1. This is a reference under Section 256(1) of the I.T. Act, 1961, andthe questions are as follows :
' 1. Whether, on the facts and in the circumstances of the case and on a proper construction of the agreement dated 31st December, 1960, the Tribunal was right in holding that the impugned payment of Rs. 53,000 was an item of revenue expenditure deductible in computing the assessee's income from business ?
2. Whether, on the facts and in the circumstances of the case and on a proper construction of the agreement dated 31st December, 1960, the Tribunal was right in holding that the payment to M/s. RIG by way of royalty (Rs. 62,600) and the expenditure incurred by the assessee for payment of remuneration and travelling expenses for the German technicians were items of revenue expenditure deductible in computing the assessee's income from business '
2. The statement of the case relates to the assessment year 1962-63, the relevant previous year being the calendar year 1961.
3. The assessee is a company. It is engaged in the manufacture, inter alia, of low and high tension porcelain insulators.
4. Under the aforesaid agreement M/s. Roeanthal Isoletoren Gesellschaft (hereinafter referred to as ' RIG ') agreed to supply the technical know-how to the assessee and to advise the assessee for increasing the output of the aforesaid products and manufacturing them economically.
5. In the accounting year, the assessee incurred the following expenses :
Rs.1.Technical fee by way of lump sum payment of Rs. 50,000 equivalent to
53,0002.Royalty at fixed percentage on net sales of porcelain insulators 62,6603.Travelling expenses for German technicians 51,6644.Remuneration to the German technicians 67,243
6. The ITO disallowed the claim with a finding that under the agreement the assessee had derived benefits of enduring nature and that the expenses in question were incurred for bringing into existence an asset of enduring benefit.
7. The AAC disallowed the lump sum payment of Rs. 53,000 and allowed the other items of expenditure.
8. The Tribunal rejected the appeal relating to the other items of expenditure filed by the department and allowed the appeal relating to the payment of Rs. 53,000 filed by the assessee in view of its finding that under the agreement the assessee did not acquire any asset or any advantage of an enduring nature by incurring these expenses which were laid out wholly and exclusively for the purposes of its business.
9. It may now be noted here that before the learned counsel for both the parties concluded their arguments' it was pointed out to them that the relevant facts relating to Article 3 of the agreement have not been found nor stated by the Tribunal. In these circumstances, they rightly submitted that the aforesaid questions cannot be answered by us. We are, therefore, not recording the arguments made and the cause cited at the Bar.
10. It is not possible nor advisable to catalogue the relevant facts relating to Article 3 of the agreement. Therefore, we will indicate only one of those relevant facts so that the Tribunal may appreciate our observations.
11. Article 3 deals with the technical ' know-how '. The main paragraph of Article 3 provides that RIG shall give to the assessee the technical ' know-how ' as defined therein for an economical manufacture of those products by the assessee. The main paragraph also provides that RIG shall advise and assist the assessee as specified in Clauses. (a) to (g) of that article for realisation of the technical ' know-how ' mentioned in the main paragraph.
12. Clauses (c), (d) and (g) of Article 3 are solely related to the capital structure of the assessee's business.
13. The ' know-how ' mentioned in clause (c) is not the same technical ' know-how ' mentioned in the main paragraph of that article.
14. Therefore, whether the assessee could or could not utilise the technical know-how mentioned in the main paragraph without the advice and assistance specified in Clauses (a) to (g) of Article 3 is a relevant fact which ought to have been found by the Tribunal as rightly submitted by the learned counsel for both the parties.
15. If without such advice and assistance the assessee could utilise the technical ' know-how ' mentioned in the main paragraph of Article 3, the expenditure incurred by the assessee may be regarded as a revenue expenditure if no other relevant facts are found by the Tribunal to indicate that the expenditure should be regarded as a capital expenditure.
16. If, on the other hand, the assessee could not utilise the said ' know-how ' the expenditure incurred by the assessee may be regarded as a capital expenditure if no other relevant facts are found by the Tribunal to indicate that the expenditure should be regarded as a revenue expenditure.
17. But at the same time, we must make it clear that the foregoing observations are not our final opinions on the legal issue involved in this case.
18. As stated earlier, the relevant facts relating to Article 3 have not been found nor stated by the Tribunal. The questions, therefore, cannot be answered by us and this reference is disposed of without answering them.
19. As the Tribunal has failed to decide the issues, Mr. B. L. Pal, learned counsel for the revenue, submits that by following the judgment of the Supreme Court in the case of CIT v. Indian Molasses Co. Pvt, Ltd. : 78ITR474(SC) , we should direct the Tribunal to take additional evidence on those issues while disposing of the appeal under Section 260(1) of the I.T. Act, 1961.
20. Mr. Pranab Pal, the learned counsel for the assessee, faintly submits that we should not give any such direction, but we are unable to accept it in view of the aforesaid judgment of the Supreme Court.
21. The Tribunal shall now dispose of the appeal in terms of the aforesaid submissions of Mr. B. L. Pal under Section 260(1) of the I.T. Act, 1961, and the Tribunal shall do so after giving a reasonable opportunity to both the parties of being heard and the parties will be at liberty to make such arguments as they may be advised.
22. There will be no order as to costs.
R.N. Pyne, J.
23. I agree.