for some reason or the other is stopped, no benefit from such payment is likely to accrue to the assessee. The licence is not transferable. Therefore, it cannot be said with any amount of certainty that there has been a....