Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1985-86 - Assessee paid certain sum to a foreign supplier for obtaining technical know-how relating to sophisticated system of paint finishing connected with manufacture of motor vehicles - Assessing Officer treated it as capital expenditure - Assessee itself was not manufacturer of any motor vehicle and it passed an information to its client for consideration and there was no enduring benefit of any type - Whether Commissioner (Appeals) and Tribunal were right in holding that information obtained by assessee was of same type as mere stock-in-trade which assessee simply sold off and expenditure involved was of revenue nature - Held, yes FACTS The assessee paid a certain sum to a foreign supplier for obtaining technical know-how and claimed it as revenue expenditure. The Assessing Officer held the expenditure to be of capital nature. But the assessee won both before the Commissioner (Appeals) and the Tribunal. On appeal by the revenue : HELD The concurrent finding of fact before both the departmental authorities was that the sum was paid by the assessee to its Japanese supplier, who supplied the technical know-how to the assessee. The know-how related to a sophisticated system of paint finishing which was of use in manu-facturing motor vehicles. The assessee passed on the information to its client 'A' for a consideration which was identical to the above sum paid to the Japanese supplier. [Para 4] The assessee treated that sum as representing a mere sale. The facts found disclosed that the assessee itself was not the manufacturer of any motor vehicle and it used the information for passing it on and obtaining reimbursement by way of consideration. [Para 5] In those circumstances, the Commissioner (Appeals) and the Tribunal had both found that the information obtained by the assessee was of the same type as a mere stock-in-trade which the assessee simply sold off. Enduring benefit of any type could not be discerned by the department. [Para 6] The appeal petition was summarily rejected and the order of the Tribunal was consequentially confirmed. [Paras 11 and 12]…

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