9911796707
|
Home
Issues:
Disallowance of royalty payment to Southern India Textile Research Association for technical assistance in manufacturing Hi-Life Tapes under section 143(3) of the IT Act, 1961 for assessment year 1976-77. Analysis: The appellant entered into an agreement with Southern India Textile Research Association (SITRA) for technical assistance in manufacturing Hi-Life Tapes. The agreement allowed the appellant to use a patented process developed by SITRA for five years, with the patent rights remaining with SITRA. The appellant was required to pay a lump sum fee of Rs. 5,000 and royalty of Re. 1 per 100 meters of tape treated using the special process. The appellant claimed a recurring payment of Rs. 4,239, which was disallowed by the Income Tax Officer (ITO) and confirmed by the Appellate Authority. The appellant argued that the payment was purely for the right to use the technical process, citing relevant case laws and provisions of the agreement. The appellant distinguished a previous Madras High Court decision and contended that the payment was based on production, making it admissible as a deduction for the appellant's business. The departmental representative relied on the lower authorities' orders and the Madras High Court decision. Upon review, the Appellate Tribunal found that the appellant had the right to use the patented technical process for a limited period and had to pay separately for any new developments. The Tribunal determined that the payment was for the right to use the special process and was allowable as a deduction. The recurring payment was considered to be of a revenue nature and wholly and exclusively for the appellant's business purposes, thus warranting allowance. In conclusion, the appeal was allowed, and the appellant was granted relief for the disputed amount of Rs. 4,239.
|
