TMI Blog1994 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ration for the assessment years 1973-74, 1974-75 and 1975-76. It appears that the assessment for the aforesaid years was completed by the Income-tax Officer by adding the amount of Rs. 2,00,000 to the capital of the assessee. It is not in dispute that the assessee had entered into a collaboration arrangement with a Dutch company and is manufacturing synthetic musk and perfumery compounds. The foreign company, Messrs. Maschmeijer Aromatics, has permitted its technical know-how to be supplied to be used by the assessee. They have also permitted the use of their patent trademark, design, certification marks, etc., by the assessee company. Clause 7(g) of the agreement provides that the assessee-company will have exclusive licence to use in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, by its order dated July 21, 1978, held that Explanation 1 to rule 2 of the aforesaid rules is not attracted in the facts and circumstances of the case and, therefore, the Income-tax Officer had rightly taken the said amount of Rs. 2,00,000 as capital by the assessee. The present reference was thereafter sought for and made at the request of the Department and is before this court for consideration. The facts and circumstances of the case are no longer in doubt. The assessee has, in fact, allotted 200 shares worth Rs. 2,00,000 to its foreign collaborator in consideration not only of the know-how, but also for the use of patents, trademarks, licence, certification, designs, marks, etc., in India. It is also not in dispute that havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in clause (iii) or (vi) or (viii) of rule 1. Under the circumstances, this Explanation will not be applied or attracted to other clauses of rule 1. Since the case in hand is covered by clause (i) of rule 1, there is no scope for applying the tion to the facts and circumstances of the case. We have, therefore, no hesitation in rejecting the submission. It was also submitted that what the assessee has obtained from its foreign collaborator is the licence to use the design, etc., and not the ownership thereof and, therefore, the amount paid was only to be treated as revenue expenditure and not capital. There is again no substance in the submission. The argument assumes that capital can only be utilised for purchasing a permanently transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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