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Issues Involved:
The Revenue's appeal against the order of the Income Tax Appellate Tribunal (ITAT) dismissing its appeal against the order of the Ld. CIT (Appeals)-XIII, New Delhi regarding the calculation of royalty paid to Telkoku Piston Ring Company Ltd. Summary: The impugned order upheld the view of the CIT (Appeals) regarding the royalty amount calculated at 3% of the net ex-factory sale price paid to Telkoku Piston Ring Company Ltd. The Tribunal distinguished a Supreme Court decision disallowing 25% of royalty paid, relying on decisions of the Delhi High Court. The Tribunal found that the technical knowledge accessed through the royalty payment was not an absolute transfer, making the expenditure revenue in nature. The Tribunal concluded that no question of law arose for consideration, and thus dismissed the appeal. In the impugned order, the Tribunal examined the agreement between the assessee and Telkoku Piston Ring Company Ltd., Japan, where royalty was to be paid at 3% of the sale price of licensed products. The Tribunal noted the non-transferable and non-assignable nature of the license, emphasizing the confidentiality of technical information provided. Citing Delhi High Court cases, the Tribunal held that the payment for technical knowledge access was revenue expenditure due to the nature of the agreement and the purpose of the payment being turnover-based. Therefore, the High Court dismissed the Revenue's appeal, affirming the Tribunal's decision that the royalty payment for technical knowledge access was revenue expenditure based on the terms of the agreement and previous court decisions.
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