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The Commissioner of Income Tax IV, Nagpur Versus M/s. Nagpur Alloys Castings Ltd.

2017 (9) TMI 486 - BOMBAY HIGH COURT

Payment for technical knowhow - nature of expenditure - revenue expenditure under Section 37(1) or capital expenditure under Section 35AB - Held that:- The acquisition of technical knowhow is by way of license for manufacture of the raw material required for the parent business of steel production. The raw material produced is required to be used for the finished product of which the main business of manufacture of steel is undertaken by the respondent. In our view, this aspect has been dealt wi .....

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erefore, dismissed. - Income Tax Appeal No. 72 -74 of 2002 - Dated:- 1-9-2017 - R. K. Deshpande And Manish Pitale, JJ. Anand Parchure with Shri Bhushan Mohta, counsel for Appellant Shri K.P.Dewani, counsel for Respondent JUDGMENT (P.C.) 1] In both these appeals, common substantial questions of law are involved and hence, they are disposed of by this common judgment. Two substantial questions of law framed are reproduced below. "(1) Whether on facts and in the circumstances of the case as in .....

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ee to treat the expenditure incurred of ₹ 97,52,071/towards payment to M/s. M.N.Dastur & Company, Technical Consultant and ₹ 33,30,761/paid to Shougang of China towards technical knowhow, as revenue expenditure was rejected. The Commissioner of Income Tax (Appeals), Nagpur, has allowed the appeal filed by the assessee and this order is confirmed by the Income Tax Appellate Tribunal. In short, the claim for revenue expenditure under Section 37(1) of the Income Tax Act has been acc .....

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rders. We find that no reasons are recorded by the assessing officer to hold that the expenditure incurred in payment to two companies is of capital nature and covered by Section 35AB of the Income Tax Act. The Commissioner, Income Tax (Appeals) as well as the Income Tax Appellate Tribunal have considered the aspect in details and we would like to reproduced the findings recorded by the Income Tax Appellate Tribunal in para 10 of the judgment. "10. A perusal of the aforesaid terms and condi .....

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ocumentation and drawings to any third party. As a matter of fact, the assessee company was not authorised to use the said technology and design even for the purpose of his own use except for the blast furnace to be set up under the said contract. From the perusal of the said agreements, in particular, the confidentiality/secrecy clause, it is also evident that the relevant design and technology as well as the technical documentation and drawings were to remain the property of the concerned part .....

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ufacture pig iron and steel scrap. Obvious as it is, there was no transfer of the design and technology or the technical documentation and drawings from the concerned parties to the assessee as per the said agreement and the assessee company had not acquired any ownership or similar rights in the same" 4] Shri Mohta, the learned counsel appearing for the Department has relied upon the decision of the Apex Court in the case of Honda Siel Cars India Ltd. vrs. Commissioner of Income Tax, Ghazi .....

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or revenue expenditure depends upon the facts and circumstances of each case, more particularly the interpretation of the agreements between the parties in the light of the distinction made by the Apex Court in various decisions to determine which of the expenditures should be treated as revenue expenditure or capital expenditure. In this decision of the Apex Court, it was a joint venture and the transfer of ownership of technical knowhow was absolute. It was not a running business but a new bus .....

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