TMI Blog2001 (12) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... r ended on June 30, 1979. The assessee, a limited company, entered into a collaboration agreement for obtaining technical know-how as well as various services in respect of spot technical assistance to promote sale of furnished carbon black manufactured by the assessee. Pursuant to the agreement, the assessee-company paid a sum of Rs.22.25 lakhs for obtaining technical know-how and this sum was capitalised by the assessee in its books of account. Over and above this lumpsum payment, the assessee was required to make payment of royalty based on figures of sales as provided in the agreement for a period of five years in return for various services which were to be rendered by the collaborator. The Income-tax Officer held that after the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of detailed process designs for manufacturing of mechanical plant and putting the same into working conditions, and the second pertaining to after installation services dealing with the services of technically qualified persons to provide spot technical assistance to promote sale of furnished carbon black manufactured by the assessee. In relation to the second agreement dated November 26, 1975, the assessee was required to make payment of royalty at the rate of three per cent. of the net ex-factory sale price. As per terms of the said agreement, it has been found by the Tribunal that the same pertained to supply of information on day-today developments in the range of products manufactured by the assessee-company and pertaining to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision: "(i) It would be unrealistic to ignore the rapid advances in research in antibiotic medical microbiology and to attribute a degree of endurability and permanence to the technical know-how at any particular stage in this fast changing area of medical science. The state of the art in some of these areas of high priority research is constantly updated so that the know-how could not be said to bear the element of the requisite degree of durability and nonephemerality to share the requirements and qualifications of an enduring capital asset. The rapid strides in science and technology in the field should make us a little slow and circumspect in too readily pigeonholing an outlay such as this, as capital. (ii) In the infinite variet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular outlay is capital or revenue. The 'once for all' payment test is also inconclusive. What is relevant is the purpose of the outlay and its intended object and effect, considered in a commonsense way having regard to the business realities. In a given case, the test of 'enduring benefit' might break down." In the aforesaid decision of the Supreme Court in the case of Jonas Woodhead and Sons (India) Ltd. v. CIT [1997] 224 ITR 342, it is also stated that various clauses of the agreement were to be examined bearing in mind the changing economic realities of the business and varieties of situational diversities. It was in the light of these observations that the decision of the High Court was confirmed by stating that the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in manufacturing as the benefit was acquired only for running an existing business. Mr. Qureshi vehemently contended that the findings recorded by the Tribunal on the basis of the reading of the documents in question give rise to anomaly and in view of the same, the court must hold that the assessee was not entitled to claim deduction on revenue account of the entire sum of royalty paid at least in relation to the first agreement. We are not in a position to render any opinion on this aspect of the matter in the absence of the relevant agreements on record. It is necessary to note at this stage that whenever any party challenges any interpretation of any document, primarily it would be the duty of that party to place such document ..... X X X X Extracts X X X X X X X X Extracts X X X X
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