TMI Blog1998 (4) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... etting aside the assessment order ?" The matter relates to the assessment year 1976-77, in which the question cropped up as to whether the assessee-company which was doing the business of manufacturing and selling electric motors, was entitled to deduct a sum of Rs. 3,25,927 as payment of royalty made to the licensor Jyoti Limited for providing it with technical know-how in the form of drawings, designs, technical documents, etc., as revenue expenditure. The Income-tax Officer allowed the claim. However, the Commissioner of Income-tax, noted that the advantage derived by the assessee-company in consideration of the payment of the said amount was of an enduring nature, which would endure even after the license agreement was over. It, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after examining the agreement and other material would be justified in passing any order which he thinks proper on the merits. The assessee's case is that the assessment order was neither erroneous nor prejudicial to the interests of the Revenue and that order of the Income-tax Officer was in conformity with the provisions of law and in accordance with the decision of this court in CIT v. Jyoti Limited [1979] 118 ITR 499, and, therefore, there was no valid ground for the Commissioner to exercise his powers under section 263 of the Act. It will be noted from article 4 of the licensing agreement that for the supply of additional design and manufacturing drawings and other information, necessary to disclose any modification and improvement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment, or cancelling the assessment and directing a fresh assessment, if he considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner had lawfully exercised his powers under section 263 of the Act and taken a decision after giving the assessee an opportunity of being heard in the matter, as envisaged by that provision. The Tribunal was, therefore, right in holding that the Commissioner was justified in passing the order under section 263 of the Act setting aside the assessment order and directing the Income-tax Officer to take a fresh decision. The question referred to us is, therefore, answered in the affirmative against the assessee and in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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