TMI Blog2008 (3) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... mpire Jute Co. Ltd. s case [ 1980 (5) TMI 1 - SUPREME COURT] were fully applicable to the facts of this case and both the authorities were right in concluding that the payments made by the assessee towards licence fee to SECL was a revenue expenditure. We may note that the Assessing Officer had allowed 75 per cent of the expenditure but had disallowed only 25 per cent of the licence fee. Therefore, the dispute is limited only to the 25 per cent amount. No substantial question of law arises - Appeal is dismissed. - MADAN B. LOKUR AND V.B. GUPTA, JJ. R.D. Jolly for the Appellant. V.P. Gupta and Basant Kumar for the Respondent. JUDGMENT Madan B. Lokur, J. - The revenue is aggrieved by an order dated 12-5-2006 pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee derived an asset of an enduring nature and, therefore, the licence fee that the assessee had claimed as a revenue expenditure was rejected by the Assessing Officer. 5. Feeling aggrieved, the assessee preferred an appeal which was allowed in its favour by the Commissioner of Income-tax (Appeals) [CIT(A)]. The CIT(A) noted the fact that the assessee had been in business since 1945 and it had entered into the agreement with SECL only in 1984. It was also noted that no new plant was set up nor any new machinery was obtained by the assessee; the assessee did not commence any new business nor did it initiate a new process or utilize new technology for manufacturing its products. What the assessee had actually done was to improvise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which were obtained, but the assessee could manufacture the product in the factory that has been set up with the collaboration of the foreign firm; the cumulative effect on a construction of the various terms and conditions of the agreement; whether the assessee derived benefits coming to its capital for which the payment was made ? 8. The CIT(A) also referred to the decision of the Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 2 wherein the Supreme Court has noted the following: - 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 while leaving the fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right to use patents and trade marks of the foreign party, the payment would not bring into existence an asset of enduring advantage to the Indian participants, and should be regarded as expenditure incurred for the purpose of running the business during the period of the agreement. The payment would therefore be revenue in nature. The recent decision of the Supreme Court in the case of CIT v. Ciba of India Ltd. [1968] 69 ITR 692 provides clear guidance in cases of this type. 12. A perusal of the Circular shows that if in terms of the agreement, only a licence is required for user of technical knowledge from a foreign participant for a limited period together with or without the right to use the patents and trade marks of the foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue has submitted, and we think rightly, that each case has to be decided on its own facts. In the present case, the facts have been fully considered and a concurrent opinion has been expressed both by the CIT(A) as well as by the Tribunal that the expenditure is of a revenue nature and not of a capital nature. 16. We do not find any reason to differ with the opinion on the facts of this case and it is quite clear that the ratio of the decisions of the Supreme Court in Jonas Woodhead Sons (India) Ltd. s case (supra) and Empire Jute Co. Ltd. s case (supra) were fully applicable to the facts of this case and both the authorities were right in concluding that the payments made by the assessee towards licence fee to SECL was a revenue e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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