TMI Blog2010 (3) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... cence agreement dated 1st September 1997 as modified on 15th June 1998. - i the assessee had obtained the benefit, purely on a non-exclusive basis, of a licence confined to the territory of India, for a limited term and that the proprietary rights in the patents which formed the subject matter of the licence continued to vest in the licensor, the provisions of Section 32 were not attracted in this case.t is not a capital assets u/s 32 - No application (for Duty Free Advance licence ) was made by the assessee during the assessment year 1999-2000 and consequently no real income had accrued to the assessee during that period. – revenue appeal dismissed. - 2305 OF 2009 - - - Dated:- 22-3-2010 - Dr. D.Y. Chandrachud J.P. Devadhar, JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Free Advance licence which was credited in the books of the assessee was not in the nature of the real income though the income is squarely covered by the provisions of the section 28(iv) of the I.T. Act? 2. The assessee entered into an agreement with a company by the name of KMK Lizence Limited, registered in the Republic of Mauritius, under which the licensor granted to the assessee a non-exclusive licence, restricted to the Territory of India to manufacture and use tube-making machines and the tools and parts thereof with the right to register the licence. The licensor was a registered proprietor and beneficial owner of certain patents for manufacturing tube-making machines. Under the terms of the agreement, the assessee obtained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a period of five years was of a capital nature because the assessee acquired an intangible asset in the form of technical know how. The Commissioner of Income Tax (Appeals) allowed the claim of the assessee. The Tribunal in appeal has come to the conclusion that the rights acquired by the assessee were for a specific tenure and were not absolute. The assessee was not entitled to transfer the rights which it obtained under the licence and had a limited right to use the technical know how for manufacturing machines over a limited tenure. In the circumstances, the Tribunal held that the Commissioner of Income Tax (Appeals) was justified in allowing the claim of the assessee. 4. We have perused the original licence agreement and the modific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the Swiss Co. to the assessee: (a) the licence was for a period of five years, liable to be terminated in certain eventualities even before the expiry of the period; (b) the object of the agreement was to obtain the benefit of the technical assistance for running the business; (c) the licence was granted to the assessee subject to rights actually granted or which may be granted after the date of the agreement to other person; (d) the assessee was expressly prohibited from divulging confidential information to third parties without the consent of the Swiss Co.; (e) there was no transfer of the fruits of research once for all : the Swiss Co. which was continuously carrying on research had agreed to make it available to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the licensor, the provisions of Section 32 were not attracted in this case. Moreover, the finding which has been arrived at in the present case is that the agreement was entered into on 1st September 1997 which was prior to 1st April 1998 on which date the amended provisions of Section 32 were brought into force. Though the contention of the Revenue was that the approval of the Government was obtained after 1st April 1998, more specifically on 5th June 1998, the Tribunal has observed that once approval was granted, it would relate back to the original date of the agreement, 1st September 1997, and that as a matter of fact the assessee had used the technical know how for the production of machines in financial year 1997-1998. Thus, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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