TMI Blog2000 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal is justified in law : 1. in holding that the sum of Rs. 55,15,730 paid by the assessee to Goodyear Tyre and Rubber Co., USA, on account of technical know-how fee to produce extra large OTR tyres was of revenue in nature ? 2. in holding that the assessee was entitled to deduct a sum of Rs. 1,31,81,180 from the closing stock on account of excise duty paid thereon despite the Supreme Court's decision in the case of McDowell and Co. Ltd. [1985] 154 ITR 148 wherein the apex court had held that the excise duty is a part of the turnover ? 3. in holding that the amount of Rs. 2,52,55,428 written back by the assessee in its books of account on account of excise duty liability was not covered under the provisions of section 41(1) ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement was not. made for the manufacturing of an entirely new product. The consideration was paid for the betterment of the product in question. The assessee only enlarged the range of the existing product. Admittedly, the assessee was manufacturing OTR tyres. By acquiring know-how the assessee entered into the production of extra large OTR tyres. The inclusion of the range of extra large OTR tyres constituted the profit making apparatus of the assessee-company and the expenditure was laid out as a part of the process of profit earning. It was an outlay of business in order to carry it on and to earn a profit. It facilitated the trading operations. It reflected its impact on the profitability of the business. Having regard to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the observation that the opening stock for the subsequent assessment year will also be reduced by the same figure. The third issue arises out of the Revenue's appeal before the Tribunal. In its profit and loss account the assessee had written back the excise duty liability to the extent of Rs. 2,52,55,428. The said amount represented post-manufacturing excise duty (PME) provided in the earlier years. Though the assessee had itself written back the said amount and had in fact included the same in its total income but vide its letter attached with the return it was contended that since the liability had not yet ceased, the amount may not be considered as income for this assessment year. It was submitted that the matter was-still pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the abstract proposition of law, as canvassed by learned counsel for the Revenue, but having regard to the facts found by the Tribunal in the instant case, we are of the view that the proposed question No. 1 is not fit for reference. In a recent decision in Jonas Woodhead and Sons (India) Ltd. v. CIT [1997] 224 ITR 342, the apex court has laid down the test to determine the question when an expenditure can be regarded as a capital or revenue expenditure, thus : "The question whether a particular payment made by an assessee under the terms of an agreement forms a part of capital expenditure or revenue expenditure, would depend upon several factors, namely, whether the assessee obtained a completely new plan with a complete new process an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with the American company for enlarging the range of its existing products and had only acquired the right to use technical knowledge to manufacture a new product in the same line of business, the Tribunal has, inter alia, recorded the findings that the agreement was not made for manufacturing of an entirely new product ; the consideration was paid for the betterment of the product in question and the assessee had only enlarged the range of its existing products and the expenditure was an outlay of business in order to carry it on and to earn better profits. These are pure findings of fact, which have not been specifically challenged by the Revenue in the proposed question. In our opinion, in the light of the facts found by the Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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