TMI Blog2023 (8) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... d not result in acquiring and owning the Engineering and Development Technology so as to be characterized as an intangible asset capable of capitalization. Rather, it is a case of payment in the nature of royalty for the use of such Technology, being an item of revenue nature. As such, the view point of the authorities below in this regard does not merit our concurrence. We, therefore, overturn the impugned order on this score and direct to delete the disallowance made by the AO and affirmed in the first appeal. - SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER For the Assessee by Shri Dhanesh Bafna Shri Hardik Nirmal For the Revenue by Shri Keyur Patel, CIT-DR ORDER PER R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant material on record. The assessee entered into Engineering Recovery Agreement dated 11-03-2010 with Lear Corporation, Japan Ltd. and Tachi-S Co., Ltd. which is also a Japanese entity (in short Lear and Tachi-S ). Under this Agreement, Lear and Tachi-S were to perform Engineering and Development work for the Automotive Seating systems chosen by the assessee in the manufacture of seats for passenger cars. This Agreement, whose copy has been placed at page 1 onwards of the paper book, clearly provides in the Background that Lear and Tachi-S would: perform the engineering development work for the Products under the terms of this Agreement . Clause 2.3 of the Agreement dealing with `Engineering costs , provides that the assessee would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erminated but Tacle is still supplying the Products to the Customer, the parties agree to negotiate in good faith ongoing licenses for the Technology on commercially reasonable terms . Clause 4 of the Agreement dealing with `Confidentiality of the Proprietary Information states that: Each party shall at all times hold confidential all information provided to such party by or on behalf of another party during the term of this Agreement . Clause 4.2 with caption `No license to IP , which is quite relevant for our purpose, provides that: Except as provided in this Agreement, no right or license under any intellectual property right, express or implied, is granted to any party relating to any information furnished by one party to another par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the same either during the term of the agreement or thereafter; and (vi) The assessee was not entitled to transfer or assign any rights or privileges granted to it under the Agreement. 6. It is manifest from the key points of the Agreement as culled out above that the assessee did not have any dominion and control over the intellectual property rights of the technology developed by Lear and Tachi-S, which was simply licensed to it on non-exclusive basis. Thus, the payment by the assessee did not result in acquiring and owning the Engineering and Development Technology so as to be characterized as an intangible asset capable of capitalization. Rather, it is a case of payment in the nature of royalty for the use of such Technol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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