Law:

Section:

Section 37(1) of the income-tax act 1961-Capital or revenue expenditure-Assessee-company entered into licensing and technical assistance agreements with two foreign countries in respect of industrial fans and boilers for a limited number of years-Whether in view of the decision in cit v. tata engg. & locomotive co. (p.) ltd. [1980] 123 itr 538 (bom.) and cit v. wyman gordon (india) ltd. [1983] 144 itr 911 (bom.) facts of which were similar to this case, payments made by assessee under agreements were allowable as revenue expenditure-Held, on facts, yes Facts The assessee-company, carrying on business as manufacturers of furnaces, factory ovens, etc., entered into a licensing and technical assistance agreement with a foreign company, W, for the manufacture of industrial fans for a period of ten years. Under the agreement (i) the exclusive licence was given to the assessee to manufacture such fans in India; (ii) the licences were non-divisible, non-transferable and non-assignable; and (iii) the assessee had to use certain drawings, specifications, etc., for the manufacture of these items for a limited number of years. The assessee also entered into another agreement with foreign company S for the manufacture of water tube boilers, and fire tube boilers, according to which the assessee was furnished with drawings, specifications, etc., required for the manufacture of the said items, and these drawings were to be returned at the termination of the agreement. In this agreement as well as in the previous agreement, there was a provision for training of the assessee's engineers. The ITO disallowed the payments made under these agreements as being of capital nature. The A AC and the Tribunal held that the payments were of revenue nature. On reference: Held The assessee's case was covered by the decisions of this Court in CIT v. Tata Engg. & Locomotive Co. (P.) Ltd. [1980]123 ITR 538 and CIT v. Wyman Gordon (India) Ltd. [1983] 144 1TR 911. In the earlier case of Telco, it was held that technical know-how and technical advice for the time being cannot in these days of technological and scientific development and consequent change in production techniques be…

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