1999 (3) TMI 53

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..... ted December 14, 1979, was an allowable deduction for the assessment year 1980-81 when the approval by the Government to make the agreement effective, came into operation had not been received during the relevant accounting year ?" This reference pertains to the assessment year 1980-81. During the previous year relevant to the above assessment year, the assessee entered into a collaboration agreement with Merciful Ltd., Switzerland, for upgrading technology and expanding its range of production. Under the agreement, the assessee was liable to pay Rs. 21,93,987 to Merciful Ltd. as lumpsum royalty for the technical know received by it. The assessee claimed deduction in respect of the above amount in the computation of its income in the prev .....

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..... he matter, the liability accrued in the year under consideration. So far as the controversy in regard to the nature of the expenditure is concerned, the Tribunal remanded the matter to the Commissioner of Income-tax (Appeals) for deciding afresh on the merits whether the expenditure was capital or revenue. The Revenue is aggrieved by the finding of the Tribunal that the approval granted by the Government operated retrospectively from the date of the agreement. Hence, this reference. We have heard Mr. R. V. Desai, learned counsel for the Revenue, and Mr. Kotangale, learned counsel for the assessee. We have perused the facts of the case. The reference pertains to the assessment year 1980-81 ; the relevant previous year being the calendar y .....

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..... would arise only when the Government conveyed its approval and not prior to that date. In that case, the Supreme Court, reversing the decision of the High Court, held that in view of section 326 of the Companies Act, 1956, which contained an absolute prohibition against the appointment or reappointment of a managing agent before approval of the Central Government was obtained, the appellant company's liability to pay the remuneration of the managing agent arose only when the Government conveyed its approval by its letter dated September, 2, 1957, and not prior to that date. Following the above decision, in CIT v. Kirloskar Tractors Ltd. [1998] 231 ITR 849, this court has also held that the liability to pay particular sum accrued only on gr .....

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