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TMI Blog2017 (3) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... LLAHABAD High Court ] has in respect of a similar clause in the licence agreement held that nature of expenditure is revenue and not capital. The facts of the existing case in material part is similar to those in the case of Kanpur Cigarettes (supra). - Decided in favour of the assessee - INCOME TAX APPEAL No. 240, 241, 220 of 2013, INCOME TAX APPEAL No. 428, 291 of 2010 - - - Dated:- 3-3-2017 - Hon'ble Bharati Sapru And Hon'ble Saumitra Dayal Singh, JJ. For the Appellant : Ashok Kumar,Krishna Agarwal ORDER Heard Sri Krishna Agarwal and Sri Subham Agarwal learned standing counsel and Sri Abhinav Mehrotra learned counsel for the assessee. As the controversy involved in these appeals is identical, the same is bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t licence, the assessee was obliged to pay certain amount to company Hongo Japan by way of royalty and fee for technical assistance. The Assessing Officer was of the view that the said payments were in the nature of capital expenditure and he therefore disallowed the revenue expenditure claimed by the assessee. While the CIT has upheld the order of assessment, the tribunal in the appeal arising from the assessment year 2001-02 had examined the issue elaborately and considered several provisions of the agreement between the parties and thereafter reached to the conclusion that the payment of royalty and fee for technical know-how were not capital in nature but only revenue expenditure, allowed the assessee's appeal. It had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, experience and technical know-how regarding the manufacture of the licensed products which are owned or controlled by Hongo Japan and which include the specifications, blue prints details, photo copies, drawings and other drawings of such information, inventions, design, expertise, experience and technical know-how and also include sample prototype models and pattern of licensed products. In addition the assessee was also granted an exclusive and non-transferable licence to manufacture and sell the licensed products through the Republic of India by using the know-how and in strict compliance with such conditions and for such duration as set forth in the agreement. It was also provided therein that the assessee shall have no right to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Pawha Builders Pvt. Ltd. Article 14 of the agreement gives either party a right to terminate the agreement at any time by a written notice to the other party in the case of happening of certain events mentioned in the Article 14 of the agreement. Article 18 provides for the effect of termination. In the event of the expiration of the agreement or any other termination of the agreement for any reason whatsoever, the assessee shall promptly discontinue (i) the manufacture, sell and other disposition of the licensed product and (ii) the use of the know how furnished by Hongo Japan under the said agreement. It has also been provided that the assessee company shall in its own return to Hongo Japan such books, notings, drawings, and writings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment stood extinguished and no benefit was passed on to or retained with the assessee. This court in the case of CIT versus Kanpur Cigarettes (P) Ltd. reported in 2005 (198) CTR 414 has in respect of a similar clause in the licence agreement held that nature of expenditure is revenue and not capital. The facts of the existing case in material part is similar to those in the case of Kanpur Cigarettes (supra). Nothing has been shown to us to suggest that the finding recorded by the tribunal with respect to the nature of the payment under the licence agreement suffers from any mistake and error. As such we find no error in the impugned order of tribunal which calls for interference by this court and the same deserves to be affirmed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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