TMI Blog1987 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... ws : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that only one-fifth of the disclosure fee of Rs. 1,50,000 payable to the foreign collaborator was an allowable deduction in the assessment year 1974-75 ?" The assessee-company carries on business in manufacture of air and hydraulic cylinders, valves filters, lubricators, regulators, etc. The assessee was, inter alia, manufacturing spool type valves since 1967-68. The assessee wanted to improve its product by manufacturing seal-less type of valves which were supposed to be of better design. For that purpose, it entered into a collaboration agreement dated October 1, 1970, with Flick-Reedy Corporation of USA. The agreement was for a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the Income-tax Officer and held that the expenditure is revenue in nature but he held that only the sum of Rs. 30,000 paid during the accounting year relevant to the assessment year concerned herein alone should be given deduction and not the entire amount of Rs. 1,50,000. Both the Revenue and the assessee filed appeals which were dismissed by the Tribunal, affirming the decision of the first appellate authority Whereupon each party sought the reference as stated above. We shall first take up the question referred at the instance of the Revenue. It is clear from the facts stated above that the assessee's was continuing business. The assessee was engaged in the manufacture of valves even prior to its entering into an agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 20,000 dollars every year. In such a case, it is not possible to say that merely because the assessee is maintaining its accounts on the mercantile basis, the liability to pay the entire amount has accrued at once, i.e., in the accounting year in question. The liability to pay arises from year to year. The liability to pay depends upon the continuance of the agreement and the performance of the respective obligations by both the parties. For the above reasons, we agree with the Tribunal that the assessee was not entitled to deduct the entire amount of Rs. 1,50,000 in the assessment year now in question, but only an amount of Rs. 30,000 which he has actually paid. Shri S. Parvatha Rao, learned counsel for the assessee, relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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