TaxTMI 
TaxTMI 
2015 (10) TMI 2313
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.... in nature." The brief facts of the case are that the respondent/assessee was originally incorporated under the name and style of M/s. I.T.C Zeneca Limited and its name was changed to M/s. Advanta India Limited on 30.09.1998. In the course of its business during the assessment year 1995-96, the assessee paid an amount of Rs. 2,75,85,300/- to M/s. Zeneca Limited, U.K towards technical know-how fee and the assessee had also paid an amount of Rs. 47,34,306/- towards royalty and claimed the said payments as revenue expenditure. It is further stated that the Assessing Officer observed that the expenditure incurred by the assessee towards technical know-how fee falls within the ambit of Section 35AB of the Act and allowed 1/6th of the amount so claimed as deduction. The Assessing Officer had also treated 1/4th of royalty paid as capital expenditure. On appeal filed by the assessee, the Commissioner of Income Tax (Appeals) (for short "the C.I.T Appeals") treated 75% of the technical know-how fees as revenue expenditure and 25% as being capital in nature, and thus allowing 75% of the fees paid towards Technical know-how as deduction under Section 37 of the Act. The C.I.T (Appeals) had a....
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....of Income Tax, Tamil Nadu 232 ITR 359, had disallowed 1/4th of the expenditure paid as consideration for the agreement dated 01.10.1994. Both the revenue and the assessee filed appeals separately against the C.I.T Appeal's common order. The Tribunal had analyzed the agreement in detail and by applying the principles laid down in various judgments held that the expenditure incurred by the assessee in obtaining Germplasm and the technical know-how under the agreement dated 01.10.1994, would qualify to be allowed fully as revenue expenditure. In the process of discussion, the Tribunal found that the assessee came into existence by acquisition of the existing business of Hyson India Limited and the business commenced from 1.9.1994. The Germplasm and Technical know-how were acquired by the assessee after commencement of the business by the assessee. By applying the six tests laid down in the case of Jonas Woodhead & Sons (India) Limited vs. CIT 1997) 224 ITR 342, the Tribunal came to conclusion that there was no new business which was started on the basis of Technical know-how received from the foreign firm. With regard to Test No.2, though the Article 18 of the agreement gives excl....
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....other (1998) 232 ITR 359 (SC) ii) Jones Woodhead and Sons (India) Ltd., vs. CIT (1997) 224 ITR 342 (SC) iii) CIT, Tamil Nadu-II vs. Southern Switch Gear Ltd (1984) 148 ITR 272 (Mad). iv) CIT vs. Shriram Bearings Ltd (2001) 251 ITR 155 (Cal) v) Jyothi Electric Motors Ltd. Vs. CIT (1999) 237 ITR 280 (Guj) vi) Fenner Woodroffe & Co. Ltd. Vs. CIT, Madras (1976) 102 ITR 665 (Mad. vii) Ram Kumar Pharmaceutical Works vs. CIT (1979) 119 ITR 33 (All.) apart from making submissions with regard to inapplicability of the judgments cited on behalf of the respondent/assessee. Likewise, learned senior counsel Sri Parsi Pardivala, on behalf of the assessee, had also placed reliance on the following judgments: i) CIT vs. CIBA of India Ltd (1968) 69 ITR 692 (SC) ii) Praga Tools Ltd vs. CIT (1980) 123 ITR 773 (AP) iii) Coromandal Fertilizers Ltd vs. CIT (1984) 148 ITR 546 (AP) iv) Alembic Chemicals Works Company Ltd vs. CIT (1989) 177 ITR 377 (SC) v) Veljan Hydrair Pvt Ltd vs. CIT (1989) 177 ITR 552 (AP) vi) CIT vs. Avery India Ltd (1994) 207 ITR 813 (Cal) vii) CIT vs. Kirloskar Tra....
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.... get a right and license to use the technical information and the Licensor Germplasm to research and develop, produce and sell products within the India. 3) The assessee gets immunity from legal proceedings with respect to patent rights, if any in India. The assessee acquires documents relating to technical information and with genetic material for maize, sunflower, canola, msustard, sorghum, millet and cotton. Assessee also would get assistance in acquiring appropriate personal, facilities, plant, machinery and equipment for the research, development, production and processing of products by the licensee. Assessee gets the right to use, produce and sell the Germplasm in a specified products by way of sub-license to its affiliates.) One of the conclusions arrived at by the Tribunal is with regard to whether there is any enduring benefit likely to accrue in favour of the assessee on account of the agreement. This question was answered in the negative by the Tribunal by reference to the fast changing development in the filed of biotechnology. Reliance was also placed on the judgment of the Supreme Court in the case of Alembic Chemicals Works Company vs. CIT 1989) 177 ITR 377 (S....