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TMI Blog2012 (6) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of revenue expenditure?" 2. The assessee was in the business of manufacture and sale of beer. The assessee used to manufacture beer under the name and style of "Golden Eagle", which is the popular brand name of M/s. Mohan Meakins Breweries Limited., Solan, U.P. (for short 'MMB'). 3. The assessee entered into a Technical Assistance Agreement dated 7.2.1979 with MMB. Some of the clauses of the Agreement are as follows: "i) MMB (Mohan Meakins Breweries) grants, for the term of the agreement, an exclusive licence to Artos to use the know-how supplied by MMB for the manufacture of the products at the plant and for this grant of licence Artos shall pay MMB a royalty calculated at the rate Rs.1/- (rupee one only) per case on all pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MB." For use of the brand name of MMB and for the technical assistance rendered by MMB to the assessee for manufacturing beer, the assessee paid royalty to MMB. 4. For the assessment years 1980-81, 1981-82 and 1982-83 the Assessing Officer held that the royalty payments made by the assessee to MMB were in the nature of revenue expenditure and the amount was spent wholly and exclusively for business purposes so as to be eligible for a deduction under section 37 of the Income Tax Act, 1961 (for short 'the Act'). 5. The view of the Assessing Officer was accepted by the Revenue and was not sought to be revised by the Commissioner of Income Tax under section 263 of the Act. 6. For the subsequent assessment years, viz., 1983-84 to 1988-89 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion was more or less similar to the question raised in these cases and it also related to payment of royalty by the assessee, though to its foreign collaborator. This court referred to ASSAM BENGAL CEMENT CO. LTD v. CIT (1955) 27 ITR 34, wherein the principles laid down by the Full Bench of the Lahore High Court in BENARSIDAS JAGANNATH, In re (1947) 15 ITR 185 were affirmed. The following passage from the decision of Lahore High Court was approved by the Supreme Court: "If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably white leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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