TMI Blog2001 (6) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... year is 1980-81. The assessee entered into an agreement styled "Technical Collaboration Agreement" with Industriework Echsofflar, INA Ingenieur Disast GmbH, Federal Republic of Germany (INA). The agreement provided for the supply of technical know-how, which the INA had already developed, being in the same line of business, for a lump sum consideration of Rs. 3 lakhs and subject to Indian tax is sold to the assessee. According to clause 7 of the agreement, the lump sum was to be paid in the instalments as under : (a) Rs. 2 lakhs after the agreement has been taken on record by the Government of India. (b) Rs. 1 lakh after the commencement of the commercial production. The assessee claims before the Assessing Officer that the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fact that under the agreement the assessee had to pay Rs. 2,00,000 to the German company, after the agreement has been taken on record by the Government is not disputed. Under that agreement the assessee has paid Rs. 2,00,000 to the German company. The expressions, "products", "technical know-how", "INA patents" and "territory" are all defined in the agreement itself. Clause 10 of the agreement provides that the agreement will be for a period of five years from the date of the commencement of the production and on production the assessee has to pay the royalty as per the terms of the agreement for five years. Sub-clause (b) of clause 10 of the agreement provides that upon the expiry of the period pursuant to sub-clause (a) of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Jonas Woodhead and Sons (India) Ltd. [1997] 224 ITR 342 (SC), we find that the Tribunal has commuted error in treating Rs. 2,00,000 as revenue expenditure. The expenditure, the assessee has incurred before the commencement of the production on use of the technical know-how which has been transferred by the INA to the assessee acquires the benefit of enduring nature. Thus, we are of the view that the expenditure is capital expenditure. The Income-tax Officer has rightly disallowed the claim of assessee. In the result, we answer the question in the negative, that is, in favour of the Revenue and against the assessee. The reference, thus, stands disposed of accordingly. All parties concerned are to act on a xeroxed signed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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