CIT v. Prem Heavy Engg. Works (P) Ltd.
INCOME TAX ACT, 1961
Capital or revene expenditure - Allowability -Technical know-how
Assessee was doing business of selling sugar machinery parts. It entered into an agreement with a foreign company for assistance of technical know-how. Thereupon, assessee paid amount to said foreign company and claimed deduction of it on account of revenue nature. As per the agreement, technical know-how was to be provided for a period of seven years and it was for manufacturing of equipment and machinery for cane sugar plant and not for establishment of factory itself. Held:Terms of agreement stated that technical know-how received by assessee was not of enduring nature, therefore, payment made by assessee for acquiring technical know-how was allowed as revenue expenditure.
Income-tax Act, 1961, Section 37(1)
A.Y. :1985-86
Decision: In favour of assessee.
Case Law Analysis:Scientific Engineering House (P.) Ltd. v. CIT [1986] 157 ITR 86 /[1985] 23 Taxman 66 (SC) [Para 3], Tata Robins Frazer Ltd. v. CIT [1987] 165 ITR 347/ 28 Taxman 328 (Patna) [Para 5], CIT v. CIBA of India Ltd. [1968] 69 ITR 692 (SC) [Para 5], Shriram Refrigeration Ind. Ltd. v. CIT [1981] 127 ITR 746/6 Taxman 50 (Delhi) [Para 5], Kirloskar Pneumatic Co. Ltd. v. CIT [1982] 136 ITR 746/[1981] 7 Taxman 85 (Bom.) [Para 5], CIT v. Bajaj Electricals Ltd. [1984] 148 ITR 83 /[1983] 13 Taxman 50 (Bom.) [Para 5], Premier Automobiles Ltd. v. CIT [1984] 150 ITR 28 / 16 Taxman 202 (Bom.) [Para 5], CIT v. British India Corporation Ltd. [1987] 165 ITR 51 /30 Taxman 546P (SC) [Para 5], CIT v. Dr. R.L. Bhargava [2002] 256 ITR 42 / 122 Taxman 486 (Delhi) [Para8] and Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377/ 43 Taxman 312 (SC) [Para 17].