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TMI Blog1982 (6) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ? (2) Whether, on the facts and in the circumstances of the case, the Technical Services Fee of Rs. 17, 098 paid by the assessee to M/s. Wyman Gordon Co. Ltd. of U.S.A. was allowable as revenue expenditure ? " As far as the first question is concerned, it is common ground that it is concluded in favour of the assessee by the decision of the Division Bench of this court in CIT v. Elphinstone Spinning and Weaving Mills CO. Ltd. [1975] 100 ITR 139. We, therefore, have to really consider only the second question referred to us. The relevant facts, as far as the second question is concerned, are as follows : The assessee entered into two separate agreements, both dated 20th November, 1961, with Wyman-Gordon Company Ltd. of U.S.A. (refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to treat such technical information as confidential. The assessee had not purchased any technical information outright, but it merely acquired the right to draw upon the technical knowledge of the collaborator for the period of the agreement. Each of the agreements was to enable the assessee to commence and continue the manufacture in India of forgings and castings specialised in by the American Company. " In the financial year relevant to the assessment year 1963-64 the assessee paid an amount of Rs. 17,089 under the said agreement to the American Company and claimed it as a revenue deduction. The ITO disallowed this claim, inter alia, holding that the said expenditure was of a capital nature On an appeal by the assessee to the AAC, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (6) That the American Company was merely supplying technical information to the assessee to enable it to carry on business in terms of the agreement, and the payment could not be regarded as the purchase price of any asset. " On the basis of these conclusions, the Tribunal held that the assessee was entitled to claim the said amount of Rs. 17,089 as a revenue deduction. It is from this decision of the Tribunal that the aforesaid question has been referred to us. The contention of Mr. Joshi, learned counsel for the Commissioner, is that the payment of Rs. 17,089 was made by the assessee to the American company for acquiring an asset of an enduring value, namely, for acquiring technical knowledge, and, as the period of the agreement was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction. 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 patent. It was held in that case that, in essence, the agreements were for acquiring technical knowledge regarding methods of production, and in the case of Benz for use of the trade name. The assessee had not acquired any asset or advantage of an enduring nature for the benefit of its business. The amounts paid for provision of know-how and licence to use the trade name were revenue expenditure. Following that decision, we must decide the aforesaid question in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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