TMI Blog2009 (9) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... y paid by the assessee to the Korean company at rate calculated per piece of production - Further, finding of the Commissioner of Income-tax (Appeals) that payment of royalty was purely a revenue expenditure, which was annual expenditure depnding upon the quantum of production in the relevant year, as approved by the Income-tax Appellate Tribunal, is a finding of fact - 837 of 2009 - - - Dated:- 3-9-2009 - A. K. SIKRI and VALMIKI J. MEHTA JJ. Ms. Prem Lata Bansal and Ms. Anshul Sharma for the appellant. Satyen Sethi for the respondent. JUDGMENT The judgment of the court was delivered by 1. A. K. SIKRI J. - The respondent/assessee had filed the income-tax return on November 27, 2003, declaring income of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer holding that the said royalty was revenue expenditure. For holding so, the Commissioner of Income-tax (Appeals) went into the various clauses of the agreement entered into by the assessee with the Korean company. It was found that two agreements, one dated August 28, 1997, and the other dated May 8, 2001, were entered into between the parties. As per the first agreement, the assessee was to pay a lump sum amount of US$ 100,000 for transfer of technical know-how and running royalty at specified rate per piece of production of different products, i.e., catalytic converter and exhaust muffler. Under the second agreement, technical know-how of US$ 60000 and royalty at specified rate per piece of product was payable. 3. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, the grain from the chaff, one would have to closely look at the attendant circumstances, such as: (a) the tenure of the licence, (b) the right, if any, in the licensee to create further rights in favour of third parties, (c) the prohibition, if any, in parting with a confidential information received under the licence to third parties without the consent of the licensor, (d) whether the licence transfers the 'fruits of research' of the licensor, 'once for all', (e) whether on expiry of the licence the licensee is required to return back the plans and designs obtained under the licence to the licensor even though the licensee may continue to manufacture the product, in respect of which 'access' to k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal has not considered the effect of the judgment of the Supreme Court in Southern Switchgears Ltd. v. CIT [1998] 232 YFR 359, inasmuch as in that case the payment of royalty was treated as capital expenditure. However, what is glossed over is that under the terms of the agreement in that case, the assessee-company therein had agreed to pay the foreign company lump sum of royalty and it was in these circumstances the same was treated as capital expenditure and the Tribunal had disallowed 25 per cent. thereof. In the present case, as pointed out above, royalty is to be paid on the quantity of the goods produced, calculating per piece of the said goods produced. Therefore, the Tribunal rightly held that the aforesaid judgment not applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
