TMI Blog1984 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... first instance concerning processes for the manufacture of certain intermediates and pigments. Under the agreement, there were certain items which were already being manufactured by the assessee-company. The foreign company agreed to give technical know-how in respect of these items. The foreign company also agreed to give technical know-how in respect of other items which were not manufactured by the assessee-company and which the assessee-company proposed to manufacture with the help of the technical assistance provided under the agreement by the foreign company. The agreement was for a period of five years subject to renewal. The payment was made in a lump sum amounting to Rs. 1,16,390. This payment was made in the form of 840 fully paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be of a capital nature while the payment attributable to the advantage of the latter type would be clearly of a revenue nature. The Tribunal apportioned the expenditure incurred under the agreement to these two types of advantages, and it held that one-fifth of the expenditure should be considered as expenditure of a capital nature while four-fifths of the expenditure should be considered as expenditure of a revenue nature. The Tribunal also felt that the form in which payment was made to the foreign company was irrelevant. From this decision of the Tribunal, the following questions of law have been referred to us at the instance of the Department under section 256(1) of the Income-tax Act, 1961 : "'(1) Whether, on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, not necessary for us to consider the question of apportionment. What we have to consider is whether the Tribunal was wrong in holding that four-fifths of the expenditure incurred was an expenditure of revenue nature. In view of the decisions of this court in CIT v. Tata Engineering Locomotive Co. Pvt. Ltd. [1980] 123 ITR 538, Cooper Engineering Ltd. v. CIT [1982] 135 ITR 597, CIT v. Wyman Gordon (India) Ltd. [1983] 144 ITR 911, it is now well-settled that technical know-how and technical advice for the time being cannot, in these days of technological and scientific development and consequent change in production techniques, be treated as a capital asset. The agreement of foreign collaboration, where foreign know-how is availed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision in the case of Hylam Ltd. v. CIT [1973] 87 ITR 310 (AP), has been overruled in the case of Praga Tools Ltd. v. CIT [1980] 123 ITR 773 (AP) [FB]. Question No. 2 must, therefore, be answered in the affirmative, that is to say, in favour of the assessee and against the Department. In view of the answer to question No. 2, it is common ground that it is not necessary to answer question No. 1. As we have already mentioned, the form of payment does not make any difference to the kind of payment that was made, namely, whether it was of a revenue nature or of a capital nature. We accordingly, decline to answer the same. As far as question No. 3 is concerned, this point is also covered by decision of this court in the case of CIT v. Em ..... X X X X Extracts X X X X X X X X Extracts X X X X
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