Sujata V. Manohar J.
1. The assessee is a company carrying on business as manufacture of furnaces, factory ovens, etc. The assessment years under consideration are 1966-67 to 1969-70.
2. On March 1, 1965 the assessee entered into a licensing and technical assistance agreement with M/s. Westinghouse Electric International Co. of U.S.A. for the manufacture of special types of heavy duty industrial fans for a period of ten years. The licensees were granted an exclusive licence to manufacture such fans india. The licences were non-divisible, non-transferable and non-assignable. The agreement provided for giving technical assistances and know-how in respect of its manufacture. Under the terms of the agreement, the assessee had to use certain drawings, specifications, etc., for the manufacture of these items for a limited number of years. After considering the various clause of the agreement, the Tribunal came to the conclusion that under the agreement the assessee did not get a benefit which could be considered as of an enduring nature.
3. The assessees also entered into another agreement with superior combustion Industries Inc. of New York in June, 1966, for the manufacture of water tube boiler and fire tube boilers. This was also an agreement of technical assistance and licence to manufacture. Under the agreement, the assessee were furnished with drawings, specifications, etc., required for the manufacture of the said items and these drawings were to be returned at the termination of the agreement. In this agreement as well as in the previous agreement, there was a provision for training of the assessee's engineers.
4. In respect of the payments made by the assessee under these agreements for the relevant assessment years and/or the amounts written off in respect of the payments required to be made under these agreements, the ITO came to the conclusion that these were payments of a capital nature. The AAC, however, on appeal, came to the conclusion that these were payments which could be considered as revenue expenditure. The Income-tax Appellate Tribunal, in second appeal, also came to the conclusion that these payments were in the nature of revenue expenditure.
5. At the instance of the Department, the following two question have been referred to us for determination by the Tribunal :
'1. Whether, on the facts and in the circumstances of the case, the sum of Rs. 2,399 claimed by the assessee as deduction in each of these years was expenditure of a revenue nature and allowable as such ?
2. Whether, on the facts and in the circumstances of the case, the sum paid to Superior Combustion Industries of New York and written off in each of these years of the extent of 1/5th is revenue expenditure and allowable as such ?'
6. The answer to these question is covered by the ratio laid down in the decision of a Division Bench of this Court in CIT v. Tata Engineering & Locomotive Co. Pvt. Ltd. : 123ITR538(Bom) , as also a decision of this Court in the case of CIT v. Wyman Gordon (India) Ltd. : 144ITR911(Bom) . In the earlier case of Tata Engineering & Locomotive Co. Pvt. Ltd., the Division Bench of this court has held 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.
7. We have not been pointed out any feature of any of the two agreements entered into by the assessee which would distinguish this case from the cases decided by the Division Benches of this court in the above two references. In view of the ratio laid down by those two decision, which is applicable to this case, the questions will have to be answered in favour of the assessees.
8. Both the questions are answered in the affirmative, that is to say, in favour of the assessee and against the Department.
9. There will be no order as to costs.