1977 (11) TMI 31

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....5,610 were rightly allowed as revenue deductions for assessment years 1962-63 and 1963-64, respectively ? " In ITR No. 38 of 1968, the question referred to us reads as under : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 39,101 was rightly allowed as revenue deduction ? " The facts may be briefly stated : The assessee-company for the purpose of carrying on its business entered into a number of collaboration agreements with certain foreign manufacturers. In these references, we are concerned with four agreements. The first one is dated 30th January, 1959, entered into between the assessee and Benninger Engineering Co. Ltd. The agreement was to enure for a period of 10 years and under the agreement the asses....

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....ear 1963-64 and Rs. 39,101 for the assessment year 1964-65. This claim was rejected by the ITO who held that the expenditure incurred of such technical know-how was of a capital nature because the effect lasted over a period of years. In appeal the AAC also held that payments were made only to acquire an asset of an enduring nature and, therefore, capital in nature. Being aggrieved, the assessee carried the matter further to the Tribunal. After having heard the parties and considering the materials, the Tribunal was of the opinion that this was not a case of purchase of the know-how or designs outright but a mere right to use the drawings and designs and that only for the duration of the agreements, which, in the opinion of the Tribunal, co....

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....d by subsequent agreements between the foreign collaborators and the assessee it was agreed that the name of the new company, S.L.M. Maneklal Industries Ltd., should be substituted in the place and stead of the assessee. The Gujarat High Court, therefore, was considering these very agreements and the Tribunal, it is pertinent to note, has observed that the terms of these agreements are more or less identical with the terms of the agreement between the assessee and Benninger which have been extracted in the statement of the case. After considering the terms of the agreements the Gujarat High Court upheld the decision of the Gujarat Bench of the Tribunal which was to the effect that the expenses were allowable as revenue expenditure. It is n....