| The Tax Publishers2019 TaxPub(DT) 7631 (Del-Trib) : (2020) 180 ITD 0235 INCOME TAX ACT, 1961
Section 37(1)
As evident from terms and conditions of concerned technical collaboration agreement, assessee obtained only right to use, during the currency of agreement, the technical know-how and information and intellectual property right relating to the manufacture of Honda cars and did not secure any ownership right over them. Therefore, payment of lump sum fees for technical know-how and the royalty was allowable as revenue expenditure.
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Capital or revenue expenditure - Royalty and model fees paid to Honda Motor Japan - Assessee only obtained right to use technical know-how and no ownership over the same -
Assessee engaged in manufacture of cars claimed deduction of royalty and model fees paid to Honda Motor Japan. AO held the same to be of capital in nature and denied deduction.Held: As evident from terms and conditions of concerned technical collaboration agreement, assessee obtained only right to use, during the currency of agreement, the technical know-how and information and intellectual property right relating to the manufacture of Honda cars and did not secure any ownership right over them. Therefore, payment of lump sum fees for technical know-how and the royalty was allowable as revenue expenditure.
REFERRED : British India Corp. Ltd. (1987) 165 ITR 51 (SC) : 1987 TaxPub(DT) 1225 (SC), Alembic Chemical Works Co. Ltd. v. CIT (1989) 177 ITR 377 (SC) : 1989 TaxPub(DT) 1096 (SC), CIT v. Indian Oxygen Ltd. (1996) 218 ITR 337 (SC) : 1996 TaxPub(DT) 239 (SC) CIT v. IAEC (Pumps) Ltd. (1998) 232 ITR 316 (SC) : 1998 TaxPub(DT) 476 (SC), Premier Automobile Limited v. CIT (1984) 150 ITR 28 (Bom) : 1984 TaxPub(DT) 0671 (Bom-HC), Bajaj Tempo Ltd. v. CIT (1994) 207 ITR 1017 (Bom) : 1994 TaxPub(DT) 198 (Bom-HC), CIT v. Madras Rubber Factory Ltd. (1995) 212 ITR 443 (Mad) : 1995 TaxPub(DT) 377 (Mad-HC), CIT v. Madras Rubber Factory Ltd. (1983) 144 ITR 678 (Mad) : 1983 TaxPub(DT) 1007 (Mad-HC), CIT v. Madras Rubber Factory Ltd. (1984) 149 ITR 411 (Mad) : 1984 TaxPub(DT) 847 (Mad-HC), Shri Vallabh Glass Works Ltd. v. ITO (1995) 212 ITR 433 (Guj) : 1995 TaxPub(DT) 120 (Guj-HC), CIT v. Sudhir Geigy Ltd. (1996) 132 CTR 102 (Guj) : 1996 TaxPub(DT) 0770 (Guj-HC), CIT v. Chemical & Plastics (I) Ltd. (1989) 179 ITR 269 (Mad) : 1989 TaxPub(DT) 947 (Mad-HC), CIT v. Kirloskar Tractors Ltd. (1998) 231 ITR 849 (Bom) : 1998 TaxPub(DT) 1157 (Bom-HC), CIT v. Associated Electrical Industries (India) Pvt. Ltd. (1975) 101 ITR 844 (Cal.) : 1975 TaxPub(DT) 218 (Cal-HC), CIT v. Kirloskar Oil Engines Ltd. (1986) 157 ITR 762 (Bom) : 1986 TaxPub(DT) 0320 (Bom-HC), CIT v. Hindusthan General Electrical Corpn. Ltd. (1971) 81 ITR 243 (Cal.) : 1971 TaxPub(DT) 20 (Cal-HC), CIT v. Associated Electrical Industries (India) (P.) Ltd. (1975) 101 ITR 844 (Cal.) : 1975 TaxPub(DT) 218 (Cal-HC), Agarwal Hardware Works (P.) Ltd v. CIT (1980) 121 ITR 510 (Cal.) : 1980 TaxPub(DT) 445 (Cal-HC), CIT v. Avery India Ltd. (1994) 207 ITR 813 (Cal) : 1994 TaxPub(DT) 303 (Cal-HC).
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