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TMI Blog2001 (11) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,16,694 paid to Jyoti Ltd. under agreement dated September 1, 1972, as revenue expenditure. (ii) Rs.3 lakhs know-how fees and Rs.1,03,068 being royalty paid to Jyoti Ltd. under another agreement dated January 1, 1981, as revenue expenditure, and (iii) Rs.50,000 as technical report fees as revenue expenditure. We have heard Mr. B.B. Naik, learned standing counsel for the Revenue-applicant, and Mr. J.P. Shah, the learned advocate appearing on behalf of the assessee-respondent. In so far as question No.2 is concerned, it is common ground between the parties that the said question is concluded in the assessee's favour by a decision dated November 3, 1999, rendered by this court in Income-tax Application No. 269 of 1999 between the same parties. In so far as the third question is concerned, the Assessing Officer disallowed the sum of Rs.50,000 holding that the technical report fees were paid to Jyoti Consultants Ltd. for ascertaining the feasibility of manufacturing motors of different kinds than the motors which were already being manufactured by the assessee-company. In appeal, the Commissioner (Appeals) held that in principle the payment was allowable as revenue expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 374, 374A and 26-12-2000 1982-83, 1983-84 374B of 1992 and 1984-85 (3) 192 of 1994 26-12-2000 1985-86 and 1986-87 -------------------------------------------------------------------------- It was contended by Mr. Naik that in all the aforesaid unreported decisions rendered by this court reliance had been placed on the decision of CIT v. Jyoti Ltd. [1979] 118 ITR 499 (Guj) while in the case of the reported decision in Jyoti Electric Motors Ltd. v. CIT [1999] 237 ITR 280, this court had subsequently referred to and upheld. the finding of the Tribunal that the said decision was distinguishable on facts. According to Mr. Naik, therefore, we should adopt the reasoning which appealed to this court in the aforesaid reported decision and an additional factor for doing so, it was submitted, was the fact that the decision of the apex court in the case of Jonas Woodhead and Sons (India) Ltd. v. CIT [1997] 224 ITR 342 had been followed. In view of the aforestated position, after hearing the matter partially, it was adjourned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured by Jyoti Ltd. and for this purpose Jyoti shall render technical and other experienced guidance to the licensee, i.e., the assessee. It is pertinent to note that Jyoti has reserved the right to grant similar licence for manufacturing the same products covered under the agreement to any other party and furthermore the licensee, namely, the assessee, is bound by the terms of agreement and the benefits under the agreement are non-assignable or non-transferable. The articles dealing with the duration of the agreement as well as the termination of the agreement read together go to show that the agreement is liable to be terminated even earlier than the stipulated date and it is not necessary that the entire term for which the agreement is entered into, the assessee would be entitled to the benefits granted under the agreement. Article 3 which deals with right to sell motors has specifically provided that the sale of the defined products covered under the agreement shall be exclusively done through Jyoti Sales Organisation both within and outside the territories of India; and further that the agreement does not preclude Jyoti from manufacturing and selling the said products wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner was justified in passing the order under section 263 of the Act in setting aside the assessment order?" The Tribunal had upheld that assumption of jurisdiction under section 263 of the Act by the Commissioner and the assessee in reference challenged that order of the Tribunal. The court was called upon to opine as to whether prima facie the Commissioner had correctly assumed the jurisdiction as held by the Tribunal, and the court was not called upon to render any opinion as regards the merits of the claim of the assessee. The observations made in the said judgment, therefore, shall have to be read as having limited application in the context of the controversy which was there before the court. As regards the contention of Mr. Naik that the assessee-company was entitled to continue to manufacture the motors under the agreement even after the expiry of the period of the agreement, it can be seen that such user was subject to the licensee-company making payment of royalty on the basis of sales made on manufactured products after the termination of the agreement. What is more important, however, is that the licensee-company is required to return to Jyoti Ltd. all the techni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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