Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Capital or revenue expenditure - Assessee, a government company, entered into respective agreements with two foreign collaborators for obtaining technical know-how and designs, etc., for manufacture of specific machines, etc. - Under agreements assessee to use technical know-how even after expiry thereof and to pay specified percentage of royalties linked to production and/or sale of manufactured products - Whether royalty payments deductible as revenue expenditure - Held, on facts, yes Facts The assessee, a Government company, had been carrying on the business of manufacture of precision and machine tools, etc., since 1942. On 2-1-1961, it entered into a licence agreement with JS Ltd., a foreign UK company, for the manufacture of a specified tool and cutter grinding machine. For this purpose, JS Ltd. was to supply the accessories, designs, drawings, technical know-how with latest modifications and standards and provide assistance in the production of the main castings of the machine and also to sell all relative jigs, fixtures and tools, etc., as ordered at their normal/commercial retail value. For the grant of such manufacturing rights and assistance, the assessee agreed to pay lump sum amount of £ 1,000 in two instalments of £ 500 each and also a further royalty of 5 per cent of the Indian selling price of the above products during the currency of the agreement, which was initially for a period of 10 years (renewable for 5 years by mutual consent). The minimum net royalty for 10 years period was £ 20,000, subject to Indian taxes. The termination of the agreement would not affect the assessee's rights to use, for the purpose of its business, all the information, techniques, technical know-how, patents, copyrights, drawings, plans and documents relating, to the machine which have been transferred by JS Ltd. or which might have come in its possession during the agreement. The assessee was entitled to use this information free of any royalty or other payments, etc., but it would have no right thereafter to use the foreign company's name or trade mark. The rights and liabilities of either party to the agreement were not…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492