TMI Blog2014 (7) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... t there has been an accretion to the capital asset of the assessee. In case, the assessee continues to do business and continues to exploit the technology for the agreed period of time, the assessee will be entitled to take the benefit thereof. But in case it does not do so, the payment made is irrecoverable. It is in this sense that the matter was looked into by the High Court of Madras and was endorsed by the apex court in the case of CIT v. I. A. E. C. (Pumps) Ltd. (1997 (4) TMI 14 - SUPREME Court ). The point as a matter of fact is covered by the aforesaid judgment wherein concluded that the entire payment constitutes revenue expenditure . Nothing really is left for us to do in the matter. - Decided in favour of the assessee. - ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USD 100,000 within sixty (60) days after this agreement is filed with the Reserve Bank of India ; USD 100,000 within sixty (60) days of delivery of technical documentation from Timken to TTL ; and USD 100,000 within sixty (60) days of the commencement of commercial production, or four years after this agreement is filed with the Reserve Bank of India, whichever is earlier. Lump sum payments made hereunder by TTL to Timken shall be made without deduction of any present or future tax assessment or other Governmental charge, statutory levy or cess imposed upon such payments by the Government of India (or any political sub-divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in [1989] 177 ITR 377 (SC) ; [1989] 3 SCC 329. The assessee-company, he contended, was already in existence and the assessee was also engaged in the business of ball bearings. The assessee entered into an agreement with the foreign company for the purpose of acquiring a new technology. In an identical situation in the aforesaid case of Alembic Chemical (supra), the apex court held that (page 391 of 177 ITR) : it appears to us that the answer to the questions referred should be on the basis that the financial outlay under the agreement was for the better conduct and improvement of the existing business and should, therefore, be held to be a revenue expenditure. Reference may also be made to the observations of this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid case. If the payment made by the assessee makes an accretion to the capital asset the expenditure is capital in nature. She contended that the assessee may have already had an existing plant and machinery. It may also be true that the assessee was pursuing the same line of business but it cannot be denied that by paying the sum of USD 200,000 the assessee acquired a new technology. There was as such accretion to the capital of the assessee in the sense that the company became better equipped to do its business with the help of technology. Therefore, the expenditure has to be treated as a capital expenditure. On the top of that, from the agreement entered into between the assessee and the non-resident it would appear that the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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