TMI Blog2008 (11) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... tion towards Employee s Gratuity Fund was disallowed for the reason that the said fund was not approved till that point of time. It is also submitted that approval has been received only recently and in this regard, our attention was drawn to page No. 47 of the paper book as per which, approval was granted by the Commissioner on 22-4-2008 with effect from 1-4-2001. It was submitted that the assessment year in appeal is 2002-03 and hence, in view of this approval with effect from 1-4-2001, disallowance made by the Assessing Officer should be deleted. Ld. DR of the revenue supported the orders of the authorities below. 5. We have heard the rival submissions and perused the material available on record and have gone through the orders of the authorities below. We find that the disallowance was made only for the reason that the gratuity fund was not approved till date of passing of order of ld. CIT(A) on 18-12-2006. The approval has been given on 22-4-2008 which is effective from 1-4-2001 and hence, in view of this approval of the gratuity fund by ld. CIT, Delhi-I, the disallowance made by the Assessing Officer deserves to be deleted. We, therefore, delete the same. This ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Honda Seil Cars India Ltd. ( supra ). In that case, the dispute was regarding expenditure of Rs. 63.07 lakhs incurred by the assessee in connection with launch of new model of car manufactured by the assessee. It is also noted by the Tribunal in that case that the expenses incurred by the assessee are related to travelling, training, seminars, advertisement and technical guidance fees etc. of the on going business. In the present case, other facts are similar because in the present case also, the expenses are incurred in connection with launch of radiator and the assessee is already in business for manufacturing of radiators but the details of the expenses are not available and hence we feel that this issue should be decided afresh by the Assessing Officer in the light of this Tribunal decision rendered in the case of Honda Seil Cars India Ltd. ( supra ). We, therefore, set aside the order of the ld. CIT(A) on this issue and restore the matter back to the file of the Assessing Officer for a fresh decision in the light of this Tribunal judgment after obtaining the details of expenses and after providing adequate opportunity of being heard to the assessee. Ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 14. It was submitted by the ld. AR of the assessee that the relevant agreement is appearing on pages 50 to 59 of the paper book and in particular, our attention was drawn to clause ( 1b ) of Article 4 of this agreement as appearing on page No. 53 of the paper book as per which, the assessee was required to pay royalty of 3 per cent on domestic and 5 per cent on export sales. Regarding various judgments followed by the Assessing Officer as noted by him on page No. 2 of the assessment order, it was submitted that these judgments are not applicable because the facts are different. Our attention was also drawn to clause ( 2b ) of Article 1 of the said agreement as appearing on page No. 51 of the paper book and it was submitted that as per this clause of the agreement, the licensor has to provide various technology and technical services as provided for in this clause and hence, the royalty payment is of revenue in nature. 15. Reliance was placed on the following judicial pronouncements: ( a ) CIT v. Ciba of India Ltd. [1968] 69 ITR 692 (SC). ( b ) Aggarwal Hardware Works (P.) Ltd. v. CIT [1980] 121 ITR 510 (Cal.). ( c ) CIT v. Eicher Motors Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds ( i ) technical consultancy and technical services rendered and research work done, cost of raw material used for experimental work and royalties on trade marks used by the assessee. In that case, the assessee further agreed not to divulge to third parties without the consent of the Swiss company any confidential information received under the agreement. It was also a condition in that case, that upon termination of the agreement for any cause to cease to use the patents and trade marks and to return to the Swiss company all copies of information, scientific data or material sent to it and to refrain from communicating any such information, scientific data or material received by it, to any person. Under these facts, it was held that since the assessee company did not become entitled exclusively even for the period of agreement to the patents and trade marks of the Swiss company and it had merely access to the technology, knowledge and experience in the pharmaceuticals, the assessee-company did not acquire any asset or advantage of enduring nature for the benefits of its business and hence such payments made by the assessee was allowable as business expenditure under section 10( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd because of these difference in facts, we feel that this judgment is also not applicable in the present case. 20A. Now, we discuss various judgments followed by the Assessing Officer. The first judgment is the judgment of Hon ble Kerala High Court rendered in the case of Jacobs (P.) Ltd. ( supra ). The facts of this case are that by an agreement dated 24-9-1970, the assessee-company undertook to take over some of the assets and liabilities in the business done by the partnership firm. The company was also given the right to carry on the business in continuation of the firm and in consideration of assigning the rights to carry on the business of sole selling agency, the firm was to be entitled to a royalty of Re. 1 per case of liquor sold by the assesseee-company. In addition to that, the assessee-company was to pay Rs. 2.31 lakhs in the form of fully paid up shares to the partners of the firm as consideration for the same. The dispute was regarding the amount paid by the assessee-company by way of royalty to the firm. Under these facts, it was held by Hon ble Kerala High Court that the consideration for the sale of the sole selling agency business as mentioned in clause (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licensor has agreements for local manufacture. Nothing has been brought on record to show that any technical service was to be provided to the assessee on day to day basis or on regular basis at a specified interval to support the claim of the assessee that the impugned payment is of revenue nature. For this reason and in view of the combined reading of these two clauses of this agreement, we are of the considered opinion that this is a case of outright transfer of technical know-how and merely because the consideration has been divided into two parts, i.e., one part being US Dollars 1 million payable in three instalments and the other part in the form of royalty at a specified percentage of sales, it cannot be said that the second part of the payment is not capital in nature. This judgment of Hon ble Kerala High Court is applicable in the present case in view of these facts of the present case as noted by us as above and hence the impugned payment is capital in nature. 22. The second judgment followed by the ld. Assessing Officer is the judgment of Hon ble Kerala High Court rendered in the case of Polyformalin (P.) Ltd. ( supra ). The facts in this case are that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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