TaxTMI 
TaxTMI 
1982 (4) TMI 18
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....-stressed concrete structures and/or products incorporating cone anchorages and that the French company had developed the use of post-tensioned pre-stressed concrete structures and/or products incorporating cone anchorages, and it became possessed of valuable data, information and experience in the application of the aforesaid patents and processes in relation to the use of cone anchorages. Under the agreement the French company granted to the assessee the right to prospect for and exploit in India, excluding certain parts thereof, the aforesaid patents in respect of post-tensioned pre-stressed concrete structures and/or products constructed or manufactured under or in conjunction with or embodying the said patents and processes and embodying Freyssinet cone anchorages which have been referred to in the said agreement as " the structures and products ". The assessee was also granted the right to grant sub-licences to construct, manufacture, use and sell under the said patents structures and products as aforesaid. It may be mentioned that the assessee had been referred to in the said agreement as " the agent ". Subclause (c) of cl. 7 of the said agreement provides that the assessee ....
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....to the Pre-stressed Concrete Company Limited of London and as to the balance of forty per cent. thereof to the agent. The agent shall remit with each account the amount shown to be due to S.T.U.P. (v) Apportionment of royalties under the above sub-clause :-- (i) on direct royalty basis at 5% rate : S.T.U.P. 48% The agent 40% The Pre-Stressed Concrete Company Ltd. London 12% (ii) On cone anchorage basis rate :  ....
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....luation of the rupee as aforesaid, the assessee was obliged to spend Rs. 1,30,879 to make this remittance and thus incurred an additional expenditure of Rs. 48,612 in payment of the royalty for that year. In respect of the calendar year 1965, the assessee had debited a sum of Rs. 2,33,245 as the royalty payable to the French company during that calendar year in its profit and loss account. This entire amount was, remitted to the French company after 6th June, 1966, and in order to make that remittance the assessee had to incur an additional expenditure of Rs. 1,37,616 on account of devaluation of the Indian rupee. Thus, on account of devaluation of the Indian rupee the assessee had to make a total additional expenditure of Rs. 1,86,227 in respect of royalties for the calendar years ending 31st December, 1964, and 31st December, 1965, respectively, which remained to be remitted on 6th June, 1966. The assessee claimed a deduction in respect of this additional expenditure on the ground that it was a revenue expenditure incurred by it and as such deductible under the provisions of s. 37 of the I.T. Act, 1961. The ITO rejected this claim of the assessee on the ground that the assessee m....
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....ve to be paid. Sub-clause (iii) provides that the basis for assessing such royalty as aforesaid would be the rate from time to time in force of the Indian rupee equivalent of 10 shillings sterling for each cone anchorage of a particular type, and of 20 shillings sterling for each cone anchorage of another type, namely, of larger diameter. This sub-clause, in our opinion, merely fixes the amount of royalty which would be payable by the assessee in terms of Indian rupees and that the amount of the liability in terms of the Indian rupees shall be calculated with reference to the rupee equivalent of certain shillings sterling. It must also be noticed that this sub-clause does not deal at all with royalties to be received by the assessee from the sub-licensees, which are dealt with under sub-cl. (iv). What Mr. Joshi is trying to do is to read sub-cl. (iii) in complete isolation from sub-cl. (vi). This, however, cannot be done. It is beyond dispute that sub-cl. (vi) is very relevant for the determination of the question of the currency in which and the time at which the liability is to be determined. A plain reading of sub-cl. (vi) of cl. 11(a) makes it clear that the liability of the as....
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.... pointed out earlier clearly shows that the liability in terms of French francs had to be calculated at the time when the payment or remittance had to be made. In the absence of any contention by the Revenue that the assessee did not make the payment as per the accounts sent to the French company within the time specified in sub-cl. (iv) of cl. 11(a) of the said agreement, we must assume that this was not the case. As the liability has to be ascertained as on the date on which the payment had to be made and as there is no contention that the remittances were made beyond the time stipulated as aforesaid, we are of the view that the liability in terms of French francs was rightly held by the Tribunal to be determinable at the time when the remittance was made. It may be mentioned that, although no such point had been taken before the Tribunal, it was sought to be urged by Mr. Joshi that, in the present case, the assessee had made remittances beyond the time stipulated under the said agreement, and the additional liability on account of devaluation was incurred by reason of such delay, and the assessee was not entitled to get any deduction in respect thereof. In our view, it is not....