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Issues:
1. Whether the expenditure of Rs. 1,15,000 incurred by the assessee on acquisition of technical know-how is capital expenditure? Analysis: The case involved a dispute regarding the nature of expenditure incurred by the assessee company on acquiring technical know-how for manufacturing locomotives and wagons. The company entered into an agreement with another company for this purpose and paid Rs. 1,15,000 for drawings, designs, and supervision related to the manufacture of locomotives. The main question was whether this expenditure should be considered capital in nature. The Revenue argued that the expenditure was capital, relying on a Supreme Court decision related to depreciation on capital assets like drawings and designs. However, the court differentiated the present case from the precedent, emphasizing that the expenditure was for obtaining technical information for manufacturing goods, making it a revenue expense. The court cited the decision in CIT v. Ciba of India Ltd. [1968] 69 ITR 692 to support this conclusion. The court rejected the Revenue's argument that the expenditure should be treated as capital, emphasizing that the expenditure was clearly on revenue account due to its direct connection to the manufacturing process. The court highlighted that the expenditure was incurred for obtaining technical information necessary for the manufacture of goods, which aligns with the principles established in the Ciba of India Ltd. case. Therefore, the court concluded that the expenditure incurred by the assessee was not capital in nature and should be treated as revenue expenditure for tax assessment purposes. As a result, the court declined to refer the question raised by the Revenue to the Tribunal, ultimately rejecting the application made by the Revenue in this regard.
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