Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 73 - ITAT DELHINature of expenditure - royalty payment to FCC Co. Ltd., Japan - revenue or capital expenditure - assessee was granted non-exclusive and non-transferable right and license to use IPR, technical know-how and technical information in order to manufacture and sell products and parts in India - whether any right has been given which is for use of technology or it has been given for acquiring the knowhow or transfer of technology; whether any exclusive right has accrued to the licensee or it is purely for use of technology for production and sale? - HELD THAT:- No way it can be inferred that the license agreement gave any exclusive right to the licensee or any technical know-how is being transferred or it will lead to creation of any capital asset in the hands of the licensee giving enduring benefit either during the term of license or in the year of termination of license agreement. FCC Co. Japan even having 50% stake holding with the assessee company will not lead to an inference that there is exclusive or transferrable technical know-how which is being acquired by the assessee company. It is purely for use of technology for manufacturing of clutch assembly for two wheelers and four wheelers and the royalty paid based on sale percentage thereon cannot be a capital expenditure. Either having 50% control or 100% control that will not change the colour of nature of expenditure, because the royalty payment is for manufacturing or sale of manufactured products using the technical information and know-how. Precisely on these facts and circumstances the jurisdictional High Court in series of judgments have held that such a nature of payment of royalty is always a revenue expenditure. Accordingly, we hold that in the facts and circumstances of the case the payment of royalty as revenue expenditure and is allowable. Thus all the appeals of the revenue are dismissed.
|