9911796707
TMI Blog1985 (10) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ressors since its incorporation in 1928. In 1958, Kirloskar Brothers Limited considered it desirable to carry on the said business by floating a new company, namely, the assessee-company. The assessee-company was, therefore, formed in 1958 with the main object of manufacturing industrial engineering products. It started with the production of air-compressors, including industrial air-compressors. It entered into several collaboration agreements for manufacturing the full range of air-compressors, pneumatic tools and rock drills. Two of these agreements were with Messrs. Grasso Koninklijke Machine-fabrication N. V. (hereinafter referred to as "Grasso"). The first of these two agreements was dated January 2, 1962, and was for manufacturing ai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 1964-65 to 1969-70. As far as question No. (ii) is concerned, it pertains to the assessment years 1965-66 to 1969-70, and as far as question No. (iii) is concerned, it pertains to, the assessment year 1966-67. Coming to question No. (i) first, it relates to the payment made by the assessee-company to Grasso under the agreements for acquisition of technical know-how and the dispute is whether these payments are permissible as revenue deductions. In this regard, a Division Bench of this court in Kirloskar Pneumatic Co. Ltd. v. CIT [1982] 136 ITR 746, considered this very question which is before us. That case related to certain payments by the assessee before us to the very same concern and the agreement in question was the very agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it cannot be called a capital asset. Merely because an assessee, who has entered into a contract with regard to know-how, is entitled to use the know-how even after the agreement has expired, it does not mean that he has acquired a benefit of an enduring nature. An agreement of foreign collaboration where foreign know-how is availed of in lieu of payment, is in substance a transaction of acquiring the necessary technical information with regard to the technique of production. Instead of employing persons having knowledge of techniques and utilising their knowledge, technical know-how is acquired. Technical know-how made available by a party to such an agreement does not stand on the same footing as protected rights under a registered p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Development Corporation of India. The facts found by the Tribunal show that these amounts were paid as per the terms and conditions of the draft agreement between the assessee-company and the said Corporation which had not been executed. However, this does not make any difference as far as the question before us is concerned, because it is common ground that both the parties have acted pursuant to this draft agreement. The said Corporation has supplied know-how under the said draft agreement and the assessee has made payments under the draft agreement. In view of this, it must be regarded as a binding agreement and if not a written one, then oral. In fact, no contention has been raised by Mr. Jetly on the ground that the payments were made ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
